Blog, Home Buying, Mortgage

Should you buy a new house in 2010 or wait a year?18 Mar

Quick video blog to consider whether you should buy a house now, or wait a year for things to stabilize.

Blog, Financial Safety, Home Buying, Refinancing, Wealth Building

If you will never see your principal payments again, do you really want to pay extra on your mortgage?17 Mar

If you were asked to make an investment in which you were told you would never see your money again, how much would you invest?

If you put money in a savings account each month, and the bank guaranteed you that you could never withdraw the money again, would you keep depositing checks?

If your savings account was only available to keep your bank from losing money, but you could still lose money, would you keep money in that savings account to protect your banker?

If you put money in an account that was guaranteed to never pay you more than 0% interest, would you want to save your money in that account?

What if the money in the 0% account could lose money, even if it couldn’t gain money?  How much would you put there?

What are these horrible accounts I am talking about?

Did you guess Home equity?

Think about it -

  • When you make a big down payment on a house, you don’t get paid money each month by the bank for that, do you?
  • When you send in extra principal payments, does the banker pay you interest?
  • If your home loses value, does the bank lower your mortgage balance, or does your ‘Home equity Savings Account’ disappear?
  • If you have a lot of equity, does that make your house go up in value?

Down Payments, Home equity and mortgage repayment or early payments are all questions regarding where you should store your wealth over the long term.  Equity in your house doesn’t make you safer or wealthier – it just sits there.

Big down payments are safe for the banker – not you!

Of course, you pay interest on money you borrow, but that is a choice – you can pay interest, and store your money elsewhere, or not pay interest, and maybe keep the bank from losing money.

Make sure your mortgage provider asks a lot of questions about down payment amounts and home equity before you structure your mortgage.

If you already are in a mortgage, get an annual checkup to make sure your mortgage is helping you to succeed financially, rather than helping the bank succeed.

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Blog, Mortgage, Refinancing

Home Value has fallen? You can still refinance12 Mar

If your mortgage is owned by Fannie Mae or Freddie Mac.  For most people, they have no idea who owns their mortgage – all they know is the servicer.  The Servicer of your mortgage is the bank that you send your check to each month.  They collect the escrow payments, chase down late payments, and send the owner of the mortgage their check each month.  Fannie Mae and Freddie Mac own most conventional mortgages in the US.  (Over $6 Trillion worth).

The Federal Housing Finance Agency has extended the government’s Home Affordable Refinance Program by 12 months.

HARP’s new end date is June 30, 2011.

Making Home Affordable logo

Originally known as Making Home Affordable, HARP aims to help North Carolina homeowners refinance their mortgage who may otherwise be ineligible because of falling home values.

There are 4 basic HARP criteria every borrower must meet:

  1. The existing home loan must be guaranteed by Fannie Mae or Freddie Mac.
  2. Your home must be a 1- to 4-unit property
  3. You must have a perfect mortgage payment history going back 12 months. No 30-day lates allowed.
  4. Your first mortgage balance must be 125% or less of your home’s market value

If you’re not sure whether Fannie Mae or Freddie Mac back your mortgage, you can look it up. Fannie’s website is http://www.fanniemae.com/loanlookup; Freddie’s is http://freddiemac.com/mymortgage.  If you don’t locate your loan on either website, your mortgage is backed by a third-party and is not HARP-eligible.

For homeowners that meet HARP’s criteria, there are some underwriting details of which to be aware.

First, if your original mortgage does not require mortgage insurance, your HARP mortgage will not require it, either — regardless of your new loan-to-value.

Second, all HARP refinances require income verification. It doesn’t matter if your original mortgage was a stated income or no income verification loan. You should expect to produce 1040s and W-2s for your HARP refinance and asset statements, too.

And, lastly, second (and third) mortgages may not be “rolled in” to a new first mortgage loan balance. Junior lien holders must agree to remain in a junior lien position, regardless of combined loan-to-value.

There is a thorough HARP FAQ section on the government’s website, but it’s for general questions only. For specific Home Affordable Refinance Program information, first make sure you’re program-eligible, then pick up the phone to call your loan officer.

While this program hasn’t been too successful nationally, we have helped many, many homeowners in the Charlotte area over the past year with this program.  If the resources listed in the post aren’t enough to get you started, feel free to give us a call for more answers.

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Blog, Financial Safety, Mortgage

Will your ARM adjust this year? Don’t Worry…Be Happy10 Mar

Pending ARM Adjustment March 2010

If your mortgage is set to adjust this year, the smart move may be to let it. Today’s conforming mortgages are adjusting lower than ever before — as low as 3 percent.  It may not be what you expected when you signed for your ARM several years ago.

The reason why ARMs are adjusting lower is because of how they’re made.

When conforming adjustable-rate mortgages adjust, they adjust according to a pre-determined formula. The formula is the sum of a constant and a variable.  The constant is usually 2.25 percent and the variable is a daily-changing interest rate called LIBOR.

The formula looks like this:

New Mortgage Rate = LIBOR + 2.250 percent

LIBOR is an acronym for London Interbank Offered Rate.  LIBOR is very similar to the Federal Reserve’s Federal Funds Rate.  Banks borrow and lend money from each other at the LIBOR or the Fed Funds Rate.

