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Buying a house and qualifying for a purchase mortgage can be a nervous time for first time home buyers, but if you prepare yourself it is possible to have a pleasant experience. Home prices have fallen considerably and home loan interest rates remain at record lows, so the timing could not be better.  The fact is that once again we can say that this year, we have seen the best fixed mortgage rates of our lifetime.

Getting a pre-approved mortgage is the important qualifying procedure in which the underwriter will review your credit history, income and monthly obligations in an effort to determine your debt to income ratio. It is important to get a home loan approval before making an offer on a house, because sellers will consider your offer to be stronger if you have already been pre-approved by a bank or lender. You should know that government loans, like the FHA mortgage requires a monthly mortgage insurance payment. When figuring out your budget you need to make sure you are considering the mortgage payment, mortgage insurance payment, property taxes.  One significant benefit is that you will be able deduct the interest on your mortgage for tax purposes. Qualifying for a first time home buyer loan can be challenging but again being prepared and working with the right lender is an important first step.

  1. Know your credit score before shop mortgage lenders online.
  2. Save money for the down-payment of the home purchase loan.
  3. Use a mortgage calculator to determine how much you can afford to spend on a new house.
  4. Compare conventional and FHA loans for first time home buyers.
  5. Consider the pros and cons of an ARM versus a fixed rate mortgage.
  6. Get a mortgage pre-qualification with a letter from a credible lender.
  7. Make sure there is no pre-payment penalty with home loan you choose.

Homeownership offers many financial benefits but in most cases there will be new costs that you must account for. Before committing to a buying a house you should get a home inspection and make sure that you are emotionally and financially prepared for being a homeowner.

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Getting approved for a VA mortgage after a bankruptcy or foreclosure can be challenging.  The VA mortgage loan program is essentially the last mortgage option in the United States that does not have a minimum credit score.  Even the Federal Housing Administration caved into pressures to implement a minimum credit score on the FHA mortgage loan.  After boasting of no minimum credit scores for nearly 76 years, FHA implemented a new credit policy in 2011 that mandates a minimum credit score of 500 for FHA mortgages.  It’s hard to believe that the US government has not increased the VA requirements for home buying or refinancing at a time when so many loans are delinquent.

Lock into an Affordable VA Mortgage that Guarantees a Fixed Interest Rate for 15 or 30-Years

As you may have started to realize, the VA mortgage loan is a special finance program for the military.  VA financing is the last of a dying breed of flexible and aggressive home loan programs. The VA home loan program requires no down-payment for home buying and no equity for rate and term refinancing.  VA interest rates are as low as any home mortgage rate on the planet, so if you are eligible for VA financing, we strongly suggest that you seize this opportunity now while the rates and loan guidelines are so appealing.  There is no guarantee that the Veteran’s Affairs won’t tighten guidelines for VA refinancing and home buying. In fact, it is more likely that VA loans will become less aggressive if you simply look at the current trends in the industry.

With significant rises in delinquencies, defaults and foreclosures, one of the ways banks and VA lenders protect themselves is to require more from the borrower. For now, VA refinancing with bad credit is still possible for loan applicants that have their VA loan eligibility and income documentation to demonstrate their ability to afford the proposed mortgage payment. If you are a VA borrower who recently had a foreclosure, you will not be eligible for a VA home mortgage for 24 months from the foreclosure date on the credit report. After two years, you will be eligible for home purchase or refinance with the VA program. The lenders will be looking for a clear demonstration from the VA borrower that they got back on track since the foreclosure and now have the ability and willingness to make their VA loan payment on time each month.  In most cases it will help if the VA borrower can reestablish credit with a credit card or an auto loan in which timely payments could be documented.

Take a minute and speak with one of our mortgage consultants so that they can help you estimate monthly payments and determine qualifying for a VA loan with bad credit.

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The Obama administration has made it clear that the mortgage interest deductions for home buying, refinancing and equity loans are on the chopping block to be eliminated or significantly altered.  Many conservative watch-dog groups believe that Obama is using the national debt debacle to justify the redistribution of wealth by eliminating tax advantages for American homeowners. We need to remember that much of the U.S. economy was built on the confidence individuals have that home buying is a good investment.  Unlike a stock, people can use their investment, borrower against their investment and finance real estate with very little money down.  Imagine calling your stock broker and telling him that you wanted to buy $400,000 in stocks and that you have the ability to come up with 5% for a down-payment. Last time I checked if you want to invest in the stock market, you have to come up with a 100% of the funds. Any serious discussions of removing the ability for tax-payers to deduct home loan interest and dismantling the tax benefits for homeownership are simply reckless.

