Mortgage Application Tips #5: Required Information

We briefly mentioned some of the things that you may need to bring with you before you start your application, but here is a more detailed list of the information mortgage lenders will use to consider your loan application. For all loans: Social Security Number, for borrower and co-borrower if any Employment History for the last two years, employment dates, addresses, salary. Current pay stubs or W-2 forms. Check and Savings Accounts and Certificates of Deposit. Location of bank accounts, account numbers and balances, address of bank if out of town, last 3 months' statements. Stocks, Bonds, and Investment Accounts.  Broker's name and address, description of stocks, bonds, etc.  Last 3 months' statements or copies of stock certificates. Life Insurance Policies. Insurance...

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Mortgage Application Tips #4 - Credit Scores

Before they decide on the terms of your loan, lenders want to know two things about you: your ability to repay the loan, and if you will pay it back. To assess whether you can pay back the loan, they look at your income to debt ratio which we talked about last week. In order to assess your willingness to pay back the loan, they look at your credit score. To learn how to improve your credit score, view this article. The most widely used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (high risk) to 850 (low risk). Your credit score comes from your history of repayment. They never take into account your income, savings, amount of down payment, or demographic factors like gender, ethnicity, national origin or marital...

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Mortgage Application Tips #3 - Debt to Income Ratio

The debt to income ratio is a formula lenders use to determine how much of your income is available for a monthly mortgage payment after you meet your other monthly debt payments. This is an important aspect of the mortgage application process. Without a good number, you won't be able to qualify for your new home. About your qualifying ratio: Typically, underwriting for conventional mortgages requires a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio. The first number in a qualifying ratio is the maximum percentage of gross monthly income that can be applied to housing...

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Mortgage Application Tips #2 - Proving your Employment and Income

Last week we discussed the basic information that you would need to bring with you in order to begin filling out your mortgage application.  Among those things is proof of your employment and income. These are very important things to lenders. Your ability to make the monthly payments on the mortgage and to afford the costs associated with owning a home are vital to the approval process. Things to prove: At least two years employment history. We will want to know all about your job including your employer's name and address, your job title or position, length of time of the job, salary, bonuses, commissions, and average overtime...

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Mortgage Application Tips #1 -The Basics

Are you planning on purchasing a home soon?  When applying for a loan or a mortgage, there is a lot of information that you will need to fill out the forms. You can't get the loan until you are approved and that can be a very intense process for some. We are here to make it more simple for you. Here are the basics of what you need to know prior to starting the loan application process: Be sure to gather all of your information together in one place so you have it easily accessible. This includes your personal finances, your bank account numbers and their balances, your current loan amounts and payments, and your credit card account numbers. Also bring your employment and financial history, and forms of identification such as your driver's license and your SSN card. You will need...

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To Refinance or Not To Refinance?

Have you ever heard the pearl of wisdom that states you should only consider refinancing if the new interest rate is at least 2 points lower than your current one? Maybe that was good advice several years ago, but since refinance costs have been falling recently, it could be a good time to take a serious look. A refinanced loan is often worth its cost many times over, considering the advantages that it brings, in addition to a reduced interest rate. Advantages When you refinance, you may be able to lower your interest rate and mortgage payment , perhaps significantly. You might also have the option to "cash out" a portion of your equity, which you will be able use to take care of higher interest debt, make home improvements, or plan a vacation. You could be able to refinance to a shorter-term...

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Tax Tip #7: Home Equity Loans

This is the last tax tip in this series of posts. Thank you for reading. If you have more questions, we urge you to seek the counsel of an experienced tax professional. #7:  Home Equity Loans Unfortunately in this economy, people sometimes need to take out a home equity loan to pay for things other than their home that they couldn't normally afford, such as tuition. Can you get a tax break for that? Perhaps. It depends on the situation. Part or all of the interest that you pay on the loan could be deductible for up to $100,000 ($50,000 if you are married filing separately). The amount that you can deduct interest on is the difference between what your home is worth and what you owe on your mortgage. (Example: if your home is worth $250,000, and your mortgage is worth $200,000, you...

