(760) 822-7062 Rick@RickYells.com

Rates

By most estimates, mortgage rates were expected to climb this year, with rates on the 30-year fixed-rate mortgage predicted to exceed 5%. Instead, rates are now lower than they were this time in 2013 — much to the advantage of mortgage shoppers.

There are a few reasons why higher rates never came to pass.

Rates on the 30-year fixed-rate mortgage averaged 4.15% for the week ending July 10, according to Freddie Mac’s weekly survey of conforming mortgage rates. A year ago, rates averaged 4.51%.

“In January, we were projecting at the end of the year that the 30-year would be 5.1%,” said Leonard Kiefer, deputy chief economist with Freddie Mac. “We most recently revised that down to 4.4%.

Supply and demand

Economists had largely expected rates to rise once the Federal Reserve indicated it would taper its purchase of mortgage-backed securities through its quantitative easing program, Kiefer said. Rates did, in fact, rise spike upward due to that indication last summer.

But when the Fed actually began purchasing fewer of these securities, mortgage rates began to fall. That’s because the tapering ended up coinciding with a reduction in mortgage originations — which means fewer mortgage-backed securities were being issued, Kiefer said.

“The Fed’s ‘demand’ for new mortgage-backed securities has declined less than has the new ‘supply,’” Kiefer and chief economist Frank Nothaft wrote in a recent outlook.

And that’s keeping rates down.

Fewer mortgages are being originated in large part because refinance activity is down; with rates no longer at record lows, there are fewer homeowners interested in refinancing these days. Also, while the housing market is improving, there hasn’t been an abundance of first-time home buyers in the market today, and that has been a drag on housing, said Ted Ahern, chief financial officer of mortgage lender Guaranteed Rate.

“There’s not a big supply of mortgages being originated, so that in and of itself kind of keeps the rates down,” Ahern said.

Another reason for the supply/demand imbalance: Global investors buying mortgage-backed securities, said Dan Green, chief publishing officer of The Mortgage Reports, a mortgage blog.

“Wall Street planned for the end of QE3 in a vacuum. There was no consideration given to the health of domestic and global economies or to market-destabilizing geopolitics,” Green wrote in an email interview. “The Fed has been exiting the market exactly as forecast, but not as quickly as global investors have joined. Demand for mortgage-backed securities still outweighs supply, which has lowered consumer mortgage rates.”

Low inflation, a weaker-than-expected economy in the first quarter and a “decent, but not great” housing market are also forces contributing to keeping mortgage rates low, Ahern said.

If you’re mortgage shopping

Eventually mortgage rates will go higher — unless there’s some sort of slowdown in economic growth, a recession or some big shock to the economy, Kiefer said. “It’s likely to be gradual, but [rates are going] up, for sure,” he added.

Once it’s clear the economy is expanding, mortgage rates should be on their way up, Green said.

In fact, those in the market for a mortgage may want to pay close attention to any marked improvement in the job numbers and any increases in inflation, Ahern said. Those are likely to be tell-tale signs that rates are heading up, he said.

 

Share

6 Tips for Buying Real Estate

  1. Be prepared for “multiple offer” scenarios – Different markets have their “sweet spots” where the ideal size, location, condition, and price all meet. These real estate properties will receive multiple offers, typically in a very short time period.
  2. Get ready to act quickly. It’s a big decision, and a lot of money, so many buyers will struggle with this. But the most desirable properties are going under contract in 1-2 days.
  3.  Make a strong offer – Asking prices for these uber properties are usually dead-on, or even a little low. List price or higher often is what it takes to get it done. Sellers also look carefully at your down payment, and whether or not you need to sell something else to finance your purchase.
  4. Do as much leg work as possible. Research your ideal neighborhoods first so that you don’t have to get to know an area the day you make an offer. And while you’re waiting for that “perfect storm” property, make sure you have your agent show you properties representative of a style or age even if they are not in the ideal location.
  5. Leverage resources – DAILY – Your agent should have searches that are updating you daily, or multiple times per day, giving you new listings. When you see something you like, be sure to be the first one there. Call your agent often to check-in on both new properties, and other listings you might have seen.
  6. Secure financing BEFORE you begin your search – Nobody will review an offer unless a buyer has been pre-approved.
Share

