Homebuyer Affordability – How Much Home Can I Afford?

How Much Home Can I Afford?

Are you part of today’s real estate buyer pool in the Pacific Northwest? If so, you know that it’s very competitive, with multiple buyers vying for the same property in many situations. Being prepared is paramount to your success.

The first step in the home search process is not looking for homes, but first knowing how much home you can afford. Use this mortgage calculator to get started! Concurrently, you must obtain pre-approval from a qualified lender of your choice. If you’d like a few referrals for top notch professionals in the mortgage business, click here!

Just as soon as you’ve got this accomplished, you’re ready to jump in! Better Homes & Properties is a full-service, boutique brokerage serving the greater Puget Sound area. We welcome the opportunity to answer any questions you may have about real estate, the local housing market, or the transaction process. Move ahead by contacting us to obtain your Buyer Package!

New QRM Rule–What You Need To Know!

QRM Rule—What You Need To Know!

After three years of strong opposition from NAR, congressional leaders, and consumer and industry groups, the six financial regulators released the final version of the long-awaited qualified residential mortgage (QRM) rule. The six regulators listened to NAR when finalizing the rule which now equates QRM with the “Qualified Mortgage (QM)” standard. As originally proposed, the QRM rule would have narrowly defined QRMs to require a 20 percent down payment. REALTORS® were among the most vocal opponents of the originally proposed QRM rule and forged the broad-based Coalition for Sensible Housing Policy, which includes nearly 50 organizations, to draw attention to the regulations onerous 20 percent down payment requirement and other credit limiting features such as strict debt-to-income limits. The coalition asked for and received an extension of the proposed regulation comment period in 2013. During that time, NAR and its coalition partners gathered the support of 44 U.S. Senators and 282 House members, who wrote to regulators expressing their intent on QRM and opposing the sizable down payment requirement.

In synchronizing both definitions, the revised rule encourages safe and financially prudent mortgage financing while also ensuring creditworthy homebuyers have access to safe mortgage financing with lower risk of default. In addition, consistency between both standards reduces regulatory burden and gives mortgage professionals much-needed clarity and consistency in the application of the important mortgage standards required pursuant to Dodd-Frank. Read more …

2014 Tax Tip Refresher!

2014 Tax Tip Refresher!

Congratulations! You’ve just taken another step up the American dream ladder and are a homeowner. Along with the joy of painting, plumbing and yard work, you’ll now have an added dimension to your taxes.

The good news is that you can deduct many home-related expenses. These advantages apply to any type of residence–mobile home, single-family, townhouse, condominium or cooperative apartment.

The bad news is that to take full tax advantage of your home, you need to itemize your deductions on Schedule A. You’re not living on “EZ” Street anymore; you’ve moved to the 1040 long form.

Avoid common mistakes and freshen up on some of the financial benefits of homeownership this tax season!

New Loan Requirements for 2014!

New Loan Requirements for 2014!

New mortgage rules scheduled to take effect in 2014 could fundamentally change the way home loans are created. All borrowers should know about these forthcoming changes. To help you sort it all out, click here for a handy guide to the 2014 mortgage lending rules. Read more

Are you Pre-Approved? Loan Pre-Approval Q&A!

Get a Loan Pre-Approval—Q&A!

Few experiences are more frustrating than falling in love with a home that’s for sale and then discovering you can’t afford to buy it. The majority of buyers need to finance their home purchase, and a consultation with a mortgage lender is a crucial step in the home buying process because you need to understand your purchasing power before you begin to look at homes. Read more

Should You Fear Rising Mortgage Rates?

No Need to Fear Rising Mortgage Rates!

History shows us that we don’t need to fear the recent spikes in mortgage rates because they won’t have an impact on home prices, according to Fannie Mae researchers in a new report.

Fannie Mae evaluated the trajectory of mortgage rates since 1990. Over the years, researchers have found that rising rates don’t hamper home sales and have no impact on home prices.

“History suggests that interest rate increases at the level recently witnessed will not stop the current housing recovery,” the report notes.

For example, the study found that from October 1993 to December 1994, mortgage rates rose from 6.8 percent to 9.2 percent. However, home prices leveled off and then only dropped slightly during that time.

From October 1998 to May 2000, mortgage rates soared from 6.7 percent to 8.5 percent and there was no impact found on home prices during that period, according to Fannie Mae.

“What we see through the ups and downs of rate changes is that sellers are reluctant to lower prices,” Mark Palim, who led the Fannie Mae study, told CNNMoney. Read more

Understanding Mortgage Loans – Part 2

Printed on the seal of approval documents

Mortgage Loans – Part 2

In Mortgage Loans Part 1 we talked about fixed and adjustable rate mortgages. There are additional terms that may be discussed and you may be wondering what the terms mean and how it applies to you.

In addition to the fixed rate mortgage and adjustable rate mortgages, mortgages may also be either “conventional” (meaning funded by the private sector–usually a bank) or a “government-backed” loan. Government-backed loans are backed by the federal government, including the Department of Veteran Affairs or the Department of Housing and Urban Development. The government agency is “insuring” the loan, although the funding may still be by a bank.

So why the two different types of loans? The Department of Housing and Urban Development typically has less stringent lending qualifications, making it easier for some buyers to get a loan. For example, at the time of this writing, the down payment on an FHA loan (by the Federal Housing Administration) can be as low as 3.5%; a private loan generally requires 10-20%, but can be as low as 3%.

