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Tuesday, February 24, 2009

First Time Home Buyer Tax Credit

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The First Time Home Buyer Tax Credit Basics
This is a dollar for dollar credit you get on your taxes at the end of the tax season the year you buy your first home. Dollar for dollar means, there is no formula of deduction where you hear some nice big pretty number of $8,000 and then you get a small percentage of that in cash with your tax refund. If you qualify for all $8,000, that will be the amount directly added on to your end of the year tax refund. If you get $2,500 at the end of the year and qualify for say, $2500 in First Time Buyer Tax Credit, then you'll get $5,000.
Please see my previous Blog called "Housing and Economic Act and Tax Credit..."about this tax credit from it's original inception, and then read on below here to see how it has evolved to a great opportunity for First Time Buyers in the year of 2009.
Here are the details of the Tax Credit. There are listed below the "Original Version" and "Updated Version". There were changes made that made this credit a lot more opportunistic for Americans, and that is the "Updated Version" to each of the guidelines I've listed below.

Amount of Credit
Original Calculation: Lesser of 10 percent of cost of home or $7500
Updated Version: Maximum credit amount increased to $8000

All principal residences eligible.

Refundable
Yes. Reduces (or can eliminate) income tax liability for the year of purchase. Any unused amount of tax credit refunded to purchaser.
No change

Purchasers will continue to receive refund for unused amount when tax return is filed.

Income Limit
Yes. Full amount of credit available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return). Phases out above those caps ($95,000 and $170,000).
No change

First-time Home buyer Only
Yes. Purchaser (and purchaser’s spouse) may not have owned a principal residence in 3 years previous to purchase.
No change. Still available for first-time purchasers only. Three-year rule continues to apply.

Repayment
Original: Yes. Portion (6.67% of credit or $500) to be repaid each year for 15 years, starting with 2010 tax filing.
Updated Version: No repayment for purchases on or after January 1, 2009 and before December 1, 2009

Recapture- (means that if you do the below...sell the home, there could be within the guidelines stated here, a requirement for you to pay back the tax credit.)
Original: If home sold before 15-year repayment period ends, then outstanding balance of repayment amount recaptured on sale.
Updated Version: If home is sold within three years of purchase, entire amount of credit is recaptured on sale. Applies only to homes purchased in 2009.

Feel free to call me for more specifics. Brad Lynch 469-450-2723

Thursday, February 12, 2009

January Retail Sales Data may not help rates today...

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After a couple days of low rates, we in the mortgage "circle" were hoping for the January Retail Sales Data report to come back negative...again, it's not good for the economy for negative reports, but for interest rates it might have helped. The expectations were a fall of .3% and it increased by 1%. Right off, that might lead us to believe that we would definitely see an increase in rates today. On the other hand, there was quite a bit of momentum in a bettering market towards the end of the day yesterday, and we have hope at the most, that rates at least stalemate today and don't go up.

Tuesday, February 10, 2009

How is the Government going to get mortgage rates down to 4%?

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Too often, the media passes over a story and doesn't do a good job explaining HOW. Sometimes the "HOW" is more simple than we expect, but if so, take a minute to mention it. The question, "how is the government going to get rates down to 4%," is obvious once noted and reminded of what happened with Fannie Mae and Freddie Mac a while back.

The government bought into the conservatorship for Fannie and Freddie, so they could directly demand the Treasury to issue bonds and fund the housing agencies(CLICK HERE for previous Blog on Conservatorship). In turn, their lower costs for funds would allow for a lowering of mortgage rates. In a Blog at Marketplace.com, they make a good point about offering rates at 4%...4% doesn't offer much compensation for overhead (default, prepayment risk, and underwriting).

Anyway, the government has the conservatorship on Fannie and Freddie and has lots of money...they can make it happen.

Monday, February 09, 2009

The Worry Free Mortgage

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Is there a Home Loan similar to the one Hyundai has for their cars where when you get fired, you have a worry free option?The Worry Free Home Loan was invented and Service First Mortgage is offering it to insure that a home buyer doesn't lose his home if they lose their job.