The 5 Ways to Be Mortgage Free Earlier

The 30-year fixed rate mortgage is the most popular mortgage in the US, but with 15-year mortgage rates still near historic lows, does it still make sense?  As the average age of home buyers increases past 30 years old, the reality is that you could still be making mortgage payments well into your retirement.  It can be difficult to make your mortgage payment, once you are past your prime income-earning years. So, set a smart financial goal for yourself to pay off your house before you retire and before your income declines.

To help you become mortgage free faster, here are some simple ways that you can pay off your mortgage faster, and save a lot of money over the course of your loan.

 

  1. Make bi-weekly payments
    Instead of making 12 monthly mortgage payments, pay half your normal mortgage payment every two weeks. You’ll make 26 total payments per year, equivalent to 13 monthly mortgage payments.  For example, if you have a $200,000 loan at 5% interest, making a bi-weekly payment will pay off your 30-year loan in 25 years and 3 months. Your total interest drops by more than $34,000.

    Not every lender will take bi-weekly payments and some lenders charge a fee to accept them, so check with your lender before adjusting your payment plan.

  2. Make monthly prepayments to principal 
    Making prepayments is one of the most effective way to pay off your mortgage faster. An easy trick is to round your regular payment up to the nearest $100. Be sure that your extra payments are marked to go directly to your principal balance. By directly reducing your principal each month, you pay less interest each month and more towards your loan balance.  Check with your lender to make sure the payments are properly applied and if the lender charges any prepayment fees.
  3. Make an extra payment at the same time each year
    If you cannot commit to a fixed prepayment each month, consider using your holiday bonus or your tax refund and apply it to your principal. It’s another great way to save money and accelerate the time it takes to pay off your loan.
  4. Refinance to a lower interest rate
    With rates still near historic lows, reducing your interest rate will can save you money over the life or your loan and also save you money, each month, because you will have a smaller monthly payment. Refinancing rates and fees vary from lender to lender, so shop around to find the best loan available.
  5. Refinance to a shorter term (Recommended)
    Refinancing to a shorter term loan offers the best way to pay off your mortgage faster while saving you thousands in interest.  15-year ratesstill remain near historic lows, with rates significantly lower than for 30-year loans, making it more affordable than ever.  Low rates may not last much longer and many savvy homeowners have taken advantage of the low 15-year rate to reduce their mortgage costs.   If you can afford the 15-year mortgage payments, you could save hundreds of thousands in interest and be mortgage free in half the time.

 

Share

7 credit myths that don’t really hurt your scores

By Casey Bond, GoBankingRates.com

There are enough potential trouble spots for your credit’s health without worrying about these myths.

The Internet is brimming with tales of how your complete lack of knowledge surrounding credit scores is costing you big every day.

We get it. How about some good news for once?

Finding out you had it wrong all along doesn’t have to be a bad thing. In fact, you could be relieved to learn you were mistaken.

The following are common misconceptions about credit that you’ll be happy to know aren’t true at all.

1. Closing my oldest credit card will shorten my credit history

One of the most pervasive credit myths, closing an old credit card account will not lower your credit score due to a reduced credit history. Closed accounts in good standing actually stay on your credit report longer than negative entries, thus maintaining the positive credit history that attributes to a higher score, specially if you decide to apply for credit card once again.

As credit bureau Experian explains on its blog, “Even if closed, the accounts that have no late payment history remain on your credit report for 10 years from the date closed. As long as the positive information remains, it contributes to a stronger credit history.”

That’s not to say, however, that closing a credit card account can’t hurt your score. If you are presently carrying debt — whether it’s an outstanding loan or another credit card balance — eliminating a portion of your available credit will increase your credit utilization ratio and using a free online credit card processing is a good choice for this. And that’s bad news for your score.

