Who Represents You?

In almost every state in the U.S., buyers have the option of being represented by their real estate agent. This relationship creates responsibilities that require the agent put their client's interests above their own.

The duties a buyer or seller can expect to receive among others are honesty, accountability, full disclosure, representation and reasonable skill and care. In a nutshell, the agent who represents you is working in your best interest.

It's a special relationship that doesn't exist with most of the other professionals involved in a real estate transaction. Mortgage and title officers are limited to their duties of honesty, accountability and specific requirements under the Real Estate Settlement and Procedures Act.

This special relationship with your real estate agent makes it advantageous to have them coordinate your efforts with the other professionals in the home buying process. Since most buyers' and sellers' transactions are infrequent, the agent can bring valuable experiences to the transaction.

A Residential Finance Consultant is trained and has special tools to help you make better decisions when you buy or sell and in between. Our goal is to help you improve and maintain the investment in your home so we can earn the right to be your lifelong real estate professional.

Top 10 FHA Loan Advantages

Fannie Mae and Freddie Mac underwritten conventional, FHA and VA loans account for the vast majority of mortgages chosen by buyers to finance their home purchase. While buyers have the choice on which product to use, there are some considerable advantages to FHA.

1. More tolerant for credit challenges than conventional loans.
2. Lower down payments than conventional loans.
3. Broader qualifying ratios - total house payment with MIP can be up to 31% of borrower's monthly gross income and total house payment with all recurring debt can be up to 43%.
4. Seller can contribute up to 6% of purchase price - this money must be specified in the contract and can be used to pay all or part of the buyer's closing costs, pre-paid items and/or buy-down of the interest rate.
5. Self-employed may qualify with adequate documentation - two year's tax returns and a current profit and loss statement would be required in addition to the normal qualifying and underwriting requirements.
6. Mortgage Insurance Premium can be released in five years when the balance is 78% of original sales price
7. Liberal use of gift monies - borrowers can receive a cash gift to assist in purchase from family members, buyer's employer, close friend, labor union or charity. A gift letter will be required specifying that the gift does not have to be repaid.
8. Special 203(k) program for buying a home that needs capital improvements - requires a firm contractor's bid attached to the contract specifying the work to be done. The home is appraised subject to the work being done. If approved, the home can close, the money for the improvements escrowed and paid when completed.
9. Loans are assumable at the existing interest rate - assumptions require buyer qualification but are actually easier than qualifying for a new mortgage. Closing costs are lower on assumptions than originating a new mortgage.
10. If the rate on the assumable mortgage is lower than current rates for new mortgages, it could add value to the property.

One More Chance?

Fixed Rate mortgages are at their lowest level for 2011 as reported in the current Freddie Mac weekly Primary Mortgage Market Survey. Many qualified buyers missed the opportunity last fall in October and November to refinance at record low rates. This may give homeowners one more chance to refinance and save money on their payments.

An important thing to keep in mind is that points paid in connection for refinancing a home are generally not considered prepaid interest and must be spread over the life of the mortgage. Some advisors suggest that you have the lender quote a "par value" loan to eliminate the points which will lower refinancing costs even though the mortgage rate will be slightly higher.

Additional income tax information is available in IRS Publication 936.

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Cash Now - Mortgage Later?

You might think that a person who pays cash doesn't have many concerns or at least not the same ones as most people.  Roughly, about 9% of people paid cash for their home last year with a considerably higher percentage paying cash this year. 

The first question that comes to mind when I hear someone say they want to pay cash for a home is "Do you think that you might put a loan on the home in the future?"  Paying cash may affect your ability to deduct the interest on a mortgage placed on the home at a later date.

Currently, a homeowner may deduct the interest on up to $1 million of acquisition debt.  Paying cash for a home establishes acquisition debt at $0.  At that point, the only deductible interest would be home equity debt which is limited to $100,000 over acquisition debt.  You can get more information about this from IRS Publication 936.

On the surface, paying cash certainly seems simple but it may have consequences later.  As a Residential Finance Consultant, I can point out the areas when advice from a tax professional is in order.