Normalcy is returning to banking and the timing couldn’t be better for Charlotte homeowners with ARMs. 15 months ago, a homeowner’s ARM may have adjusted to 6 1/2 percent.  Today, that same ARM falls to just above 3.

As a strategy play, it might make sense to let your ARM adjust. Or, because fixed rates are still near 5 percent, converting that ARM to a long-term fixed-rate product might make sense, too.  The decision is a balance between how low do you want your payment, and how long might you live in your home.

The longer you stay, the more it might make sense to switch to fixed-rate, even though ARM rates are so low.

If, however, you are in an Option Arm, and Interest Only ARM, or a Sub-Prime ARM, it won’t be so simple.  You want to carefully review the original mortgage paperwork to see what will happen with that loan when it adjusts. I can help with that.

If you’ve got a conforming, adjusting ARM, it makes sense to review why you chose that program 3,5, or 7 years ago – if htose reasons still amke sense, maybe you should keep it.  Of, it may be time to lock in a new rate for 5,7 or even 30 years.

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Blog, Home Buying, Mortgage

What’s Ahead For Mortgage Rates This Week : March 8, 201008 Mar

Non-Farm Payrolls Mar 2008-Feb 2010Mortgage markets improved last week in low-volume trading.

Between Monday to Thursday, Wall Street focused on the upcoming jobs reports and mortgage markets gained while traders jockeyed for position. Mortgage rates drifted lower through Thursday afternoon. But, then, after a better-than-expected Non-Farm Payrolls report Friday morning, mortgage markets — and mortgage rates — reversed.

Overall, mortgage rates dropped last week, but only by a small margin. Rates were best Thursday afternoon.

It was the second consecutive week in which mortgage rates fell.

Last week was also interesting in that both stock markets and bond markets improved, proving that rates don’t always rise when stock prices do. 455 of the S&P 500 companies posted gains last week.

If you’re shopping for a home or a refinance, though, don’t rest on your laurels. After Friday’s big sell-off, this week opens into a major headwind and, plus, the Federal Reserve’s support for mortgage markets ends in just 3 weeks.

This week, without much data to influence traders, the upward momentum in rates may have little cause to temper. We’ll see the Consumer Confidence numbers on Tuesday and Retail Sales on Friday.  Beyond that, there’s not much else.

After last week’s performance, conforming mortgage rates in North Carolina may be poised to rise rather sharply. If you’re waiting for the right time to lock your rate, it may have been this past Thursday. Consider locking your rate early this week to protect against further rate hikes.

Blog, Home Buying, Mortgage

Homebuyer Tax Credit Update03 Mar

You are probably aware that the first time home buyer (FTHB) credit of $8,000 ends soon – contracts must be signed by April 30th and close by June 30th.  A few rules that you may not be aware of:

  1. For homes purchased after November 6th, single filers with modified adjusted gross income in excess of 125k (225k for married filers) cannot take the credit.
  2. The income threshold is lower if the home was purchased prior to November 7th (phase out starts at 75k for singles and 150k for married couples).
  3. If you move within three years of buying the home, you have to pay the credit back.

You do have the ability to choose which year to take the credit.

  • If you were a FTHB in 2009, you can elect to amend your 2008 return or claim the credit in 2009.
  • Similarly, if you are a FTHB in 2010, you can elect to claim the credit in 2009 or 2010.

This rule offers flexibility if you go over the income threshold in one year, but not the other.

If you have lived in your current home for 5 of the past 8 years, you can claim a credit of $6500 using the same rules that apply to FTHB’s, above.

I’m not a huge fan of the governments decision to spend our money this way, but, I do think you will do a better job spending the $6500 /$8,000 than they will, so go ahead and enjoy the cash if you are buying a house!

About

My first profession was an F-16 pilot with the United States Air Force followed by short stint as a commercial airline pilot with US Airways.  As a pilot, I honed my ability to stay focused on “the mission” while adjusting to unplanned circumstances like bad weather, equipment problems, and even enemy aircraft.  This ability serves me well as a Certified Mortgage Planning Specialist (CMPS).

Speaking as a former airline pilot, a long flight resembles a mortgage: you should start with a destination in mind, a plan for how to arrive there, and adjust your course along the way.  With a mortgage, the destination is paying off the loan and living in the right home.  You make course corrections by paying extra on the mortgage, using a home equity line or refinancing.

In a long flight, however, missing one simple thing at the beginning, like checking the oil level in the engines, or setting the heading wrong by even just one degree, could have disastrous consequences later on. Same with a mortgage.

I had big ambitions when I started my mortgage company (and still have them). I envisioned a company that would help homebuyers develop an integrated mortgage strategy that would lead to financial clarity, and a plan that would help them increase their financial security, minimize their tax obligations, and increase their net worth over time.

Read more about Tom Tousignant . . .

Contact Us

Tom Tousignant, CMPS
704-541-1171 Office
866-835-7153 Fax
Tom@StartWithTheHouse.com

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