Question: Can I get a mortgage for less than 30 years? Is that a good deal? – Avi, Westminster, CO

The quick answer is yes & maybe.

Mortgages are available in a variety of loan terms. The two most common are 30 year fixed and 15 year fixed. However, 25 year and 20 year options are becoming more popular with consumers. Many people like the idea of refinancing to a shorter term and paying off their home more quickly. In some instances, dropping the rate will offset the shorter maturity of the new loan and result in paying off faster with the same monthly investment.

The second part of the question is a little harder to discern. Terms such as the 20 year and 25 year often offer little rate incentive. These options do however offer a price incentive. Typically, 12.5bps-25bps ($250-$500 on a $200,000 loan) of a price improvement for these options. So while these options are the same as the 30 year mortgage rate, the consumer does get the benefit of an additional credit from the lender at closing.

Now 15 year fixed mortgages are a different story, they are much more attractive in terms of rate than a 30 year fixed mortgage. The spread between these two products is typically 50bps or ½%. Over time that reduction in rate adds up to a significant lower overall cost of borrowing than a 30 year fixed. The downside, higher payments.

If flexibility and cash flow are your primary concerns, I’d recommend sticking with a 30 year fixed. If you are more interested in paying down the balance on your home, the 15 year fixed mortgage remains the most attractive option available to consumers.

With today’s low rates, consider looking into your options. We’d love to help. Give us a call at 970.455.4131 or “Contact Us” by email for a quick and simple review.

“I’m confused about the different ways one can hold title to a home. I’m a first-time buyer and my mom is interested in being on the loan with me. Would you please explain the options?” – Eve in Denver

Answer:

Several options as to how title to a home can be held exist, each has its advantages. It’s important to know your options before signing the final papers.

SOLE OWNERSHIP. For a single person buying a home, this is the most often used title-holding option. Even married couples can choose this Sole Ownership if one of the spouses signs a quick claim deed terminating marital rights to the property. The primary reason couples would choose this option would be for business purposes.

TENANTS IN COMMON. A piece of property can be owned by two or more people. Owners do not have to be living on the property and owners can own unequal shares in the property. For instance, three people can own a piece of property, with one person owning 50%, another owning 30% and the third owning 20%. This becomes especially important when the property sells or when one of the owners wants to sell. He or she can sell their portion without the approval of the other owners. Tenants in Common is used especially with second marriage partners who want to leave a portion of their property to children from previous marriages.

JOINT TENANCY WITH RIGHT OF SURVIVORSHIP. This option of title holding is most often used by married couples. Each has full title to the property and upon death of one spouse, the other spouse solely owns the entire property. This type of title holding does not require the addition of a Will to implement. A drawback of Joint Tenancy is that either owner of the property can transfer their share without permission from the other, possibly ending the Joint Tenancy and creating a Tenants in Common.

COMMUNITY PROPERTY. To date, ten states allow couples to purchase property as Community Property. This means that each person owns 50% of the property and a Will must be in place stating who will get the 50% share upon the death of either of the partners – it is not automatic, as it is in Joint Tenancy with Right of Survivorship.

LIVING TRUSTS. Utilizing a Living Trust is like having another “entity” own and control your assets, including your home. But that “entity” is yours, or others designated as trustees, who “own” the entity. While the creator of the Living Trust lives, the Trust is revocable (can be changed) during his or her life. Upon the death of the creator of the Living Trust, it becomes irrevocable (cannot be changed), and probate costs and delays are avoided because the assets in the Trust automatically pass according to the dictates of the Trust. Privacy is a major attraction in setting up a Living Trust. A trust document does not become public upon the death of the trust-holder like a Will does.

It’s also a way for an owner of a home to remove himself from the title to the property.