2. Checking my own credit will ding my score

It’s true that multiple credit inquiries can have a negative affect on your credit (depending on the circumstances — more on that in No. 6), but not if you’re the one doing the inquiring. You could check your credit every day if you wanted, with no harm to it.

In fact, staying on top of your credit reports and scores is a smart way to help catch errors or instances of fraud right away. The sooner these problems are addressed, the faster your credit will recover.

3. Working with a credit counseling agency will be reported to the credit bureaus

Simply seeking out the advice of a credit counselor will not be reported to credit bureaus and won’t affect your scores positively or negatively. However, the actions you take at the recommendation of a credit counselor can impact your scores.

Credit scoring agency Fair Isaac explains on its website:

“For example, choosing to make partial payments or agreeing to settle for less than the full amount on accounts may be regarded negatively by the FICO scoring model. Additionally, any late payments occurring either before or after you began the plan may also be regarded negatively.”

4. Earning a lower income means being stuck with a lower credit score

Like credit counseling, your income has no correlation to your credit score.

Claire E. Murdough, a contributing writer to personal finance blog ReadyForZero, explained, “A high earner can have terrible credit and a low earner can have excellent credit. Just because you make a good wage does not mean you’ll have high credit and salary does not necessarily indicate financial responsibility.”

She added, “Instead of focusing on simply making more, it’s helpful to focus on the ways that you can work to solidify a solid financial foundation.”

5. Paying off my cards will prevent my score from increasing

A common credit myth is that you have to carry a balance on your credit card in order to generate activity. The truth is that paying off your bill in full every month is the best thing you can do for your credit rating. As long as you are using the card regularly, the activity will be reported to credit bureaus regardless of whether or not you pay the entire balance.

Credit Reporting Expert and President of Consumer Education at SmartCredit.com, John Ulzheimer, stated on the site that, “Another thing to consider, along with expensive interest, is the impact on your credit scores of carrying a balance … Carrying a large balance relative to your credit limit can have a negative impact on your credit. Less than 10 percent should be your target.”

6. Rate-shopping for a loan will result in several dings to my credit score

When you apply for a credit card or loan, the lender performs a hard pull of your credit report to determine your creditworthiness. One or two of these hard pulls can cause a slight, temporary decrease in your credit scores. Many inquiries over time can result in a significant decrease in score and is a big red flag to creditors. If you’re in need of credit repair Atlanta services. It always helps to get professional help when it comes to dealing with your credit.

That is, except when you’re shopping around for a loan. Since getting the lowest interest rate possible on a home, auto or student loan is incredibly important, credit bureaus understand you will want to get quotes from several lenders before settling on a deal.

Fair Isaac explained “the FICO score ignores inquiries made in the 30 days prior to scoring. So, if you find a loan within 30 days, the inquiries won’t affect your score while you’re rate shopping.”

It’s recommended that if you are looking for a loan, keep rate shopping limited to within a 30-day period to protect your credit score.

7. A low credit score could cost me my job

This last myth is more about the perceived consequences of a low credit score, but bears discussion nonetheless.

Although it’s not uncommon for employers to review certain parts of your credit report as part of the hiring process, no one will ever look at or consider your credit score. These two words are often used interchangeably, but mean two very different things.

“It is illegal for credit scores to be used as a tool for screening potential employees,” Kimberly Foss, certified financial planner and founder of Empyrion Wealth Management, told Daily Worth.

An employer can only pull your credit report with your permission, and even then, they don’t get the full picture. Essentially, they’re looking for major warning signs of irresponsible behavior — but your score, whether high or low, should never be a determining factor.

Share

Did you refinance your mortgage? Here’s a tax break…

If you are among the many who refinanced their home mortgages last year, you are probably in line for some often-overlooked tax deductions on your 2013 Form 1040. Here’s what you need to know.

Refinancing tax deduction basics

You are generally allowed to immediately deduct refinancing points to take out additional mortgage debt used to finance improvements to your principal residence. However, points paid to refinance the remaining balance of the old loan must be amortized over the new loan’s life.

