Rental of current home

I wanted to give some additional info on rental of current home if the borrower was going to go with an FHA loan for their next loan and additionally for conventional financing, IF the 30% equity cannot be documented:

FHA: Cannot use any rental income unless it has been rented for over 12 months and is on the tax returns. (home being vacated cannot be an FHA loan and get a new FHA loan)

CON: Need to show proof of 30% equity with AVM or exterior only appraisal, proof security deposit has been deposited and lease agreement. If the 30% equity CAN NOT be documented- you need to have 6 months PITI for BOTH properties. 75% of the rental amount can be used.

Marty

Rental of present home and purchase another (future home to be owner occupied)

If a buyer would like to rent their present home and purchase a new home, what is the documentation requirement to make this possible?

1. Buyer must have at least 6 months of piti (full payments) for the home to be a rental on deposit in checking or savings AFTER closing of the purchase of the next home
2. Rental home must have at least 30% net equity (from an appraisal or County tax notification)
3. Show that the Security Deposit and 1^st months rental/lease payment has been received (verification that the amount has been deposited in their checking or savings account).
4. The buyer cannot have an FHA loan on the rental and get a future FHA loan (only 1 FHA owner occupied loan is allowed at a time).

Call me if you have any other questions.

FHA holds firm on 3.50% minimum down payment

This past Thursday (March 11, 2010), FHA Commissioner David Stevens testified before Congress that an increase in the minimum down payment from 3.50% to 5% would result in 300,000 fewer buyers able to use FHA financing. This translates into a 40% drop in the Housing Market. It looks like FHA is going to stand firm on their minimum down payment at 3.50% and says the increase in the upfront mortgage insurance premium in 3 weeks from 1.75% to 2.25% should be sufficient to correct the shortfall in revenue and keep FHA solvent.

In other news last Thursday, David Stevens said that a .25% to .75% increase in mortgage rates is an acceptable sign of health in the economy. Wow, hang onto your hats if this happens! This of course is not the news that we want to be hearing and I could see that if there is a chill in the housing market because of the increases in rates, we will see the Government again participate in the Mortgage Back Security (MBS) program. For now, this is an excellent time for taking advantage of tax credits, low rates and depressed home prices.

WSU Bridal Fair Drawing Winner

Yesterday, March 3, 2010 I sponsored a booth at the Weber State University Annual Bridal Fair and met many students, Brides and Grooms and discussed the fantastic opportunity First Time Home Buyer's have to purchase a home and receive the $8,000 tax credit which is scheduled to expire on April 30, 2010.

During the daylong fair I received entries into my drawing for a $25 Olive Garden Gift Certificate or a $25 Spa Treatment at New Image Day Spa located on Adams Avenue just North of the Ogden Regional Hospital.

Congratulations to Emily Craghead who was the winner of my Drawing and wanted the Olive Garden Gift Card so she could take her sister out to dinner (now that is a nice sister!).

I wanted to thank everyone who entered the drawing and for the time they took to talk to me about their mortgage needs when they stopped by my booth. I look forward to helping Newlyweds, just marrieds, or those ready to move up into a new home with their mortgage needs! Call when I can help you!

Purchase and Refinance Business Surges

Great news in the mortgage market!

Mortgage Applications surge 15% in the latest week. The Refinance Index increased 17.2% from the previous week and the Purchase Index increased 9.0% from one week earlier.

Call me with your purchase or refinance needs!

Deduction of Interest Paid and Points paid at closing

I have been getting calls this week asking about whether points paid at closing, which are shown on the settlement statement at closing, are able to be deducted as interest paid on your long form.

YES!

Deduct your points paid with or with out a form 1098 from Primary Residential Mortgage or from the Lender you are making your payment to. Keep a copy of your settlement statements with your tax papers in case of an IRS audit. As always, I advise you to double check with your tax advisor for the final word on this.

If you are at a point you would like to give up on the idea of doing your own taxes, let me refer you to my tax advisor. Her name is Lorrie Rumpsa and can be reached at 801-621-8128 for an appointment to schedule your tax review. You will LOVE her!

Thanks for the calls and please let me know what other tax questions you have and I will research it for you!

Return on Investment Calculations

The calculation appears simple enough:
Return on investment equals what has been
earned divided by what has been invested.
If an investor puts $1,000 in a portfolio of
stocks that appreciates to $1,100 and pays
$50 in dividends, the portfolio would have
returned 15 percent ($150/$1,000).

However, it is not that simple. To
make the percentages meaningful,
investors need to consider
a few important variables.
For one, a $150 return
on a $1,000 investment in
one year is better than a
$150 return on a $1,000
investment over two years.
Indeed, the first outcome
produces a 15 percent annualized return,
while the second produces a 7.24 percent
annualized return. Annualized returns
enable direct comparisons.

Fees also matter. Two investors each
earn 15 percent on their $1,000 investment.
One investor is charged 1 percent of the
portfolio’s value at year’s end, while the
other is charged 2 percent. After fees are
subtracted, the first investor posts a 13.8
percent return on investment, the second
investor posts a 12.7 percent return.

