Spring typically is when people start shopping for a home.
And with interest rates dropping to record lows, now is an attractive time to refinance or to buy a home - provided you can qualify for a loan.
"Two years ago, you could fog a mirror and get a loan," said Linda
Davidson, senior loan officer at Service First Mortgage in Garland.
"Now, you really have to qualify. You really have to show income, and you really have to have enough credit history to show that you repay your bills."
If you pass muster, "there's financing to be done," she said.
The federal government's efforts to bring down mortgage rates and make more families eligible for mortgages insured by the Federal Housing Administration have brought consumers out of the woodwork.
"We're all working overtime," said Craig Jarrell, president of the Dallas region at Pulaski Mortgage Co.
Incentives to buy
Rates on 30-year mortgages fell last week to the lowest level on record for the second consecutive week and are down by more than a full percentage point from a year ago.
Mortgage finance giant Freddie Mac said Thursday that average rates on 30-year fixed-rate mortgages dropped to 4.78 percent last week, from 4.85 percent from the previous period.
A government sweetener - an $8,000 tax credit for first-time homebuyers on homes purchased before Dec. 1 - also has helped fuel demand.
Consumers who qualify for the tax credit may claim it on either their 2008 or 2009 federal income tax returns. A tax credit is more valuable than a tax deduction because it's a dollar-for-dollar reduction in your tax liability, while a tax deduction cuts your taxable income.
Davidson said: "The $8,000 tax credit has been a big incentive for people to call and see if they qualify to purchase."
That's where things get sticky.
"I've never talked to so many people with bad credit than I've had in the last two months," Davidson said. "In the past, we could talk to 10 people and seven could qualify. Right now, we're talking to 10 and three qualify. Their credit scores are really, really low or their stated income does not exist."
To get the best interest rates, your credit score has to be above 740 now, Jarrell said. "A year ago it was 700."
The widely used FICO credit score ranges from 300 to 850.
To get an FHA-backed loan, your credit score has to be at least 620, Davidson said.
A low credit score also will make it tougher to get private mortgage insurance, which protects lenders if you default on your loan.
Joel Luebkeman, spokesman for PMI Mortgage Insurance Co. in Walnut Creek, Calif., said consumers in the Dallas-Fort Worth area need a minimum credit score of 620 to get mortgage insurance from his company.
"Previously, we went down to as low as 580," he said.
Your income and assets also must be "fully documented," he said.
Bigger down payments
The easiest way to avoid having to buy mortgage insurance is to put down at least 20 percent of the home's purchase price. If you can't afford that, you still will have to put some amount down.
FHA-insured loans require a 3.5 percent down payment. Most lenders are requiring a minimum of 5 percent down on conventional loans, said Keith Gumbinger, analyst at HSH Associates in Pompton Plains, N.J., which publishes mortgage information.
"You can still find lenders who can do 95 percent financing, providing you can get private mortgage insurance," he said.
But the 5 percent requirement may not last long, Jarrell said.
"Five percent down payments are hanging by a thread," he said. "I think 10 percent is going to be the new minimum. I think the government is pushing us in that direction. They've tightened the guidelines, so it's harder to lend the money."
Mortgage broker Gary Akright already is seeing that trend.
"Lenders have not loosened their underwriting standards," said Akright of Dominion Mortgage Corp. in Dallas. "If anything, it's being tweaked a little tighter."
Pay bills on time
A refundable first-time homebuyer tax credit of up to $8,000 is the centerpiece of four housing incentives found in the 2009 American Recovery and Reinvestment Act.
The new credit is designed to boost sales in the nation's sagging housing market.
Lawrence Yun, chief economist for the National Association of Realtors, predicts homebuyers will purchase an additional 300,000 homes in 2009 as a result of the tax credit.
"The impact will likely not be felt for at least three or four months, because it generally takes buyers that long to qualify for a mortgage and search for a home," says Yun.
The new credit improves on a first-time homebuyer credit passed in 2008, Yun says. That credit had to be paid back over a period of 15 years, making it more of a loan than a true credit.
"We think this year's tax credit will certainly have a much bigger impact because it is a true tax credit which is also refundable," Yun says. "For instance, if you owe $1,000 in taxes and qualify for the first-time homebuyers tax credit, you will receive a tax refund of $7,000."
Yun believes activity spurred by the new credit will help bring down housing inventory and stabilize prices.
Gibran Nicholas, chairman of the CMPS Institute, which certifies mortgage banker and brokers, says his group was in favor of a more generous tax credit.
However, he still believes the credit will have a positive impact on the housing market.
"This tax credit is more of a half-step, but at least it is in the right direction," says Nicholas.
Rules for 2009 first-time homebuyers tax credit
Nicholas especially likes a provision allowing homebuyers to claim their credit immediately.
"The greatest part of this tax credit is that homebuyers can take the credit on their 2008 tax return even when they have purchased the home in 2009," says Nicholas. "This acts as an immediate stimulus for a lot of people."
Homebuyers can take advantage of this filing exception in one of three ways: closing on the home prior to April 15, 2009, getting an extension to file taxes later in the year or filing an amended return.
Some state housing programs are introducing programs that allow homebuyers to access the tax credit money at settlement.
Not only do you have to understand what type of mortgage you should choose, you have to understand the costs associated with your mortgage. All of these costs will be paid upon closing your mortgage.
