Home Buyer's Tax Credit About to End

You're probably up to your neck by now in forms and paperwork as the April 15th income tax deadline approaches. Maybe you've already completed your taxes, paid your bill, or are awaiting your refund check. Either way, now is the perfect time to revisit the extended and expanded Home Buyer's Tax Credit.

Why? Because now, as you calculate your tax bill or your refund, you can finally see in real terms just how beneficial a tax credit of up to $8,000 can be to your bottom line.

Here's the basics:

Qualified 2009 and 2010 first-time home buyers can get up to 10% of the home's purchase price or a maximum of $8,000. In November 2009, legislation extended a tax credit of up to $6,500 (or up 10% of the home's purchase price) to long-time residents of the same primary residence if they purchase a new main home. To qualify, eligible taxpayers must show that they lived in their previous homes for a five-consecutive-year period during the eight-year period ending on the closing date of the new home.

Important details to remember:

1) You don't have to pay it back (as long as you stay in your qualified home for at least 36 months).

2) If you qualify for the credit, you can still apply it to this year's taxes, even if you've already filed your returns, or save it for your 2010 returns.

3) This is a true tax credit, not a deduction. If you qualify for the full credit, there will be an actual dollar-for-dollar reduction of up to $8,000 (or up to $6,500 for qualified repeat buyers) on your tax bill now or in 2010.

4) New income qualification limits have been put in place that expanded the pool of qualified buyers.

5) If you purchased a qualified home or plan to after reading this article, you must have a contract in place by April 30, 2010 (with closing to take place by June 30, 2010), so don't wait!

There are, of course, other details and qualification requirements and restrictions that you'll need to consider. But don't hesitate to give us a call if you have any questions. Also, if you happen to have your completed 2009 tax return handy, we'll help you calculate how much money you can get if you purchase a home and qualify for the full credit.

If you know anyone who is looking to buy, sell or refinance a home, please forward their name and telephone number to us. We will happily provide the same high level of service that we have provided to you. The greatest compliment you could possibly give us is the referral of your friends and family.

Karl Peidl
Accredited Loan Consultant
Pleasant Valley Home Mortgage Corp.
Phone: 856-252-1224
Cell: 609-254-6687
kpeidl@pvhmconline.com
http://www.karlpeidl.com/

New FHA Lending Policies

Recently, the Federal Housing Administration (FHA) announced some lending changes. If you or someone you know is considering an FHA loan, some of these changes may affect you. Here's a brief rundown of the major changes.

Increased mortgage insurance - The mortgage insurance premium (referred to as private mortgage insurance by many people) will be increased from 1.75% to 2.25%. This change will add some cost to purchasing a home, but will not overburden consumers since the mortgage insurance is paid over the life of the loan, rather than upfront at closing.

New down payment and credit score requirements - According to the new policy, homebuyers who have a credit score of at least 580 may still be able to purchase a home with 3.5% down, but those with credit scores of less than 580 will be required to put down at least 10%.

Reduced seller concession - The seller will now only be able to offer the homebuyer 3% to help defray closing costs, as opposed to 6% under the previous policy.

The bottom line is that the changes will impact some homebuyers more than others. But in the end, the FHA is still committed to providing affordable home loans.

Mortgage Interest Rates for Fixed Rate Mortgages*

Rates as of Monday, 22nd February, 2010:

*Rates are subject to change due to market fluctuations and borrower's eligibility.

The Advantages of FHA Loans

In many regions of the US, FHA loans have not been utilized for years, so a lot of real estate agents and mortgage originators aren't familiar with this great resource. The following are a just a few of the recent changes that have made FHA loans a more attractive option again for some consumers looking to buy a new home or refinance an existing one:

1) Congress passed the Stimulus Act of 2008. During the recent housing boom, home values surpassed FHA loan limits in many regions of the US. The recent enactment of this important legislation, however, increased FHA loan limits up to $729,500 in many high-cost regions of the US through the end of the year. FHA loan limits vary by county, so give us a call for loan limits in your area.
2) The FHA changed its appraisal and fee negotiating guidelines. In the past, many sellers steered clear of FHA loans because the appraisals were too strict and certain fees were non-negotiable. The FHA has greatly loosened these guidelines to make it easier for both buyers and sellers.
3) FHA loans are much cheaper now. Because FHA loans are federally insured, they tend to trade at a higher premium in the secondary market. This means lenders can often charge a lower rate.

Other FHA Benefits:

1) FHA loans are typically not credit-score driven. Borrowers usually can have a lower score than with other products and still qualify for a good rate.
2) FHA loans require as little as 3.5% down, and allow a) Sellers to finance up to 6% of the buyer's costs to close; b) Homeowners to take cash out up to 95% of the home's value; and c) Homeowners to consolidate first and second mortgages up to 97% of the home's value.
3) FHA loans allow down-payment assistance programs that are not seller-funded. *It is important to note that there are 22 ways in which FHA allows the funds for buyer contribution, including relative gifts and loans.
4) FHA loans allow non-occupying co-signers (i.e., mom/dad) to co-sign on the mortgage, even if the occupying signer (i.e. son/daughter) has no income. Note that specific restrictions apply.