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Tax Tip #6 - Mortgage Discount Points

#6 - Mortgage Discount Points Sometimes people choose to pay a point toward their mortgage upfront at closing so they can get a lower interest rate. Each point is the equivalent of 1 percentage of your loan. This can save you money in the long run, even if it doesn't go toward actually paying off the loan. Many people do this. If you opted to go this route too, you may able to deduct them if you meet all of the following criteria: The loan was used to buy, improve or build the home The loan is secured by your primary residence Paying points is normal where you live The points are calculated as a percentage of the loan principal The points are clearly outlined on the buyer's settlement statement The amount of cash you put into buying your home is as least equal to the amount...

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Tax Tip #5: Disaster Damage to your Home

#5 - Home Damage Caused by a Disaster If your home experienced damage from a disaster, such as a tornado, hurricane or fire, you may be able to deduct the amount that was not reimbursed by your home insurance. To find out how much you are able to deduct, first figure out what your Adjusted Gross Income is. This refers to the amount that you will actually be taxed on after you subtract all of your expenses and deductions. These are also known as your "above the line" deductions. Once you know what your AGI is, multiply it by 10%. Add $100. Then subtract that from the amount of damage not reimbursed. This gives you your damage deductible....

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Tax Tip #4: Adding "Green" Home Improvements

#4 - Energy Efficient Home Improvements Did you have a big remodeling project this year? You may be able to deduct some of those expenses if they were energy-efficient improvements by way of the Nonbusiness Energy Property Credit. Doing things like installing insulation, new windows or furnaces qualify. However, you can only claim $500 over your lifetime. If you have installed a solar electric system, solar hot water heaters, wind turbines, fuel cell property, or geothermal heat pumps in your home, look into the Residential Energy Efficient Property Credit. This credit will give back 30% of what you spend on running those features. There...

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Tax Tip #3: Paying Property Tax

#3: Paying Property Tax If you own a home, you were definitely responsible for property tax. The good news is that it is deductible. You usually pay these taxes as part of your monthly mortgage payments, so your lender will have all the information you need spelled out on your annual statement. Sometimes real estate taxes can be deducted on your federal tax return whether they are deductible by the state's rules or not. If you happened to buy a house this year, you no doubt paid plenty of property tax upfront. Be sure to find out how much of that you can deduct. It can be found on your settlement documents. Ask a tax professional for help...

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Tax Tip #2: Paying Interest on a Mortgage

With the tax deadline around the corner, we thought we would provide a few homeowner-related tax break tips over the next couple weeks that may help you. #2: Paying Interest on a Mortgage Your lender will be sending you a 1098 form that details how much interest you paid last year. Most likely your loan is less than $1 million (or $500,000 for those married but filing separately). In that case, you are allowed to deduct 100% of your interest and property taxes. If your mortgage exceeds this, the IRS will limit the amount that you can deduct. In order to claim this deduction, however, a bit of itemization is required. To do this, you must...

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Tax Tip #1: Selling your home and making a profit

The tax season is now upon us. We will be posting homeowner-related tax break tips over the next couple weeks that may help you. #1: Selling your home and making a profit: Congratulations! This is hard to do in this economy. Selling your home for more than you paid gives you a "capital gain". This gain that you made on your home is exempt from income taxes as long as you meet the following criteria: The gain is less than $250,000 single, or $500,000 for married couples filing jointly You owned the home for at least two years You lived in it for two out of the last five years before selling If you do not meet these requirements, the IRS...

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How To Improve Your Credit Score

How can you improve your credit score? It's virtually impossible to change your score in the time between when most people decide to buy a home or refinance their mortgage and when they apply. So the short answer is, you really can't do so "on the spot." But there are strategies you can live with to make sure when you apply for a loan your score is as high as possible. Make sure that the information each of the three credit reporting bureaus has on you is consistent and up to date. Order a copy of your credit report about once a year, and dispute any inaccuracies. Note: Theoretically, if a series of credit reports is requested on your behalf...

