Posts filed under 'Mortgages'

TEN QUESTIONS TO ASK YOUR LENDER

By Mike Daughtry
President, Home Builders Association of Midwest Georgia

Mike-Daughtry2.jpg Before you settle on the house of your dreams, it’s essential to find the right lender. Knowing how much home you can afford before you start searching will help the home buying process go that much smoother, and the right lender also can help you determine what mortgage works best with your financial situation. Here are ten questions you should ask potential lenders before making your final selection.

1. What is the Interest Rate & Annual Percentage Rate?
The annual percentage rate (APR) is determined by a complex calculation that includes the interest rate and all the related lender fees divided by the loan’s term. Keep in mind however that there is no way to accurately compute an APR for an adjustable loan, and APR doesn’t account for early payoffs. If you decide on an adjustable rate, investigate how often it can change, and if it has a maximum annual adjustment. A few points increase in interest rates can make a big difference in your monthly payment.

2. What are all the costs?
There are many fees and costs associated with any third party involved in a mortgage transaction. These can include the appraisal, credit report, lender’s title policy, pest inspection reports, and taxes, among others. Find out about all these costs before finalizing a loan. Lenders are required to provide a written good faith estimate of closing costs within three days of receiving a loan application.

3. Which type of loan is best?
The right lender will ask a lot of questions about you and your financial situation before suggesting loan options. Don’t hesitate to ask about the pros and cons of the different options: fixed-rate loans, adjustable-rate loans, interest-only loans, Negative-amortization loans, and others.

4. What are the qualifying guidelines for this loan?
Depending on the loan, the qualifying guidelines may relate to your debt-to-income ration, credit history, employment, assets or liabilities. If you are participating in a first-time buyer program, a VA loan or other government-sponsored mortgage programs you may be able to find a loan program with easier qualifying guidelines. Ask your lender to thoroughly explain to you the guidelines for any loan, and which one works best with your situation.

5. How many discount and origination points will I pay?
When people want to find out how much their mortgages cost, lenders often give them quotes that include both loan rates and “points.” Points “buy downâ€? the interest rate of a loan. Therefore, the more points you pay, the lower the interest rate, and vice versa. Each point is equal to one percent of the loan amount. So, two points on a $100,000 loan costs $2,000. Discount points are tax deductible, and are actually prepaid interest on the mortgage loan. Origination points are charged by the lender to cover the costs of making the loan. The origination fee is deductible if it was used to obtain the mortgage and not to pay other closing costs.

6. Is there a prepayment penalty on this loan?
Many mortgages charge a penalty for paying off the loan before the end of the time period. The penalties vary; some are one percent of the loan total, others are equal to six months’ interest and some others apply only when you refinance. Find out upfront if your loan carries such a penalty, and what it would cost if you decided to prepay. Some lenders offer lower interest rates to buyers who accept prepayment penalties.

7. Do you offer loan rate locks?
Interest rates fluctuate daily and can change from the day you apply for a loan to when you close it. If you think interest rates are moving up, you can lock your loan rate. Ask your lender about fees to lock your interest rate, how long they lock it for, and if the lock-in protects all loan costs. If you do end up locking your loan rate, make sure to get the details in writing

8. Who will service the loan? Your bank or another company?
Underwriters review loans and issue conditions before approving or rejecting a loan. Ask if the lender does this in-house or uses another company. The answer can make a difference in the amount of time the loan takes to process.

9. How long will the loan approval process take?
In most cases, it takes between 21 and 60 days. Ask your lender what the anticipated turnaround time is and what possible obstacles could delay that. You’ll need to coordinate with your lender to determine the closing date for any purchase contract.

10. What might delay approval of my loan?
The more accurate you are in your loan application, the smoother the process will go. Notify your lender if your financial situation changes, if you change jobs, incur additional debt or change martial status between applying for and receiving the loan. Check your credit report before applying for a loan to ensure that everything is accurate and up-to-date.