If you or someone you know are thinking about buying or refinancing a home, give us a call. We'll see if an FHA loan is right for your financial goals and needs.

The Clock is Ticking...
Extended and Expanded Tax Credit Expires 4/30/10

For prospective homebuyers who are on the fence about making a home purchase, the next few months represent a countdown of sorts as huge tax credits are about to expire. Here are important details for you to know:

Tax Credit for First-Time Homebuyers (FTHBs)
FTHBs (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000. Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

Tax Credit for Current Homeowners
The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years. Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

What Are the New Deadlines?
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010. Those in the military do have some special extensions on the timelines available.

What's So Great About a "Tax Credit"?
The benefit of a tax credit is that it's a dollar-for-dollar benefit, rather than a "tax deduction", or reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a first-time homebuyer who qualified for the entire benefit were to owe $8,000 in income taxes and would qualify for a tax credit of $8,000, she would owe nothing.

Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little or no income tax liability. For example, if a first-time homebuyer is eligible for a tax credit of $8,000 but is liable for $4,000 in income tax, she can still receive a check for the remaining $4,000!

Higher Income Caps
The amount of income someone can earn and qualify for the full amount of the credit has been increased. Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible. Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

Maximum Purchase Price
Qualifying buyers may purchase a property with a maximum sales price of $800,000.

It's also important to note another upcoming deadline as the Federal Reserve winds down a program that has been keeping home loan rates artificially low. The fact is that the lowest rates of 2009 were driven down to their attractive levels because of the Fed's Mortgage Backed Securities (MBS) purchase program, which the Fed once again emphasized in its January 27, 2010 Rate and Policy Statement will end on March 31, 2010. As the Fed's program winds down and ends, rates could rise over time since MBS will have less support from the Fed.

If you have any questions regarding the tax credit, pick up the phone and call me. I'm here to help you take advantage of one of the greatest opportunities homebuyers may ever have.

Sincerely,

Karl Peidl
Pleasant Valley Home Mortgage Corp.
856-252-1224
kpeidl@pvhmconline.com

Those Who Wait Will Pay Thousands More This Spring

Waiting a few extra days or weeks to purchase a home this spring could cost buyers thousands of extra dollars as the office of Housing and Urban Development (HUD) implements several changes for loans guaranteed by the Federal Housing Authority (FHA).

Coming just weeks before the April 30 deadline for the Home Buyer Tax Credit and just days after the March 31 expiration of the Federal Reserve Board's mortgage backed securities purchase program (which has kept home loan rates artificially low for over a year), these FHA changes make it even more important to act now to save big.

Here are a few reasons why:

On April 5th, the cost of required up-front mortgage insurance for loans guaranteed by the FHA will increase from 1.75% to 2.25%. For a borrower purchasing a $200,000 home with a $7,000 down payment, the up-front mortgage insurance will increase by $965. Up-front mortgage insurance is typically financed in the final loan amount so the impact to a monthly payment will be minimal but overall, the increase is still borne by the borrower both upfront and monthly.

Later this spring, the amount of money that a seller can return to the buyer from their sale proceeds will be reduced from 6% to 3%. The reduction in these "seller concessions" can increase the amount of cash a buyer will be required to pay at closing by $6,000 for a home purchase of $200,000.

There is only one way to avoid being affected by all of these costly changes that lie ahead - submit all FHA mortgage applications by the last week of March.

If I can answer any questions you may have about how these changes could impact you, call me. I appreciate your business.

Sincerely,

Karl Peidl
Pleasant Valley Home Mortgage Corp.
856-252-1224
kpeidl@pvhmconline.com

Mortgage Rate Update

FHA Loans Facilitate Home Ownership

The Federal Housing Administration (FHA) program first began in 1934 in an effort to encourage home ownership despite the difficult economic times of the era. The program enables consumers who may not qualify for a standard loan to obtain the financing they need to purchase a home without income limitations.

FHA loans differ from typical loans in that they are insured by the Federal Housing Administration, which is a part of the Department of Housing and Urban Development (HUD). Because this insurance reduces the lender's risk on the loan, lenders have greater flexibility with regard to approving loans. For example, FHA loans are not credit-score driven, so a client may be able to obtain a loan despite having had credit problems or even a bankruptcy in the past.

FHA loans also provide added flexibility when it comes to closing costs and the down payment. Many of the closing costs can be incorporated into the loan, and a down payment of just 3.5% of the purchase price is required. The down payment may be obtained as a gift from a family member.  FHA loans are processed just like any other loan, and they provide a wonderful opportunity for consumers who are seeking to achieve home ownership!

Mortgage Interest Rates for Fixed Rate Mortgages*

Rates as of Thursday, 7th January, 2010:

*Rates are subject to change due to market fluctuations and borrower's eligibility.