This is a market where even disciplined and responsible home owners have the risk of Bankruptcy or foreclosure.
The loan plan can provide you the security you need when deciding to buy a house in an economy that isn't strong enough to trust. This Worry Free Loan works like an insurance policy if you were to loose your job in the first two years of ownership. If you were to lose your job, the Worry Free Loan will pay your mortgage payment, Principle AND Interest, for you. Beyond the first two years, there is a free extended plan that kicks in to support you in hardship as well.

Alrighty, what is the cost for this "so called Worry Free Loan"? Right? You were thinking that? (:
It is a program that can go side by side with your regular loan for a price ranging from $300-$600 at closing that the seller or Custom Home Builder can pay for you. Call Brad Lynch if you are interested further in this loan. !!!469-450-BRAD!!!

Thursday, February 05, 2009

Should I pay points/origination...CONT'D/Part II

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Should I pay points/origination?
If you haven't read part I of this Blog, please click on this hyper link...Part I or scroll to the Blog title previous to this one below.
...YES!!! Pay points.
First off, somewhere in the time continuum's past, the word "point" became a trigger word that people hear and focus in on. The way I see it, it's a block for understanding how to shop or understand how to effectively shop your loan. I can tell you this, as a long time loan officer, when I hear a client ask about "points" or mention that their father, brother, uncle, or spouse asked them to ask about "points", I right now know there is a possibility I will have a hard time explaining mortgage and explain how to structure a loan for this person because they are "cursed" with the "point block".
That being said, if it makes since, pay points! Lots and lots and lots of points! OK, I'm exaggerating...but yes, pay points when it makes since. The interest rate that families are getting today, at this point in time, they will unlikely be able to refinance into a lower rate that makes since for the duration of that loan's life. So, there is no fear that they pay up front money to get the best rate and then rates drop months or a year later and now they refinance again and double the cost that they are trying to make up for the savings of the refinance.
There is a less obvious reason to pay points now, and many/most loan consultants won't "go there" with their client, lenders, investors, and banks are being really greedy with their incentives that pay the commissions and overhead for their loan officers. (I also don't "go there" with many clients because some clients are not interested in how or why, they are only interested in, "what's in it for me". I try to profile clients that care about me as a business relationship, not a slave that happens to have the key to the door that they have to get through to get a loan.) It used to be easy to go to a client and say, "George, I can offer you 5.5% with no origination/points, or I can offer you 5.375% with you paying .5% in origination/points, or 5.25% with you paying a full 1% origination/point." Reason being, the lending establishments would pay much larger incentives to loan officers that would offer .125% above the rock bottom lowest rate and then every .125% increase to the next and so forth as the rate that is offered moves up. Well now, we loan consultants would have to literally move an interest rate that we offer where the borrower has to pay 1% origination up .5% or .875% to be compensated enough to waive the origination/point...that blows the deal for a refinance because the payment increases to much.
What does that mean to me, the refinancing borrower or home buyer?That means that you need to ask your mortgage consultant for the lowest rate possible and ask him what kind of origination and discount must be paid for that rate. If you want your lender to waive origination/discounts/points, you are setting yourself up for trouble in this market.
Good luck! Go and buy a home or refinance to help your country through this recession.

Wednesday, February 04, 2009

Should I pay points/origination on my refinance?

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Should I pay points/origination on my refinance?
YES! If you are going to be there for a while.

