In this weeks’s blog post, I will explain why buying is significantly better than renting. You may have wondered about this yourself. The responsibility of owning a home, and long term commitment may seem like buying is much more expensive, but I’m going to show you why that isn’t the case. 

It's very common for someone in the market for a new home to look only at the sale price .  For instance, you may be looking in a specific neighborhood for a house for sale and say ‘Why am I looking here?  We can’t afford a home for that much'  They see the sales price and get intimidated, without stopping to think about what the realized cost will be.  By “cost” we typically mean out of pocket expense.  For example, a home listing at $400,000 does not mean that is what you will spend on it.  With our wide array of loan options, and historically low interest rates available, mortgage payments now are now very comparable to current monthly rents.  .  

I've prepared a list of reasons why it's better to buy than rent

• The ability to build equity — your wealth will grow as you gain more equity

• Tax benifits — mortgage loan interest is tax deductible 

• Stabilize your payments — While your landlord can increase the rent, your mortgage payments are relatively steady if your loan has a fixed interest rate

• Have something that belongs to YOU — a home is a place where your family can live and grow, and even though you will still owe a large amount you can decorate or build onto a house the way you like

• Gain a sense of belonging— homeowners often are more in tune with their communities; it's common for homeowners to work together to provide better schools and less crime 

Here is a breakdown of the differences between renting and owning from a financial perspective:

Rent                                                              Mortgage

$2,000 per month                       $2,500 per month (PITI)

3 year total - $72,000               3 year total - $90,000

Equity - $0               Equity - $22,006

Not Tax Deductible               Mortgage interest and mortgage insurance 

                      are tax deductible

Rent can increase year over year       Principle and Interest portion of mortgage is

                      fixed and will not increase

Wouldn't you prefer to build your own equity rather your landlords? Contact me here to complete the loan process and launch your future as a home owner.

Advantages of Mortgage Pre-approval

There was a time when getting a mortgage was as easy and common as shopping for groceries.  Unfortunately, that is no longer the case. There are, however, options available now to make the process easier; they are essential, and in some cases required. One step is to get pre-approved for a mortgage.  This means a mortgage lender has reviewed your financial standing and given you authorization to look for a mortgage for a certain price with certain terms. It is far more efficient and effective to get pre-approved before  starting a home search -  this way you go into the process more secure about what is realistic for your situation and confident to find what you are actually looking for.

Here are some advantages to consider when deciding on getting a pre-approval:

      1. Quicker approval process when applying for a home mortgage

      2. Buyers are taken more seriously by agents and sellers when looking for a home

      3. Credit issues and potential problems can be addressed ahead of time, proactively

      4. Buyers with a pre-approval are far more likely to win a bidding war if the other party is not similarly positioned

      5. The home search is narrowed to properties that are realistic for the buyers - making it a far more pleasant and efficient process for all

          involved

When going for pre-approval, there are a few things you will need for all applicants (if this is a purchase where both spouses financials are required to secure the loan, both parties information is required):  

1. Previous two years W-2 statements (or 1099 if self-employed/contractor)

2. Federal tax returns for the last two years

3. Bank statements for the last 3 months

4.  Recent pay stubs and proof of other income

5. Proof of investment income (if you have it). 

With this information on hand, you will be well on your way to being pre-approved. It is important to keep in mind that a pre-approval letter states that at that time you are eligible for a particular loan amount with certain terms. It is not a promise to fund a loan and does not guarantee any rates or conditions. It is simply a letter that should go with you when you are searching for a home and lets the agents know you are ready to stand behind a legitimate offer within your price range.

If you're in the market for a home or just thinking about it, give me a call or apply online. Click here to get your loan process started. I can help you get pre-approved getting you one step closer to your dream home.

FHA Mortgage Insurance Premium Increase

     

     This is the fourth increase in the last two years. What are the ramifications of this increase and why is it coming about now? In an ongoing effort to encourage the return of private capital to the residential mortgage market and strengthen the FHA Mutual Mortgage Insurance Fund, On February 27^th 2012, FHA Commissioner announced a new premium structure for FHA-insured single family mortgage loans. FHA will increase its annual mortgage insurance premium (MIP) by 0.10% for loans under $625,500 and by 0.35% for loans greater than that. Upfront premiums will also increase by 0.75%. The FHA commissioner was quoted saying “These modest increases are one of several measures we are taking towards meeting the Congressionally mandated two percent reserve threshold, while allowing FHA to remain a valuable option for low- to moderate-income borrowers.”

     The Up Front Mortgage Premium will increase from 1% to 1.75% of the base loan amount. This increase applies regardless of the amortization term or Loan to Value ratio and will continue to be permitted to roll into the financing. This change is effective for case numbers assigned on or after April 1, 2012. 

     The main purpose of the MIP is to aggregate money from FHA borrowers which is placed in the Mutual Mortgage Insurance Fund. This fund is supposed to equal 2 percent of FHA loans outstanding, but is now below the required level. HUD has reported to Congress that under this MIP structure, the Mutual Mortgage Insurance Fund will grow to the required 2 percent by 2014. Lenders face new charges, raising home financing costs at a time when the housing market remains sluggish. Higher mortgage costs result in borrowers qualifying for lower mortgages. Sellers will be impacted by the fee increase in the form of lower buyer demand and pressure to keep prices low.  

    Given this overview, and that the MIP increase will cost borrowers with a $200,000 mortgage, for example,  an additional $5,400 over a 30-year loan term - is this good , bad, or just necessary?  I can help you figure out the mortgage that makes sense for you. Click here for more information.