Jumbo Loan Ceiling Up!

This is great news so it's worth repeating! The ceiling for jumbo loans is UP from $417,000 to $625,500 according to the March 21, 2009 article by Kenneth R. Harney in The Washington Post.

To read the full article click here!

A More Profitable Alternative

You’ve probably heard the term "reverse mortgage," which refers to a loan that allows homeowners aged 62 and older to tap the equity in their home, without repaying it. This has become an increasingly popular way for retirees to generate extra income for living expenses and paying off debt.

However, high fees and aggressive sales tactics prompted the Senate Special Committee on Aging to recently issue an investor alert. The intention behind the warning is not to discourage reverse mortgages, but rather to encourage homeowners to make sure it's the right loan product for them.

The biggest downside to such an agreement is that the up-front costs for application, legal fees, document recording, and loan origination fees can sometimes top 10% of the loan's value. For this reason, the federal government requires meeting with a financial counselor prior to applying for a reverse mortgage, helping ensure that it's the best loan product for your situation.

In addition to a financial advisor, you are strongly encouraged to consult with a local real estate agent. Simply put, you might generate more income by selling your home and moving to a less expensive one, directly pocketing the equity you've worked so hard to build over the years. An agent can compare your home's value to other attractive properties on the market, and guide you to a profitable conclusion!

Sheltering You and Your Income

It's easy to be swayed by all the negativity swirling around in the real estate industry. However, home ownership offers benefits you just can't get from other forms of investment, regardless of market conditions. In particular, the US tax code makes buying and owning a home a great deal.

First, you can deduct from your income the interest paid on your mortgage. That applies to second homes, too. You may even be able to deduct your loan's insurance premiums. If you've taken out a home equity loan, that interest is also deductible, regardless of how you've used the money.

If you've sold or plan to sell your home, profits up to $250,000 (or $500,000 for married couples) are free from taxation. While some restrictions apply, you won't get that kind of bargain on the sale of stocks, bonds, or other investments.

Now to get back to that mortgage interest deduction: it's almost guaranteed that if you hold a home loan, the interest deduction will help you reach the threshold for claiming all sorts of other itemized deductions above and beyond the standard amount allowed.

So just simply owning a home puts you in the happy position of being able to claim myriad other deductions from your taxable income. Real estate agents are not tax advisers, but they recognize a good deal when they see one!

Start on the Right Foot!

As you consider buying your first home, you'll get lots of advice, but you shouldn't do anything without a complete understanding of your financial situation and how much home you can afford. So, where do you begin?

There are two parts to financing - the downpayment (generally 20% of the purchase price) and the balance (the remaining 80%). Secure the best interest rate by reviewing your credit reports and correcting errors, which are surprisingly common. Do this at least two months in advance of your home search, as that's how long it can take to clean up your reports.

You'll know exactly what you can afford by securing pre-approval from a lender, who will review your income, debt and credit, and suggest the loan best suited to your qualifications and needs. If you can put down more than the usual 20%, you may qualify for a higher loan amount.

With less than 20% down, you might pay a higher interest rate or PMI (Private Mortgage Insurance), because the lender assumes a greater risk. Consult a financial adviser about ways to raise the cash, like withdrawals from an IRA or gifts from your parents. Each has tax implications, so proceed with caution.

With your financial house in order, you're ready to discuss your desires with a real estate professional and begin your home search in earnest. Congratulations!

Don't Wait, Renovate!

There are all sorts of loans for all types of homes, and "fixer uppers" are no exception. Lenders can offer attractive terms to buyers who want to renovate their purchase. One well-known lender offers three different types of renovation loans, with the most popular requiring a downpayment of only five percent.

So how does it work? Along with their application, borrowers submit architectural drawings of the proposed improvements. Then a completed home value is determined and financing terms are offered, with interest rates usually coming in just slightly higher than those on conventional loans.

Payments are often separated into six parts during the renovation, with disbursements issued at the satisfactory completion of each stage of the project. If you're familiar with construction loans, you'll find that it works in a similar fashion.

What's really attractive about purchase-plus-renovation loans is that some lenders will even roll the first six months of interest into the total loan amount. That can free you from making payments during those first six months while you're heavily involved in your improvement project and may even need to be living elsewhere.

In any case, there is a dizzying array of financing options out there, and it's best to start the discussion with a real estate agent who is well versed in matching homes to buyers and buyers to loans!

You're Not Alone!

Foreclosure. The very term strikes fear into the heart of any homeowner. Would you believe that one in every 1000 homes in the U.S. were in the process of foreclosure at the end of 2006? If you're facing such circumstances, first understand that you are not alone.

Most people got into this position by taking advantage of ridiculously low introductory rates on adjustable rate mortgages (ARMs). Now that those loans are resetting, consumers face dramatic increases in the interest rate, and consequently, the monthly payment. Even a reasonable rate like 7% becomes a burden to those who have grown accustomed to the 1 or 2 percent introductory rates.

Ideally, a short sale coordinated by a real estate professional provides the opportunity to satisfy all the motivated parties - seller, buyer, and lender. The seller wins by liquidating the property before foreclosure proceedings begin. The buyer benefits by securing property at a good value. Finally, the lender benefits by not having to initiate the foreclosure or take the property back.

A real estate agent may even have suggestions to help keep you in your home. Granted, it isn’t a sale, but agents appreciate the subtleties of building good relationships with loyal clients who will refer business to them in the future. Trust a professional to guide you through this difficult time with experience, courtesy and respect.