For more information on selecting a lender, contact your local home builders association. To find out why now is a great time to buy, visit HYPERLINK “http://www.nahb.org/timetobuy” www.nahb.org/timetobuy. To subscribe to NAHB’s free consumer e-newsletter on all things home, visit HYPERLINK “http://www.nahb.org/housekeys” www.nahb.org/housekeys.

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(Mike Daughtry, who is president of Hilpine Builders Inc. and publisher of 20 South Magazine, is the current president of the Home Builders Association of Midwest Georgia. One of the top 100 Home Builders Associations in America, the HBA of Midwest Georgia serves over 800 members in Fayette, Coweta, Spalding, Meriwether, Heard, Pike, Upson, Lamar, Butts and Jasper Counties. For more information about the group contact Executive Officer Sandy Boda at (770) 716-7109.)

Add comment May 31st, 2007

TAX REFORM PLAN ATTACKS HOMEOWNERSHIP

By Jeff Waddle, President
Home Builders Association of Midwest Georgia

jwaddle.jpgHomeowners across the country rely on tax breaks and incentives to realize their dream of homeownership. Under current tax law, interest payments on mortgage debt of up to $1.1 million are deductible, including $100,000 for home equity loans. Thirty-seven million households deducted mortgage interest in 2004, saving $70 billion in taxes. But on November 1, the President’s Advisory Panel on Federal Tax Reform delivered a harsh blow to those millions of homeowners when it recommended overhauling the tax system.

The panel proposed replacing the valuable mortgage interest deduction with a much more limited home credit equal to 15 percent of the interest paid on a principal residence. The ceiling on the credit would be based on regional housing costs and range from $227,000 to $412,000.

“The inability to deduct mortgage interest and equity line interest would be devastating to my family and others very close to me,” said a homeowner in California. “The net effect is not just income — which would force us and others to entertain leaving California — but also my kids’ college education and pure family stability.”

Going even further, the plan would also eliminate deductions for state and local taxes (including property taxes) and interest deductions for home equity loans and second homes.

“It’s the biggest tax hike for homeowners ever considered,” said Jerry Howard, executive vice president and CEO of the National Association of Home Builders (NAHB) “Replacing the mortgage interest deduction would punish millions of homeowners, particularly those living in high-cost markets.”

NAHB analysis found that the advisory panel’s tax plan would actually represent tax hikes of 39.6 percent for a home-owning family of four in the Chicago metropolitan area, 19.4 percent for a similar family in San Jose, Calif. and 8 percent in Binghamton, N.Y.

Newest Homeowners Hit Hardest

And the hardest hit families under this plan will be the 18 million households who bought their homes during the past three years when prices were going up 10, 15 or even 20 percent annually in many markets. Most of these households have significant mortgage interest payments in the early years of their relatively large mortgages. Virtually all of them were counting on the mortgage interest deduction to reduce their housing costs to more affordable levels.

In addition, millions of other families have refinanced their mortgage to remodel their homes, to send their children to college, to cover medical expenses, or to pay off consumer credit card debt. By and large, these are middle-class Americans who are counting on these tax incentives to help them maintain their current standard of living.

Home Values Would Fall

Equally disturbing, this plan would cause home values to fall. By stripping away the housing tax incentives, demand for housing is likely to slow at a time when interest rates are already rising and home appreciation is easing. Considering that a good portion of the wealth of the nation’s homeowners comes from the net equity they have built up in their homes, this would be a tremendous blow for millions of working families.

NAHB has a host of resources on the proposed tax reform effects on homeowners available on its website. For more information, log on to this website.

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(Jeff Waddle, who is with David Weekley Homes, is 2005-’06 president of the Home Builders Association of Midwest Georgia, which serves a membership of approximately 650 builders and associate members in Fayette, Coweta, Spalding, Meriwether, Heard, Pike, Upson, Lamar, Butts and Jasper Counties. The Midwest Georgia association can be contacted by calling 770-716-7109 or at hbamwg@bellsouth.net. Formerly Southeast project manager for David Weekley Homes, Jeff became the company’s senior manager for Hilton Head/Savannah in February of this year.)

Add comment January 19th, 2006