Purchase Points
Purchase points, also known as a "buy-down" or "discount points," are an up-front fee paid to the lender at closing to buy-down or lower your interest rate over the life of the loan. Each point is equal to one percent of your total loan amount. If you have a $100,000 loan, one point would equal $1,000. The more points you buy, the lower your interest rate, but the more money you'll need at closing.
How do you decide whether you should buy points and if so, how many? Well, the decision should be based on how long you plan on living in your home and what you can afford to pay each month toward your mortgage. If you plan on living in your home for more than five years, it's probably a good idea to purchase points. The longer you live in your home, the more you can save on interest over the life of the loan.
Interest Rate
When you get a mortgage, you are charged an interest rate.this is the rate which the lender charges you for using their money to buy a home. It determines how much your monthly payments will be. Generally speaking, the higher the interest rate, the higher your monthly payment.
Mortgage interest rates change constantly.daily, even hourly. If you speak to a lender and are quoted a specific interest rate, that's not to say you'll necessarily get that rate when you close on your loan. Not unless you formally lock-in that rate with the lender.locking in an interest rate will guarantee you get your loan with a particular interest rate. Lenders will allow you to lock in for 15, 45 or 60 days. But the longer you lock in, the more expensive it will be, since it's more of a risk to lenders.
Fees
There are always fees associated with getting a mortgage, these fees cover the cost of processing and underwriting the loan. These fees can include charges for ensuring the title to the home is free and clear; paying for a land survey; or paying for a home appraisal which gives you the estimated value of the property (lenders require an appraisal to close on your mortgage).
Deciding which mortgage to get may depend on what each lender does because different lenders may charge different amounts. Some may charge lesser closing fees to lure you in, but may charge you a higher interest rate, which means you may pay more in the long run. But everyone has different needs.you may or may not be able to afford to pay more at closing and are willing to pay more over the long term.
Before it comes time to close, do your homework, make sure there are no hidden fees, and ask your lender lots of questions so that you understand all the costs involved with your mortgage.
*Please consult your tax advisor.
Hooking that hottie is hard enough without the odds stacked against you, so the city researchers at Sperling's BestPlaces have identified for you "America's Best and Worst Cities for Dating."
The study is based on criteria that includes percentage of singles ages 18-24, population density, and dating venues per capita such as concerts, coffee shops, bars, bowling alleys, etc., and includes 80 metro areas in America. We teamed up with AXE Deodorant Bodyspray, which specializes in the dating game, to find out which city is revered as the D.C. (Dating Capital) of the U.S.
Land of the Longhorn
Yee haw! Austin, Texas, tops the list of best cities to play the dating game. Is the city you call home the place to find that special someone?
Best Cities for Dating
Worst Cities for Dating
Interesting Facts from the Top Ten
"Large cities that everyone associates with socializing, like Los Angeles and Miami, did not rank particularly high, scoring lower in categories like coffee shops per capita and flowers bought as gifts," said Bert Sperling, president of Sperling's BestPlaces.
"But cities like Austin (No. 1), Colorado Springs (No. 2) and Ann Arbor (No. 8) were not a complete surprise - they are heavy-populated college towns and it's easy for young singles to get together."
He is not a mortgage broker. But for a time today, President Obama seemed to be playing one on television, urging Americans not to miss out on rock-bottom refinancing rates.
From his perch in the Roosevelt Room of the White House, the president donned his salesman's hat and touted the benefits - for you, and of course, for the American economy - of home mortgage rates at their lowest levels in 35 years.
Seldom has the president sounded so much like the host of a late-night infomercial, stopping just shy of imploring people to call the toll-free number at the bottom of their television screens.
"There are 7 to 9 million people across the country who right now could be taking advantage of lower mortgage rates," Obama said, promising savings to average American families of $1,600 to $2,000 a year. "That is money in their pockets."
Having just returned to Washington from his first overseas presidential trip, where he negotiated with other world leaders over how to contain the global economic crisis and rewrite international banking rules, Obama pivoted to the domestic economy.
The focus, vastly narrowed from his talks last week, was intended simply to draw attention to a government Web site that tells people if they are eligible to refinance their mortgages.
"We hope that everybody takes advantage of it. The Web site is MakingHomeAfforadable.gov - is that right?" Obama said, repeating the address five times in five minutes, in case his audience didn't hear it the first few times. "So get on the Web site, find out what's available."
The housing crisis is one of the critical fronts in the battle to steer the nation through its deep recession. Obama said new housing programs would be presented soon, following last month's plan to provide $275 billion to help distressed homeowners, of which $75 billion would subsidize the mortgage industry to help borrowers avoid foreclosure. But he offered no details today as he reminded Americans to look into refinancing their home loans.
To make his point, Obama invited eight people to the White House, all of whom live in the Virginia or Washington area. Their stories of refinancing were intended to serve as testimonials for the masses who have not already called their mortgage broker, whether they are in danger of foreclosure or simply looking for extra money.
The Cruz family, Pedro and Luz, said they were at risk of losing their Virginia home after Pedro Cruz's work as a mechanic began to fall off in the slumping economy. By refinancing, they said, they saved $700 a month.
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Austin Real Estate agent selling homes, property, land, ranches, luxury estates in Austin TX, Lakeway, Round Rock, Real Estate, Cedar Park, Manor and Pflugerville.
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