What does the assault on mortgage deductions mean to you?  Although the President’s budget proposal only called for rolling back mortgage deductions on high-income taxpayers, it is important to realize that this is only a political move so that when the Republican Congress rejects the budget proposal, he can say that once again, “Republicans are only trying to protect the wealthiest Americans.”  Be alert and keep your eye on future legislation, because many insiders believe that it is only a matter of time before Obama uses the debt crisis to justify stripping mortgage interest tax deductions for all homeowners.  He will say something like —- “All Americans need to make some sacrifices financially and do their part to help solve the debt crisis. The current system has been giving hand-outs to homeowners that are costing Americans almost 100 billion dollars and we can no longer afford to subsidize homeownership.” Some believe this is an ideological argument, but the fact is that tax revenues hit record highs when the government extends tax cuts that help stimulate the economy with new business and emerging markets. So when politicians say that not eliminating tax deductions is adding to the national debt, they are in fact misleading the public.  Of course the counter argument to their short-sided policies is simple: Homeownership rates will plummet as many people will get out of the housing market and rent because there is less risk and responsibility. Millions of Americans have acquired wealth while also helping to finance their retirement. So this new shift of wealth would increase as the gap between rich and poor will continue to rise rapidly.  Without any doubt, eliminating tax benefits for homeowners will stifle any attempt to mend the ailing housing sector.

Based on the current administration’s actions and policies in the first two years of his presidency, it’s not out of the question that Obama will revisit eliminating the deduction for the interest paid on new home loans, mortgage refinance loans, second home mortgages, home equity lines, debt consolidation and home improvement loans, in a second or third attempt by incrementally passing their socialistic agenda.  The ripple effect of stripping tax deductions on homeowners could be devastating. For example: An American homeowner with a $350,000 first mortgage and a $50,000 second mortgage could end up paying the Federal government an additional $7,000 a year in taxes if the mortgage interest deduction disappears. I think most people would concur that this is not the time to be raising taxes on Americans. With an adjusted 20% unemployment rate, a devastated housing market, rising inflation with food and energy costs, there is no genuine indicators that our economy will be exiting this great recession any time soon.  The other reason not to change the mortgage interest deductions is that it would depress future property values that already struggling to recover from the housing bubble that exploded a few years ago. Think about it —- the home mortgage interest deduction has been a major contributor in driving American homeownership rates.  If Americans lose the financial motivations to invest in real estate, home values will plummet and more “nest eggs” would be lost.

The government appointed deficit reduction commission included the following homeowner tax benefits:

  • Mortgage Interest Deductions
  • Second home mortgage interest deductions
  • Interest deductibility for home equity lines of credit and fixed rate equity loans less than $100,000
  • Property tax write-offs
  • $250,000 and $500,000 capital gains exclusions for single and married taxpayers who sell their property for a profit. 

Do not assume that the tax incentives you have as homeowner are safe from repeal. It is absolutely preposterous to even discuss eliminating or even tinkering with the sacred mortgage tax deduction. One of the strongest reasons for global confidence in the U.S. has been the American real estate market.

What effect will the elimination of mortgage interest deductions have on the mortgage business? Any loan professional with half a brain know that the mortgage interest deductibility is one of the most compelling arguments for buying a home.  Not to mention the residual income that would be lost for mortgage lenders and loan originators if borrowers were unable to deduct the cost of refinancing. If the Obama administration repeals the tax decuction for home loans, the housing market could be depressed for decades.  The mortgage and real estate industry have enough to deal with at the moment as the Dodd-Frank mortgage plan is slated to be implemented in a few months.  Many mortgage executives believe that the new mortgage laws will strangle the small to mid-sized loan companies with regulations and overly-aggressive restrictions and financial requirements.  Ultimately if the government shakes down the non-banking lenders, its likely consumers will suffer because without the incentive for loan professionals to make a good living, banks will seize a majority of the market-share. Without the competition, banking institutions will likely reduce the home financing options, raise to cost to buy or refinance a home while providing less service. With that being said, you can understand why many people in the mortgage industry are terrified of the proposed elimination of tax benefits of home ownership.

Privately, many lending executives are concerned that some of these tax advantages from capital gains exclusions for second home loans and home equity interest deductions are more in danger than ever before. One of the few bright spots for the real estate market last year was the increase in home sales before the first time home buyer tax credit expired. We can’t let these self-obsessed politicians raid the benefits of home ownership. It’s no secret that home sales plummeted when the government let the home buyer tax credit expire.  Many of these new home buying initiatives were showing signs of success by stimulating home sales in a sluggish market. Let’s be honest, many of these tax benefits have driven our economy.  For example, consumer spending rose significantly from 1996 to 2005 because borrowers could utilize the home equity loan deduction with a loan that enabled them to consolidate credit debt, while increasing the cash flow, so Americans could spend more money and strengthen the American economy.