Example 1: Say your old mortgage was $200,000, and you refinanced by taking out a new 15-year $300,000 mortgage. You spent the additional $100,000 of debt to pay for a new den, a kitchen remodeling project, new landscaping, and assorted other home improvements. You paid 1-1/2 points ($4,500) to get the new loan.

You can immediately deduct one-third ($100,000/$300,000) of the refinancing points, or $1,500, on your 2013 return as long as you paid at least that amount out of your own pocket to get the new loan.

You can claim amortization deductions for the remaining two-thirds ($200,000/$300,000) of the refinancing points, or $3,000, over the new loan’s 15-year term (180 months). So you can deduct $16.67 ($3,000 divided by 180 months) for each month the new loan was outstanding during 2013. In 2014 and beyond, continue claiming amortization deductions of $16.67 a month for as long as the new loan remains outstanding.

Note: If you rolled all the refinancing costs, including the points, into the balance of the new loan, you must amortize the entire amount of the points over the term of the new loan (no immediate deduction in this case).

Example 2: Say you simply refinanced your old mortgage last year without taking on any additional debt. In this case, you can amortize the points over the life of the new loan. For example, if on July 1, 2013 you paid $4,500 in points for a new 15-year mortgage (180 months) with the same principal balance as your old loan, your 2013 amortization deduction is $150 ($4,500 divided by 180 months times 6 months). Your amortization write-offs will continue in 2014 and beyond, at the rate of $25 a month ($300 a year), for as long as the new loan remains outstanding.

Deduct unamortized balance of points from earlier refinancing

Serial refinancers take note: If you had previously refinanced your mortgage and paid points, you probably have a good-sized unamortized (not-yet-deducted) balance for those points. You can deduct that entire unamortized amount when you refinance again.

Example 3: Say the mortgage you refinanced last year was taken out in a previous refinancing deal done five years earlier, back in 2008. At that time you paid $4,500 in points for a 30-year loan. You should have $3,750 of unamortized (not-yet-deducted) points left over from the 2008 loan (25/30 of the original $4,500 amount). On your 2013 return, please remember to deduct the $3,750. Please also remember to claim your rightful deductions for points on the new loan, as explained earlier.

If you refinanced and yanked out cash

Say the balance of your old mortgage (incurred when you bought the home) was $325,000 when you refinanced on July 1, 2013. On that date, you took out a new 20-year $450,000 mortgage and paid 1 point, or $4,500, for the privilege. You used the $125,000 from the new mortgage to eliminate credit card balances, pay off your car loans, and to cover various and sundry other personal outlays. As far as the IRS is concerned, you now have two separate new mortgages.

The first $325,000 of the new loan (the balance on your old mortgage when you paid it off) is treated as “home acquisition debt.” The interest on that amount of the new loan qualifies as an itemized deduction to be claimed on Line 10 of Schedule A (Itemized Deductions).

The last $125,000 of the new loan (the excess of the new loan’s $450,000 principal amount over the $325,000 balance of the old mortgage) is treated as “home equity debt.” The interest on home equity debt also potentially qualifies as an itemized deduction to be claimed on Line 10 of Schedule A. But there’s a twist: you can only deduct the interest on the first $100,000 of home equity debt. The interest on the extra $25,000 is considered a nondeductible personal expense (unless, for instance, you used the $25,000 to finance expenditures for your small business). So you can only deduct 94.44% ($425,000/$450,000) of the total mortgage interest on Schedule A.

Now let’s talk about the points you paid to get the new mortgage. You can amortize the points related to the home acquisition debt part of the new loan ($3,250 in our example) over the life of the new loan. The points related to the first $100,000 of the home equity part of the new loan ($1,000 in our example) can also be amortized over the life of the new loan. The points related to the last $25,000 of the home equity part of the new loan ($250 in our example) are nondeductible (unless, for instance, you used the $25,000 to finance expenditures for your small business).

Finally, as explained earlier, don’t forget to deduct any unamortized points from the mortgage you refinanced.