Often misspelled as “quick claim deed” or “quit claim deed”, quitclaim deeds have a multitude of applications, including:

• Assigning a home to a trust or entity
• Adding a partner to title after marriage
• Removing a partner from title after divorce

In order to quitclaim a property, the grantor must have the legal right to assign the property to a grantee, or else the quitclaim deed is worthless.  For example, you can’t quitclaim your interest in City Hall to your neighbor because you don’t actually own City Hall. 

This is where quitclaim deeds vary from warranty deeds (or grant deeds) — the types of transfers that occur when real estate is sold.  In instances of the former, the title to a home is guaranteed to be clear.

Before using a quitclaim deed on your own home, consult an estate planning attorney.  Transferring real property can trigger ruin a will, or trigger taxes — it’s important to consult a professional for help.

There’s some common sense ways to protect your home from burglary — keep the doors locked, the windows shut, and the alarm system on, for example. 

But drawing from a series of interviews with ex-convicts, NBC’s The Today Show reveals there are ways by which a vacationing homeowner can unwittingly make his home a theft target.  Awareness is the key to prevention.

As cited in the video, when vacationing:

• Have neighbors pick up mail and newspapers daily
• If it snows, have somebody drive tire tracks on your driveway
• Don’t announce your vacation on social media networks
• If you don’t have a safe, consider moving valuables to a child’s room

You can’t protect a home 100 percent from burglary, but you can at least make it “not the easiest target” on the street.  Use your common sense, and follow the steps outlined in the video.

It’s what the burglars don’t want you to know.

That leaves you 6 weeks from today to find a home and go under contract.

The First-Time Homebuyer Tax Credit program was passed as part of the 2009 economic stimulus plan. It credits up to $8,000 in tax payments to qualified buyers.

The qualification criteria are as follows:

• Buyer may not have owned a “main home” in the past 36 months
• The home may not be purchased from a parent, spouse, or child
• Adjusted gross income for the household must be below $95,000 for single tax filers and $170,000 for joint tax filers

Furthermore, not everyone who’s qualified will get the full $8,000. The credit can’t exceed 10 percent of a home’s purchase price, for example, and households with income approaching program limits get lesser benefits, too.

Meanwhile, an interesting note about the First-Time Home Buyer Tax Credit is that it’s a true tax credit and not a deduction. &nbsp. A person or couple claiming the $8,000 credit whose “normal” tax liability is $5,000 would get back $5,000 or whatever had been withheld for federal income taxes plus an additional $3,000 from the US Treasury when their tax return is processed by the IRS.

Review the program’s criteria at your leisure, but don’t wait until October to start looking for homes. If you can’t close by November 30, 2009 for any reason whatsoever, you won’t qualify for the tax credit.

Better to be ahead of the deadline than chasing it.

Greed
The days of originators (not including bankers) making 2% or more on a loan are gone. Charging bogus ‘handling’ fees is a short-term strategy and a disservice to consumers and the industry as a whole.

Consumers
If you are looking into refinancing and you think you are being charged excessive discount points &/or ‘broker’ fees in addition to origination fees on the good faith estimate, give us a call today for a ‘fairness’ quote. We will tell you if you are being charged too much and what you can do about it. Regards ~ JB

“TB&W has received clarification from both HUD and VA regarding allowable fees. This is not a change to either HUD or VA policy, this is a clarification of their existing policies.

Discount Points – If the loan is locked above Par, the borrower may not be charged any discount points. It is not permissible to both price the loan above par and charge any discount points, only one or the other is allowed.

Broker Fee – If the originator is charging a loan origination fee, the borrower may not be charged any additional broker fee. It is not permissible to charge both an origination fee and a broker fee, only one of the fees may be charged to a maximum of 1%.”

05.14.09 Update: The whole industry is subject to bogus fees. Teresa Boardman, at Inman News, provides more perspective about real estate ‘junk fees’.

Same for homeowners looking to pull the refinance trigger.

Versus mortgage rates on Friday afternoon, many lenders were already showing lower rates Monday morning before a late-afternoon rate sheet reprice even lower.