Who is attacking the mortgage interest deductibility?  According to the Wall Street Journal, there is bipartisan group of lawmakers on Capitol Hill and a select group of leaders in the Senate drafting legislation that would implement the agenda of Obama administration’s deficit reduction commission report released in December of 2010. The legislative outline sets annual targets for higher revenues and lower spending in multiple budget categories and would impose significant cuts automatically if Congress was unable to reach the specific targets. Congress would have two years to figure out how and where to make the required reductions. The WSJ article said the “Senate group is working quietly with deficit-reduction advocates in the House, consists of Majority Whip Richard J. Durbin (D-Ill.), Tom Coburn (R-Okla.), Budget Committee Chairman Kent Conrad (D-N.D.), Mike Crapo (R-Idaho), Mark R. Warner (D-Va.) and Saxby Chambliss (R-Ga.). Durbin and Conrad were members of the commission who voted to approve the final report calling for $1.7 trillion in discretionary federal spending cuts and $180 billion in tax revenue increases over the next 10 years. Time after time, the deficit reduction commission made the argument that cutting of certain tax benefits across-the-board is needed to stem the national debt that has spiraled to over $14 trillion.  Many economists have projected the national debt to exceed 90% the country’s gross domestic product by 2020 unless drastic spending cuts are implemented quickly.  Even the Obama administration has forecasted the debt to rapidly increase and those shocking figures are just based on government projections for government initiatives that are already in motion.

The Congressional Joint Committee on Taxation released an estimate that the mortgage deduction will cost the government $99.8 billion in uncollected taxes this fiscal year and $107.3 billion in fiscal 2012. The Administration has published reports indicating that homeowner property tax write-offs will cost $26.6 billion in uncollected taxes this year and $31.6 billion in 2012. The $250,000 and $500,000 tax-free exclusions on capital gains for home sale profits are projected to cost the Treasury about $19 billion this year and $21 billion next year. Hopefully American tax-payers will open their eyes and look at the writing on the wall. The Obama administration is making calculated efforts to destroy the image of homeownership by mischaracterizing mortgage interest deduction and capital gains exemptions for people that sell their home for a profit as excess income that would be better off in the government’s hands.

The time has come for us to stand up for what is right and hold our government accountable for spending money they do not have.  The time is here for us to take up some personal responsibility and defend what is in the best interest for us as individuals and what’s also best for our country.  Killing the housing market will certainly not help us resolve the national debt crisis. Stripping the benefits of home ownership will not be a solution for our government spending problems.  Cutting off the tax write-offs for American homeowners will surely not help us escape the Great Recession.  The mortgage interest deduction has been extremely successful policies for helping average Americans acquire wealth, in addition to molding the greatest country in the history of this world.  For more information on mortgage interest tax deductibility, please visit the IRS portal that answers most questions related to home mortgage interest deductions.

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Feb
09

Mortgage and Refinance Help

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The housing market has been beaten to a bloody pulp but people still need mortgage and refinance help. Millions of homeowners are still stuck with adjustable rate mortgages and option ARM loan that are about to reset.  Most analysts agree that when these home loans reset, the delinquency and foreclosure rates will set new records. The sad reality is that most lenders are not offering mortgage refinance help, not because they don’t want to, but because nobody will insure this type of refinancing.  The Home Affordable Refinance Program extends borrowers new home refinancing opportunities up to 125%, but only a select few are actually eligible for HARP. The no documentation refinance is becoming more difficult to find as most lenders have strayed away for this type of risky loan.

Get Mortgage Help from Experienced Loan Professionals

1. Work with the Best Mortgage Lenders – Now is not the time to experiment with a loan officer because they are your friend or a relative.

2. Keep your credit score high so you retain eligibility for Fannie Mae and Freddie Mac refinancing

3. If you have had isolated late payments, consider a FHA refinance.

4. Discuss a note modification with your lender directly.  Many borrowers who have an option ARM may be eligible for a fixed rate adjustment.

5. Don’t rule out a loan modification if you have explored all viable mortgage refinancing options

2011 will likely not be remembered for the year that lenders eased the loan refinancing guidelines.  All indications point toward tighter underwriting and stiffer loan requirements.  However, with the federal reach, 2011 may turn out to be the best year for mortgage and refinance help.  Don’t forget that the U.S government continues to offer incentives to banks in lenders for extending mortgage help, forgiveness and loan modifications in an effort to prevent foreclosures.

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Categories : Mortgage Help
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