Archive for February, 2009

Does Refinancing Make Sense?

Friday, February 27th, 2009

In the current market, if you can refinance, you probably should be. Refinancing is the process of obtaining a new loan that pays off your existing home loan. There are several reasons for wanting to do this, but the most important is to get a lower interest rate so you save money on your home loan. FHA loans can help you to refinance, as can other conventional lenders. The key here is to know when it makes sense to refinancing.

What’s Your Rate?

The first step in knowing if it makes sense to refinance is to know what your interest rate currently is. According to Bankrate.com, current 30-year mortgages are available at about 5 percent, which is a very low number. Those who wish to obtain a 15-year loan may even be able to pick up a home loan that is under five percent. If your current mortgage is at an interest rate that is higher than this, you could save money by refinancing.

Here is an example. Let us say you currently have a mortgage loan payment of $1400 per month and you owe $175,000 on your home and have another 28 years to pay on it. You are currently paying about 9 percent for the mortgage. If you keep this loan for the next 28 years, you will end up paying a total of $304,984 in interest alone, on top of the purchase price of the home.

Now, let us say you refinancing your home loan to a loan for 30 more years and pay 5.5 percent on the loan. Your mortgage payment is now under $1000 a month. At the end of your payments, you will have paid just $182,707 in interest payments towards the loan. As you can see, this is much more affordable than holding onto the loan you currently own.

You will likely need to pay closing costs and your homes appraised value still needs to be high enough to cover the mortgaged amount to qualify for a refinance. There are other qualifications you may need to make, too.

To find out if this is an option for you, get a quote from a lender. You may even qualify for an FHA loan through the refinance process. This can further lower your interest rate and make it even more affordable to buy your home.

Stimulus Bill and FHA

Thursday, February 19th, 2009

The stimulus bill, The American Recovery and Reinvestment Act passed Congress on Friday and is to be signed by President Obama on Tuesday, February 17th.  The Bill does mention the FHA, Freddie Mac and Fannie Mae, the government lending bodies. One of the things the Bill does for these organizations is to raise their lending limits. In 2008, lending limits were raised significantly to allow the FHA to step in and help more people facing foreclosure. Those levels reverted back in 2009. The Bill pushes the limits back to the 2008 level. This means more funds are available for these banks to aid those purchasing homes.

What Do New Limits Do?

There are several things that this new higher limit offers to the mortgage industry. First, by raising the limit, there is more money available to these organizations to purchase loans. This means that when Joe Smith comes to purchase a home, and would like FHA backing on that loan, he can get it because the funds are available to allow for this.

As you know, the FHA allows individuals to get a lower interest rate when borrowing money because it gives the lenders an added insurance that the loan is secure to them. If the borrower with an FHA loan fails to make payment, the property is foreclosed on, but the loan holder can file a claim with the FHA to be reimbursed some money. It works very much like an insurance policy for the lender. Because of the lessoned risk, the lender offers a lower interest rate to the borrower. In short, it aids each body involved.

There are other ways this new higher limit on Freddie Mac and Fannie Mae will. Because it does free up some of this money, more people will qualify in all likelihood for these home loans. With better qualification numbers, more homes can be purchased. People can afford to purchase a home again with the lower interest rate. In turn, more properties that have been sitting on the market or even vacant can be sold. In other words, by raising these limits, the government is aiding in reducing inventory of available housing. This will give cities back their property taxes and aids in boosting other home values throughout the area.

The overall process improves the liquidity of the mortgage market as a whole. Many economists blame at least part of the economic downturn on the failure within the housing market. By restoring some stability here, it could also help to restore some of the value in housing and the markets as a whole.

What Does It Mean To You?

As you consider the Bill and what is included in it, one thing you may want to consider is your own ability to obtain a mortgage and to purchase one of these homes. Not everyone will qualify for a home loan through this program, but far more money is available to help more people to qualify. If you have been considering purchasing a home, but where not sure if you could, or should do so, there benefits of these increased limits makes now an ideal time.

The benefits of having an FHA loan are immense and it should not be overlooked by anyone who is looking for an opportunity to buy a home. Keep in mind that you will still need to meet income and credit qualifications to obtain an FHA loan. If you have been thinking about this type of loan opportunity, take the time to talk to an FHA loan specialist to find out if you qualify for the loan.