Below are the most typical types of government loans:

FHA (Federal Housing Administration) Loan: The three benefits of this loan are the low down payment, lower credit score requirements, and additional monies to fix the home up can be included in the loan amount. Buyers who want to take advantage of an FHA loan first need to find an FHA-approved lender. I have a full list of our local FHA-approved lenders in the event these loan parameters sound like a good match for your needs.

Once the buyer finds a home and makes an offer, FHA will require an inspection of the property the buyer has made an offer on. There is a minimum list of requirements the property must meet in order for FHA to back the loan.

The drawback to an FHA loan? Government mortgage insurance is an additional expense you will need to cover.

VA Loan: These are managed by the Department of Veteran Affairs and are reserved for military service members. The benefit of a VA loan is that it does not require a down payment. If you are a military service member, an agent can help you find a property, but when it comes time to apply for the loan, your Veterans Administration office will point you in the right direction and help you with the application process.

USDA Loan: These loans are managed by the United States Department of Agriculture and are reserved for rural areas. They are available to low-income residents. Please visit http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do to see if a particular property is eligible for USDA financing.

As you can see, there are pros and cons to both conventional and government-backed loans. If you are thinking about buying a home in the near future, let me set up a meeting with a lender who can guide you through the ins and outs of each, and help you determine the best loan for your needs and comfort level. Please contact me at 425•213•3700 or send an email to kristy@betterhomesproperties.com.

Understanding Mortgage Loans – Part 1

mortgage application form

Mortgage Loans – Part 1

Buyers can easily get overwhelmed by the options they are confronted with when it is time to apply for a loan. Conventional? Government-backed? Fixed rate? Adjustable rate? Even within these categories there can be several options.

Before you can determine which loan is right for you, you need to have an understanding of how each one works and the costs and benefits of each. Let’s start with definitions:

Fixed Rate Mortgage: Fixed rate mortgages are exactly that–the mortgage rate remains fixed for the life of the loan. Monthly payments are fixed (for the principle and interest–if property taxes and homeowners insurance are paid as part of your payment, these are paid through an “escrow” account which can fluctuate from year to year).

Adjustable Rate Mortgage: These are also called ARMs. This type of loan has the potential to have monthly payments that change since the interest rate can change. There is usually an initial period of time where the interest rate does not adjust. This might be a “1-year” ARM, 3-year, 5-year, or 7-year. How often the interest rate adjusts will also depend on the loan. Since interest rates do change over time, the payment can either be higher or lower depending on the difference in the interest rate. For example, if someone took out a loan now when interest rates are at record-low levels, it is unlikely that interest rates will continue to be this low when the interest rate adjusts. Furthermore, ARMs generally start out with a lower interest rate than a fixed rate loan.

It is important to know your future plans when determining the type of loan which is ideal for you. For example, if you are planning on staying in your home for only seven years, it might save you money to use an adjustable rate mortgage with the expectation that you will be moving and taking out a new loan before the interest rate is adjusted. However, what happens if there is a health issue or something else which prohibits you from moving in seven years? What if you cannot move into a fixed-rate mortgage? These things must be taken into consideration when determining whether you can afford your monthly payment–now and later.

Below are our current interest rates as of the writing of this article:

Conventional Loan:
*30 Year Fixed Avg: 3.5%
*15 Year Fixed Avg: 2.75%
*5/1 ARM Avg: 2.875%
**Fees and Points: 1.0
***Margins: 2-2.5

FHA Loan:
*30 Year Fixed Avg: 3.25%
*15 Year Fixed Avg: 2.875%
*5/1 ARM Avg: 2.5%
**Fees and Points: 1.0
***Margins: 2-2.5

*Information provided by Ron Autry, Mortgage Advisory Group.

**Fees and Points refer to the cost of obtaining a loan. For example, on a $100,000 loan, the fees would be 1.0% or $1,000.

***Margin refers to the interest rate added to the measure for the ARM (also called the “index”) to determine the full interest rate charged. For example, if the index is the prime rate, in the instance of the 5/1 ARM above, the interest rate would be the prime rate plus 2-2.5%.

If you are thinking about buying a home in the near future, let me set up a meeting with a lender who can guide you through the ins and outs of each, and help you determine the best loan for your needs and comfort level. Please contact me at 425•213•3700 or send an email to kristy@betterhomesproperties.com.

Mortgage Relief Tax Exemption Set To Expire, Threatening Struggling Homeowners!

Global warming, house on a lifebelt, rising sea levels, flooding

Mortgage Relief Tax Exemption Set To Expire, Threatening Struggling Homeowners!

Beginning on January 1, 2013, people who lose their home to foreclosure will be required to pay federal taxes on any unpaid mortgage the bank can’t recoup through an auction. The same will be true for homeowners whose loan principal is reduced by a mortgage modification, with the wiped-out loan being treated as taxable income.

The new tax obligation will hit because the Mortgage Forgiveness Debt Relief Act expires at the end of 2012. The 2007 law was passed to save struggling homeowners from getting whacked twice, first by the sagging housing market and second by the Internal Revenue Service. Its expiration could push more people to remain in homes worth less than their mortgages, slowing the housing market’s recovery. Read more