Where to claim deductions

Deduct interest from your new mortgage on Line 10 of Schedule A (Itemized Deductions). Claim deductions for points paid to obtain the new loan on Line 10 of Schedule A if the points were reported to you on a Form 1098 (Mortgage Interest Statement) received from the lender (they probably were). Deductions for points that were not reported to you on a Form 1098 (somewhat unusual) should be claimed on Line 12 of Schedule A.

Article By Bill Bishoff, Wall Street Journal

Share

Top 10 Myths on Reverse Mortgage

Below are common myths that are important for you to be aware of as you investigate the benefits of our product!

Myth 1: I’ve heard I won’t qualify for a reverse mortgage because of my limited income.

Fact: False. Most traditional mortgages require income qualifications and a monthly mortgage payment; however, the HECM (Home Equity Conversion Mortgage) reverse mortgage generally does not use income as a factor and it pays you. Many seniors who don’t qualify for traditional financing are eligible for a reverse mortgage.

Myth 2: If I take out a reverse mortgage the lender will own my home.

Fact: False. Homeowners still retain title and ownership to their homes during the life of the loan, and can choose to sell the home at any time using tools like Showcase IDX. As long as the borrower continues to live in and maintain the home and property taxes and homeowners insurance are paid, the loan cannot be called due.

Myth 3: There are restrictions on how reverse mortgage proceeds may be used.

Fact: False. There are no restrictions. The cash proceeds from the reverse mortgage can be used for virtually any purpose and borrowers should be cautious of lenders attempting to cross sell other products. Many seniors have used reverse mortgages to pay off debt, help their kids, make ends meet or to have a financial reserve.

Myth 4: Only low-income seniors get reverse mortgages.

Fact: False. Although some seniors may have a greater need than others for the monthly proceeds or lump sum funds reverse mortgages offer, most simply prefer to be free of monthly mortgage payments. Without monthly mortgage payments, many homeowners find they can maintain their existing quality of life and build their savings to help with future expenses. A growing number of people who have no immediate need are taking out these loans so that they have a financial cushion for future expenses.

Myth 5: If I outlive my life expectancy, the lender will evict me.

Fact: False. Reverse mortgage lenders put no time limit on how long the borrower(s) can stay in their homes. Since homeowners still own the property, lenders cannot evict them as long as the borrower continues to live in and maintain the home, and property taxes and homeowners insurance are paid.

Myth 6: A reverse mortgage will affect my government benefits.

Fact: A reverse mortgage generally does not affect regular Social Security or Medicare benefits. However, if you are on Medicaid, any reverse mortgage proceeds that you receive would count as an asset and could impact Medicaid eligibility. To be sure, we recommend that potential borrowers consult their federal benefits administrators or financial advisors.

Myth 7: There are no objective advisors available to seniors trying to decide if a reverse mortgage suits their needs.

Fact: False. Borrowers are required to work with independent, third party counselors approved by the U.S. Department of Housing and Urban Development (HUD) in their local communities. This educational session helps them make the right decision for their unique situations.

Myth 8: My children will be responsible for the repayment of the loan.

Fact: If the borrower or their estate wants to retain the property, the balance must be paid in full. However, as long as the borrower or their estate sells the property to pay off the debt, there is no recourse if the HECM loan balance exceeds the home’s value at maturity. Any equity remaining in the property after the reverse mortgage is retired belongs to the borrower or their estate.

Myth 9: Reverse mortgage lenders take advantage of seniors.

Fact: Seniors who have been victims of reverse mortgage lending schemes are extreme exceptions and typically victims of unsavory lenders. As a consumer, you should only work with reputable lenders. Protect yourself by conducting as much research as possible by consulting government agencies, your financial advisors and NRMLA, the National Reverse Mortgage Lender’s Association.

Myth 10: I cannot get a reverse mortgage if I have an existing mortgage.

Fact: False. If your house isn’t paid off, the proceeds you receive from the reverse mortgage must first be used to pay off any existing mortgage.

Share