Karl Peidl
Pleasant Valley Home Mortgage Corp.
305 Harper Drive, Suite 3
Moorestown, NJ 08057

856-252-1224

kpeidl@pvhmconline.com

www.karlpeidl.com

What Lenders Look for in Home Loan Applications

Once your loan application is filled out and sent to the lender for review, the first thing they will look for is your ability to payback the loan you are requesting. My team and I have a streamlined loan process to help you get your ducks in a row prior to this review. A grand slam loan package is in perfect order and answers all the important questions up front. We know what the lenders are looking for, based on long-term relationships with them and extensive knowledge of guidelines for a multitude of loan programs that are available today.

What is the lender looking for when they review the loan application?

The lender wants to know about your personal financial picture, including savings and credit history and your employment stability. The co-borrower's history is also taken into consideration. The lender also considers the loan amount and appraised value of the home you are looking to purchase. Not every applicant is approved the first time through the process. If the underwriter has any questions or concerns, he or she will require certain conditions be met before they approve the loan. Pre-approval prior to house hunting lets you know exactly how much you are qualified to borrow in advance.

What can I do on my end to make it easier?

Before taking out a home loan it helps to establish a consistent record of paying your bills on time. If you have utility bills that are overdue, bring these up to date. Make sure you are paying credit card installments in a consistent and timely manner.

We can help you evaluate your debt-to-income ratio to determine what mortgage payment will be comfortable and affordable for you on a monthly basis. Aim for having enough savings to cover your down payment, closing costs if necessary, and two month's expenses in case of emergency. We'll help you find a program that works for you.

If I just started a new job six months ago, can I still apply for a loan?

A stable employment history is important, but the lender does take human factors into consideration. If you've recently completed college or vocational training, or were released from the military, you have good cause to have a lack of consistent work history. If your profession is seasonal, and gaps in employment are normal in your field, there are loan programs that can work with your situation. If you are a freelancer or do contract work, the lender will look for consistency in income over the last two years.

Consistency is the key word in the lender's mind. But know that lenders have developed many different loan structures to meet the needs of the general public. When your grandparents bought their first home, they probably put 50% down and made a lump sum payment when the note was due. Times have changed, and so have loan programs. My team and I stay on top of current mortgage trends. We monitor rates daily and have a support network of Realtors®, CPAs, Financial Planners and Credit Repair Consultants to lend you additional assistance.

Call me directly for a free consultation.

Karl Peidl
Pleasant Valley Home Mortgage Corp.
305 Harper Drive, Suite 3
Moorestown, NJ 08057

856-252-1224

kpeidl@pvhmconline.com

www.karlpeidl.com

Mortgage Rate Update
High Credit Score = Low Mortgage Rate

Credit scoring was developed in the 1960s as a means to determine whether or not consumers were likely to repay their loans. The score ranges from 350 to 850 with a higher score being extremely favorable. Essentially, a high credit score translates into lower interest rates for the borrower.

There are five factors that comprise the credit score. Payment history accounts for 35% of the score; outstanding credit balances have a 30% impact; credit history makes up 15%, type of credit factors at 10%; and inquiries influence the score by 10%. This gives the lender a snapshot of an individual's sense of financial responsibility and ability to pay back loans.

There are many quick tricks to improve the credit score, and I can provide borrowers with more information on this subject. If necessary, I guide them to a reliable resource for credit remediation. If a borrower has to pay a higher interest rate to close a loan, the tarnished credit rating will begin to improve once mortgage payments are made on time and in full. If that is the case, my team and I will be on the watch to alert the borrower when an opportunity arises to refinance and get a lower interest rate.

Mortgage Interest Rates for Fixed Rate Mortgages*

Rates as of Thursday, 31st December, 2009:

*Rates are subject to change due to market fluctuations and borrower's eligibility.

Mortgage Rate Update
Know Your Credit Score

In the past, it wasn't out of the question to obtain a mortgage with a FICO score in the low 500 range. In fact, if you were willing to accept the payment, you could even do so with little money down.

Today, however, if you have a low FICO score, you may not be able to get a mortgage. In fact, depending on how much of a down payment you can afford and the mortgage program you are applying for, you may be looking at a minimum score of 680 to obtain a mortgage.

The point is, your credit score is more crucial than ever-not just for getting a low rate, but for qualifying for a mortgage at all.

So, before you sign a purchase contract or apply for financing, take the time to have your credit profile checked out. Often, there are steps you can take to help correct and improve your credit score. But doing so, requires the insight and advice of a professional who knows what to look for and what to do to achieve the desired results.

If you think your credit score and credit profile could use even a little improvement, contact me to discuss your situation. With a short conversation, we can discuss what your credit score looks like and what options you have.

Mortgage Interest Rates for Fixed Rate Mortgages*

Rates as of Thursday, 24th December, 2009:

*Rates are subject to change due to market fluctuations and borrower's eligibility.