The drop in rates lowered annual mortgage payments by roughly $180 per $100,000 borrowed.

Rate dips like this aren’t expected, of course, bringing us to the one of the most important axioms of shopping for a mortgage rate: You can’t shop for good luck. This is because mortgage rates are inherently unpredictable. 

• On some days, rates are higher
• On some days, rates are lower
• On some days, rates are unchanged

Occasionally, there are days when rates are all three.

Monday’s rate dip, though — while sharp — may not last.  Early this morning, markets were pressuring mortgage rates to rise and lenders are often quick to pass rate hikes on to consumers.

With a little bit of luck, you’ll get your rate locked in before changes for the worse.

Both mortgage guidelines and the economy have tightened since 2006, bringing more attention to “joint homeowners” — non-spousal partners that buy and share a home as roommates.

The practice is not new, but, anecdotally, co-purchasing is becoming more common.

In the video above – filmed two years ago but still on-target today – real estate expert Barbara Corcoran provides good advice for co-purchasing partners.  Like any business relationship, it’s important to plan ahead.

• Hire an attorney to draft contracts and agreements
• Have a plan for when one or both parties wants to move or sell
• Consider life insurance policies on each other

The over-riding theme for co-purchasing arrangements is to be prepared.  Done right, however, they can create two proud homeowners where there would have otherwise been none.

The IRS expects to process 138 million tax returns this year and accompanying those returns will be a melange of tax deduction requests. 

Most will be run-of-the-mill including such staples as mortgage interest, vehicle mileage, and child care deductions. Others, however, will be less ordinary.

On its website, TurboTax pays homage to some of the most off-the-wall, offbeat tax deductions through the years permitted by the IRS. 

Among the “weirdest deductions allowed“:

• A bodybuilder’s body oil so his muscles would glisten in competition
• A private airplane for owners of investment properties
• Landscaping for a sole proprietor that meets clients at home
• A swimming pool for a man with emphysema

Tax deductions are prized by U.S. taxpayers. Hopefully, your 2008 tax returns included some good ones, too.

Some days, mortgage rates are favorable.  Other days, they’re not.  And while you can sometimes make an educated guess about where rates might be headed, you’re not always going to guess right.

Even the experts get it wrong more often than they’d like.

But some parts of the rate shopping process can be predicted and one of them is the future of mortgage guidelines. 

In general, the more often homeowners default on their respective mortgages, the harder it is for future mortgage applicants to be approved.

This is why “now” may be the best time to apply for a FHA mortgage.  Defaults are climbing, suggesting that FHA underwriting guidelines are about to tighten.

Indeed, the FHA has implemented two major changes since last summer:

1. The minimum downpayment requirement was raised by a half-percent to 3.5%
2. Cash out refinances are now limited to 85 percent, down from 95 percent.

These changes create barriers to entry for potential FHA borrowers, improving the overall quality of the FHA loan pool. 

For a taxpayer-funded agency like FHA, loan performance is an important goal.  Therefore, as the number of defaults grows, expect FHA guideline to get tighter.

The problem is, though, we can’t predict just where the FHA will tighten.  Maybe the FHA raises its minimum FICO score requirement, or maybe it gets tough on seller-paid closing costs.  A hike in loan fees isn’t out of the question, either — that’s the path Fannie Mae took, after all.

Whatever the FHA does, fewer people will qualify for FHA mortgages once it’s done.  So, if you’re planning to buy a home and your downpayment is limited, or your credit scores are suspect, or there’s some other “red flag” in your profile, consider moving up your timeframe to act. 

Mortgage rates may rise or mortgage rates may fall, but neither is going to matter if you can’t get qualified for a home loan.  And, for FHA mortgage applicants, tougher mortgage guidelines are only a matter of time.

(Image courtesy: The Wall Street Journal Online)

A Few Reasons Why Now May Be The Least Expensive And Easiest Time To “Go FHA”