I'll update this shortly...going to a meeting and can't wait to share. In the meanwhile, read this that I copied and pasted from CNNMoney and their trusty writer Les Christie. He does a great job expressing this.
"CNNMoney.com
Mortgage borrowing today: What you need to know
Wednesday February 4, 1:35 pm ET

By Les Christie, CNNMoney.com staff writer

If you're shopping for a mortgage these days, it's a whole new world out there.
"There have been a huge number of changes over the past few years in mortgage borrowing," said Gibran Nicholas, founder of the CMPS Institute, which trains and certifies mortgage advisors.
Of course, many of the subprime loans that helped fuel the housing boom - those that didn't require borrowers to show any proof of income, or that let homeowners make minimum payments - are are simply no longer available.
But even buyers looking for a traditional mortgage are now faced with different factors to consider.
Here is what you need to know:
Paying up-front points. Borrowers can pay points - one-time, up-front fees - in order to reduce their mortgage's interest rate over the life of the loan. One point represents 1% of the mortgage value.
But they often assume that they should never pay points, according to Alan Rosenbaum, founder of mortgage broker Guardhill Financial. That's a mistake, in his opinion.
When interest rates were high, paying points didn't make sense because borrowers were very likely to refinance after rates dropped. They wouldn't hold their original loans long enough to recoup their up-front costs.
But now borrowers can get a lot more bang for their buck. The old rule of thumb was that paying one point at closing could lower their mortgage's interest rate by a quarter percentage point or so.
"Today the spread is worth a half point to a full point on the rate," said Rosenbaum.
It means paying $2,000 on a $200,000 mortgage at closing can shave as much as a whole percentage point off the loan's interest rate, changing a 6% loan to 5%.
That would save $126 a month, and pay for itself in 16 months. Even if the rate were only lowered to 5.5%, that would still save $64 a month, paying for itself in 32 months.
Still, not everyone is convinced. Rosenbaum recently had a client who chose a 15-year fixed rate loan at 5.875% with zero up-front points on a $800,000 loan, instead of paying a point to get a 5.375% loan.
Had the borrower chosen to pay that point, he would have recouped that cost in about three years, and then gone on to save more than $200 a month for the remaining 12 years of the loan.
Of course, there are caveats. Buyers who are planning to refinance or sell within a few years shouldn't pay points, since the strategy simply doesn't pay in the short term.
Making more than the minimum down payment. If you can afford to put 25%, 30% or more down, should you do it?
Most lenders require a minimum down payment of 20%; anything less and borrowers will need to obtain private mortgage insurance.
And if a buyer could afford to put more than 20% down, it was generally assumed that they should.
The traditional thinking was, "If you have the capital to commit, why not?" said Keith Gumbinger of mortgage research firm HSH Associates. "It will give you a smaller balance to pay off. But now, in light of declining home markets, not everyone would agree with that."
High down payments can be wiped out in severely declining markets.
Nicholas said he knows of a couple in Arizona who put a whopping $400,000 down on a million dollar house a couple of years ago. That gave them, they thought, a nice home equity cushion should they run into financial trouble.
"But prices are down so much, the couple still fell underwater," he said. "It would have been better to conserve that cash in case home prices continue to decline."
Locking in the mortgage rate. Many borrowers choose not to lock in when rates are falling, as they have been, since they assume that the deals will only get better.
But that's often a mistake.
"We almost always recommend that if you have the numbers that make your deal work, then lock it in," said Gumbinger.
His reason: Interest rates tend to jump up much faster than they inch down, meaning that buyers are much more likely to get stuck with a higher mortgage rate than they are to get lower one because they waited.
Besides, locking in at the currently very affordable rates can give borrowers peace of mind, which is no small matter when you're trying to buy a house.
"You'll sleep better at night," said Gumbinger."

Testimonials & About Me

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Frisco, Texas, United States
In 2002, Brad Lynch began energetically consulting families in finding the right mortgage plan for their needs. In the beginning years, he was trained by a mentor who led by example, and this example was the epitome of integrity. Brad learned in the beginning by his mentor that many prospects may not consciously see what good intentions he has for them, do to the “wrap” many have caused w/in this industry, but always do what is right for the customer and in the end it will payoff. Integrity coupled with an energetic nature to nurture relationships, Brad has created clients for life. Through these clients for life, referrals have become the lifeblood of his business.