Leverage, or debt, is another important
variable. Consider two $200,000 rental
properties: One investor pays the full price
in cash while another investor borrows 80
percent of the property’s value ($160,000) at
6.5 percent on an interest-only loan. After
one year, the property generates $15,000
in operating income. The first investor
earns 7.5 percent ($15,000/$200,000) on
his invested capital. The second investor
earns 11.5 percent [($15,000-$10,400 in
interest payments)/$40,000] on his invested
capital.

The variable of leverage,
in turn, leads to the variable of
risk. Some investments are
riskier (offer a greater
chance of losing money)
than others. A leveraged
investment is riskier
than a non-leveraged
investment; bonds are
riskier than stocks; futures
contracts are riskier than
stocks.

Bottom line: An 11.5 percent return
on a leveraged investment isn’t necessarily
better than a 7.5 percent return on an
unleveraged one.

Returns on investment are important
considerations, to be sure, but the variables
that contributed to those returns are just as
important.

MBS Purchase Update

As I have mentioned in previous Blog posts recently, the Government’s Program to purchase Mortgage Backed Securities (MBS) is nearing the end. This program began in January 2009 as part of the economic recovery act of 2009 and was designed (and has been successfully implemented) to hold down mortgage interest rates.

This week’s purchases of MBS by the Government was $12 Billion, bringing the total to $1.173 Trillion since January, 2009, and leaving $77 Billion to be spent over the next 8 weeks. Leaving an average of $9.62 Billion per week to be spent, I have warned, as have other financial experts, that mortgage rates are going to begin increasing.

This latest week of increased refinance activity (up 21% Nationally) may be an indication of the reality of our situation becoming clear to homeowners who have not yet taken advantage of lower rates. A recent Government report (in a previous Blog Post), indicated that just 30% of eligible homeowners who could benefit from the lower interest rates we are enjoying, have actually taken the steps to refinance.

Also, homeowners wanting to sell their current homes in order to take advantage of the $6500 tax credit scheduled to expire on April 30, 2010 has also dramatically risen recently (National Association of Realtors article I read yesterday).

And finally, the first time homebuyer. What a shining star in the market place this past 12 months! With over 42% of all homes purchased in 2009 attributed to first time home buyer’s, and why shouldn’t these first time home buyer’s take advantage of a “once in a lifetime” benefit?!

First Time Home buyer's are rushing to put homes under contract before April 30^th (and close before 6/30/10) to take advantage of the $8,000 tax credit!

This is a wonderful time in Mortgage rate history! Please call me if I can help with any Purchase or Refinance Questions you may have!

What do I do to my Home before I list it for sale?

Five Things You Must Do
Before You List Your Home

While sales are showing signs of picking
up around the country, it is still crucial that
you do everything you can to make your
home as attractive as possible to potential
buyers before you list it for sale.

1. Clean everything. A clean home gives
buyers the impression that your property
has been well cared for. (Call me if you need
help in this area, I have several professionals
who I can refer you to!)

2. Repair everything. If you have neglected
small things such as burned out light
bulbs, broken closet doors or chirping fire
alarm batteries, buyers will wonder what
bigger items you may have neglected (such
as furnace repair, roof replacement or
foundation work). (For professional Electrican,
Handyman, or Plumber, call me for phone
numbers for those I trust and would refer to you!)

3. Make your home a clutter-free zone.
Removing all clutter is vital. It can make
your home appear larger and give buyers a
sense of space and order. (Rent a storage unit
for $50 per month and get $5,000 more sales
price on your home!)

4. Fantastic curb appeal is another must have.
You want buyers to be bowled over
the moment they pull up to the house. In
this competitive market, it is not enough
to assume buyers will fall in love with
the inside; the outside of your home must
impress them as well. (Interior Design
Specialist can help Stage your homes interior,
and a Landscape architect can help with the
exterior curb appeal-Call me for names and
phone numbers for professionals I would
recommend!)

5. Hire a professional stager to ensure your
home has its best foot forward. A stager
can show you strategic ways to set up
your home including furniture placement,
color and balance that will elicit certain
emotions in your buyers and help them see
just how great your house is.

Consult your Realtor for more insight into
what you can do to ensure a quick sale at
the best possible price.

Thought for the day:

Rule No.1: Never lose money.
Rule No.2: Never forget rule No.1.
~Warren Buffett

First Time Home Buyer's Are Buying Homes!

According to the National Association of Realtors profile of home buyers and sellers, First Time Home Buyers reached the highest market share on record in 2009. First Time Home Buyer's bought 47% of homes purchased, the highest percentage since 1981.

I've gathered a lot of experience over the years. And I'd like to share it with someone ready to buy their first home. The $8,000 tax credit is soon to expire with a scheduled date of April 30, 2010 as the deadline for a home contract and June 30, 2010 as the closing date.

MBS purchase program to end March 31, 2010

Yesterday, the Fed confirmed that its Mortgage Backed Security purchase program will end March 31, 2010. This announcement was expected, however, there WAS a chance that the program would be extended or expanded but this hoped for extension did not happen.

What this means for Mortgage interest rates is that without the extra demand that the Government has created for Mortgage Bonds, we could see a fall in Bond Prices and an increase in Mortgage rates beginning in April.

I will keep you posted of additional market news affecting mortgage rates.