Mortgage Advice

Your credit scores are made up of five different factors.  Once you understand what affects your credit scores, it will make it easier to understand there are simple steps to increase the scores.

Here is the direct link to understand the simple steps to build credit scores:

http://www.genuinemortgageadvice.com/understand-the-simple-steps-to-build-credit-scores/

The down payment seems to be one of the most important factors in buying a home.  As it should be, because the more money you put down, the lower your total monthly mortgage payment will be.

A down payment should be determined by the following questions:

1.  How much can you afford?

Your down payment should NOT consist of all the money you have in your savings account.  Why?  Well, let’s say the water heater happens to break down in the first year of buying the home.  That kind of break down can cost thousands of dollars!  It’s something most people would never expect, but it’s possible. 

You see, most people buy an existing home (especially a first time home buyer) and existing homes do have wear and tear just like anything else.  Eventually, something will break or tear, leading to a repair.  Sometimes it may only cost $10, but other times it may cost $5000.  So, keep a little money in that savings account in case of an emergency.  You will thank me later!

2.  Is the monthly payment or the down payment more important to me?

It’s quite simple, the more of a down payment you have, the less your overall monthly payment will be.  The less of a down payment you have, the more your overall monthly payment will be.

Example in real numbers:

The purchase price is $200,000 and you decide that a down payment of 20% is something you can afford.  The principal and interest payment (not including the taxes and insurance) on a 30 year mortgage at 5.0% would be $858.91.  Now, assuming the same scenario, but the down payment is only 10%, the payment would be $966.28.  The difference in a monthly payment is $107.37.  Over 1 year that’s $1288.44.  Over 5 years that’s $6442.20!

The important part to keep in mind about that example is that the difference in monthly payments just saved you $6442.20 over the next 5 years, because the down payment is only 10%.  Now, the difference in down payment money is $10,000.  So, if you are looking to save the most money out of your pocket, then put a less of a down payment down.  As long as the monthly payment is affordable, you will always keep more money will less of a down payment.

3.  What is the minimum down payment lenders allow?

Right now, in today’s lending environment, there are only 2 ways to obtain a mortgage with absolutely no money down.

1. VA Mortgage Loan - You can be eligible for this type of mortgage if you or your spouse is active in the military or is a veteran of the military.
2. Rural Housing Loan - You can be eligible for this type of mortgage if the home you are looking to buy is in a rural housing area.  The area is determined by the USDA.

…if you have more questions about the details of those two no down payment mortgage loans, please don’t hesitate to contact me.  jbucio@hmcdirect.com

If you don’t qualify for a no down payment mortgage loan, then the next lowest down payment mortgage is a FHA mortgage loan.  FHA only requires a minimum of 3.5% for a down payment.  Yes, only 3.5% is required for a down payment with this mortgage program.  It has become the most popular program lately, because of it’s low down payment, favorable interest rates, and you can still qualify will less than perfect credit.

These are the types of questions you should know the answers to before looking to buy a new home.  The more knowledge you have, the more comfortable you will be in making an offer on a home.

If you or someone you know is a first time home buyer, you should check out the top 5 questions first time home buyers must know!

Free money, yes free money for buying a home this year!

You can get a tax credit of $8000 or 10% of the purchase price (whichever is less) that you can claim on 2008 or 2009 taxes if you bought or plan on buying a home this year.

Unlike the first time home buyer tax credit last year, you DO NOT have to pay this money back.  (There are some rules to follow with not having to pay this money back and I have a direct link below to the IRS form that lists these rules).  Add this to the historic low interest rates, surplus of inventory on the market, and home prices being much lower, this is a great year to buy your first home.

This is what's necessary to qualify for the tax credit:

• You must be a first time home buyer.  If you haven't owned a home in 3 years or more, you will qualify as a first time home buyer.
• You buy a home anytime between January 1st, 2009 - November 30th, 2009.
• Single income filers cannot make more than $75,000 per year.  Joint income filers cannot make more than $150,000 per year.  (Higher income buyers may receive a partial credit)

If you bought or plan on buying the home in 2009, you have to follow a few rules in order to qualify in not having to repay the money.

Here is a direct link to the actual IRS Form 5504 that explains all this in detail.  This form has been updated Februrary 2009.

I always like to hear your feedback about incentives like this.  Would this encourage you to buy a home this year?  If not, what exactly are you waiting for?  I like both postive and negative feedback.

Here is a detailed list you can print or save about the tax credit.

2009 First Time Home Buyer Tax Credit

For more information regarding this credit go to 2009 federal housing tax credit.

A reality check perhaps?  This chart shows the trend of the 30 year fixed interest rate for the last 37 years.  Let's say it's the 1980's and you are looking for a home.  You give me a call about getting yourself pre-approved for a new home loan and I share with you how the rates are currently doing.

18% for a 30 year fixed rate?  With 20% as a down payment on a $200,000 sales price, that's a mortgage payment of $2411.34.  That's just the principal and interest payment.

Now, the current 30 year fixed rate is about 6.0%.  With a 20% down payment on a $200,000 sales price, that's a mortgage payment of $959.28!  That's a difference of 1452.08 every month!

Here an even better way to look at it.  Let's assume the first mortgage payment of $2411.34 was affordable for you.  That same payment with today's interest rates will buy you a home in the price range of $500,000!  Yes, that's half a million dollar home!

Now, perhaps a half a million dollar home is too much, (it would be too much for me at the moment) but you can see how today's mortgage rates are still at a historical low.