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Is your Lender Licensed or just Registered? What's the difference?

When you have found the perfect home and are ready to go through the mortgage process, you will need to contact a loan originator. What many people don't know is that there is a big difference between a State-Licensed Mortgage Loan Originator and one that's only been registered. If they have been state licensed, then they've also passed a series of exams and received their own NMLS number. If your lender does not have an NMLS number, they're most likely registered under their Lending Institutions License and may not have completed the training to be officially licensed in their state. As of July 1, 2010, new policies were set in place that...

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How To Apply for a Home Loan

Is your family growing? Are you tired of renting and would like to own your home? Now would be a great time to buy! Once you find that perfect new house, next comes applying for a home loan so you can officially purchase it. To do that, there are a few things you will need first. 1.) Check your credit score. In order to apply for a loan, your credit will be checked to ensure that you are reliable about paying your dues. Importantly, having a good credit score can actually help you save money sometimes if you qualify for a lower interest rate and a lower monthly payment. 2.) Know exactly what you can afford. Make sure the house...

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What is the Home Affordable Refinance Program (HARP)?

HARP is a federal government program that was introduced in March 2009. It is designed to help homeowners who are underwater with their mortgage payments. It allows them to refinance their home into a fixed loan with a lower monthly payment, thus avoiding foreclosure. In October 2011, President Obama announced a change for HARP that would allow it to reach even more underwater homeowners. It is now known as HARP 2.0.  Are you having difficulty making your current mortgage payment? Do you owe more on your mortgage than your home is worth? Perhaps HARP is right for you! In order to qualify, you must meet all of the following requirements: Your...

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Congress Allows Mortgage Forgiveness Tax Break to Expire

For the past 6 years, Americans have had access to a mortgage forgiveness tax break that was designed to help those who lost their homes in a foreclosure. However, when 2013 ended, so did this tax break and Congress is under fire for allowing it to slip past them without an extension. This is particularly bad news for struggling homeowners who could have continued to benefit from it. Without it, anyone currently selling their home could get dinged with very large tax bills. There was plenty of bipartisan support for extending this law, however, lawmakers failed to do so before its expiration date was reached on December 31, 2013. This tax...

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5 Reasons Why You Should Refinance Your Home!

What are the reasons and benefits of refinancing?  • Lowering your interest rate: Securing a lower interest rate is one of the top reasons for refinancing. This can make a big difference in your monthly out-of-pocket costs for housing and save money on financing fees.    • Convert a an adjustable rate mortgage to a fixed term: converting an ARM to a fixed rate mortgage will allow you to keep payments constant and avoid balloon and spiked payments due to interest rate fluctuations. • Build Equity Faster: if you are in a position to make higher monthly payments as a result of a salary or other good fortune, switching from a...

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What is an FHA loan?

Technically, it itself is not a loan. Rather, it means that the Federal Housing Administration has your back. They will insure your loan even if you have fair or poor credit, a low down payment (at least 3.5%), or have experienced bankruptcy or foreclosure. This makes lenders more inclined to help you out and offer you a loan because it reduces their risk of loss if you default on your payment. The FHA program has been helping borrowers who normally could not qualify for a loan since the 1930s as a way to stimulate the housing market. Typically, these types of loans have been primarily offered to military families, the elderly, handicapped,...

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Update on Pending Home Sales in November

According to the National Association of Realtors, the month of November saw some stabilization where pending home sales are concerned. They received a slight gain. There were also some monthly increases in the South and the West that managed to make up for certain declines in the Northeast and the Midwest. Have you ever heard of the Pending Home Sales Index? Well, if not, it is based on contract signings of existing homes on a large national sample that makes up about 20% of all transactions in the country.  According to that index, the number of signings increased by 0.2% to a score of 101.7 in November. Keep in mind that it does not account for closings, just contracts. This is good news for the economy. NAR's chief economist, Lawrence Yun, had plenty to say about the market in a...

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