As the year draws to a close, it’s time to squeeze in some tax deductions and credits that might save you money. If you are looking to reduce your tax liability, here are some 2011 year end tax planning tips or options you may want to consider READ MORE
This morning, FHFA announced their enhancements to the HARP refinancing program. Operational details of the plan are to be released on November 15. Only loans that were purchased or guaranteed by Fannie Mae or Freddie Mac on or before May 31, 2009 and have a current LTV over 80% are eligible. In addition, the loan must be current, no late payments in the last six months and no more than one late in the last 12 months. There are no restrictions on who may refinance these loans.
Program guidelines include:
- No limit on LTV, if new loan is a fixed rate loan (current LTV must be above 80%)
- Loans previously refinanced under HARP not allowed
- Certain agency fees will be waived if new loan is a shorter term loan
- Appraisals not required where Agency AVM is available
- Certain originator Reps and Warrants will be waived
The housing market still faces many challenges. High unemployment, foreclosures
and other distress sales are keeping negative pressure on prices. This of course
is good news if you are looking to buy as low rates and lower prices have
brought affordability to record levels.
- Since 1963, it has cost an average of approximately 43% of ‘per
capita’ or individual income to finance the cost of a median priced home (20%
down payment and prevailing 30 year fixed rate mortgage). Right now, it’s only
about half of that cost at approximately 22%.
Are you holding off
on a purchase for fear that prices might fall further? - Chances are
that some sellers might be thinking the same thing. If you’re smart about it,
you can use that as an advantage to strike the best possible deal on a home
today for once a seller believes that prices have bottomed or are going back up,
your advantage will be gone.
Don’t confuse Price with Payments
- Gambling on the expectation of a lower price tomorrow at the risk of
higher rates can cost much more in the long run than locking in a sure thing
today. Ex. $200,000 30 Yr. fixed loan @ 4.625% = $1028/mo. today vs. $180,000 @
6.5% = $1137 per month later. In other words, paying less can still cost you
Own, Rent, or Borrow - One way or another, a home
is something we all need every day. The numbers here tell the story and it’s no
secret that values have fallen, yet over time, that’s not the case. As you can
see by the chart, values over the last 10 years in most states show very healthy
appreciation. And over the long haul (map), all states have positive
We don’t get a history lesson in the news because
the news is about the moment and the more dramatic the better. That’s
what sells advertising and that’s how they get paid. For the rest of us, taking
a rational, longer term view of things makes more sense. This is particularly
true when it comes to a home, for this is something we are likely to own for
many years rather than just moments.
Before deciding on what terms lenders will offer you on a loan (which they base on the “risk” to them), they want to know two things about you: your ability to pay back the loan, and your willingness to pay back the loan. For the first, they look at your income-to-debt obligation ratio. For your willingness to pay back the loan, they consult your credit score.
The most widely used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. (and they’re named after their inventor!). Your FICO score is between 350 (high risk) and 850 (low risk).
Credit scores only consider the information contained in your credit profile. They do not consider your income, savings, down payment amount, or demographic factors like gender, race, nationality or marital status. In fact, the fact they don’t consider demographic factors is why they were invented in the first place. “Profiling” was as dirty a word when FICO scores were invented as it is now. Credit scoring was developed as a way to consider only what was relevant to somebody’s willingness to repay a loan.
Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all considered in credit scores. Your score considers both positive and negative information in your credit report. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.
Different portions of your credit history are given different weights. Thirty-five percent of your FICO score is based on your specific payment history. Thirty percent is your current level of indebtedness. Fifteen percent each is the time your open credit has been in use (ten year old accounts are good, six month old ones aren’t as good) and types of credit available to you (installment loans such as student loans, car loans, etc. versus revolving and debit accounts like credit cards). Finally, five percent is pursuit of new credit — credit scores requested.
Your credit report must contain at least one account which has been open for six months or more, and at least one account that has been updated in the past six months for you to get a credit score. This ensures that there is enough information in your report to generate an accurate score. If you do not meet the minimum criteria for getting a score, you may need to establish a credit history prior to applying for a mortgage.
To get a FREE Copy of your credit score, contact your Maine Mortgage Banker today.