The New Tax Benefit Of Buying A Home

Tuesday, February 17th, 2009

If you are ready to purchase your FHA backed home mortgage, now may be a great time. In the recent Bill to pass Congress, the American Recovery and Reinvestment Bill, Congress has put into place a substantial benefit to individuals who purchase a home this year. Those who are ready to buy will find that this benefit is sizable and lucrative, making it an ideal time to buy.

What Do You Get

The stimulus bill gives individuals who purchase a home in 2009 a sizable tax break. The Senate’s version of the bill called for much more than actually passed, but for first time homebuyers, this new benefit is still very enticing. For those who purchase a property in 2009, a onetime $8000 tax credit will be available to them. This tax credit does not have to be repaid as similar opportunities in previous years have required. Rather, as long as you make under $75,000 as an individual or $150,000 jointly, you will qualify for this tax break.

Anyone that has not owned a home in the last three years is technically qualified as a first time homebuyer. This means that millions of people may have these funds available to them currently. This particular element in the stimulus bill costs $6.63 billion, but may be well worth it for several reasons.

#1: It gives individuals more of a benefit to purchase a home even if they thought now was not the time. For example, if you were unsure if the bottom of the market had hit, and you wanted to get the best deal available, buying in 2009 is likely to be a good opportunity to save money in the form of a tax credit.

#2: It helps to clean up some of the inventory that is sitting open on the real estate market right now. This will help to boost the property values of homes in the neighborhoods. In addition, it allows cities to get back some of their property tax dollars they have lost. Many cities throughout the country are cutting jobs and services because they do not have the property tax income they need to pay for such services. Getting people back into those homes may be particularly beneficial to the cities.

#3: Those who may have needed that extra reassurance that now is the right time to buy a home can get it. Credit standards are still tight, but with this added benefit, more people will see that now is a great time to own property.

What To Keep In Mind

One of the problems with tax breaks like this is that people often think of it as free money. It is important to note that while you do not have to pay this money back, you still have to qualify for the mortgage to obtain the house in the first place. It is highly recommended that you have some money to put down to buy the home and have a good or better credit score. With these qualifications, you may be able to obtain a home loan through FHA.

Do not overlook the benefits of FHA loans. These loans can sweeten the deal even more so by giving you an added benefit of a low interest rate on the home you buy. You will pay less tax and you will pay less in terms of interest over the lifetime of your loan.

To find out if you qualify for an FHA loan, contact an FHA loan specialist. Ask them about how this tax break can help you to save money while buying a home.

Foreclosure Moratorium: Lenders Have Agreed

Sunday, February 15th, 2009

As the Congress and President work to find a solution to the ever-growing problems of the average American citizen, one thing is certain. Foreclosures need to stop or find help. Even with FHA loans available, so many homes foreclosed on each month. The good news is that lenders are listening. Several lenders have agreed to moratoriums on foreclosures. If you own a home and feel threatened by foreclosure, by one of these lenders, you may have some breathing room:

*JPMorgan Chase & Co
*Citigroup Inc
*Bank of America Corp
*Wells Fargo & Co

Each of these lenders have agreed to temporarily stop foreclosures in the hopes that the government has help on the way for them and those homeowners who are struggling to stay in their homes. The stimulus programs being put into place have billions of dollars in them to help Americans to stay in their homes. This applies to ne foreclosure actions.

It’s Not Too Long

Keep in mind that this freeze is not a long-term process. Rather, according to Jamie Dimon who is JPMorgan Chase’s chief executive, as reported by Cnn.com there is limited time. He said, “We believe three weeks is adequate time for the Treasury to announce- and for use to implement- a new plan.” Bank of America’s freeze will last through March 6th. Citigroup has promised to hold off on foreclosures through March 12th. Wells Fargo has not set a specific date, but says that they will halt foreclosures until the government’s plan is announced.

What To Do

Are you likely to be affected by a foreclosure in the coming weeks? If so, you may want to use this time to secure different financing options. There is no immediate information available in terms of what President Obama will be outlining in his plan to stop foreclosures. Therefore, if you are at risk of losing your home, do not waste this time.

Keep in mind that there are already several types of programs in place to aid individuals in refinancing their current home loans to get into new ones to avoid foreclosure. FHA lenders can help you to determine if you qualify for this type of loan. While President Obama’s plan is on schedule for review in the coming weeks, do not wait that long to find out if you qualify.