Helpful Tips

Don’t Rush to Refinance that ARM – It May Go To 3% or Less

If your mortgage is set to adjust this year, the smart move may be to let it. Today’s conforming adjustable-rate mortgages are adjusting lower than ever before in Northwest Indiana – as low as 3 percent.  It may not be what you expected when you signed for your ARM several years ago.

The reason why ARMs are adjusting lower is because of how they’re made.

When conforming adjustable-rate mortgages adjust, they adjust according to a pre-determined formula. The formula is the sum of a constant and a variable.  The constant is usually 2.25 percent and the variable is a daily-changing interest rate called LIBOR.

The formula looks like this:  New Mortgage Rate = LIBOR + 2.250 percent

LIBOR is an acronym for London Interbank Offered Rate.  It’s an interest rate at which banks borrow money from each other. In Fall 2008, when Lehman Brothers fell and sparked a global banking fear, LIBOR spiked as the risk of inter-bank borrowing jumped. 

Since then, however, LIBOR is down.

Normalcy is returning to banking and the timing couldn’t be better for homeowners with ARMs. 15 months ago, a homeowner’s ARM may have adjusted to 6 1/2 percent.  Today, that same ARM falls to just above 3.

As a strategy play, it might make sense to let your ARM adjust. Or, because fixed rates are still near 5 percent, converting that ARM to a long-term fixed-rate product might make sense, too.  The decision is a balance between how low do you want your payment, and how long might you live in your home.  

The longer you stay, the more it might make sense to switch to fixed-rate, even though ARM rates are so low.

If you have an adjustable-rate mortgage, talk to a qualified mortgage adviser about your choices. Once March ends and the Fed withdraws its mortgage market support, mortgage rates may rise and the fixed-rate option may be gone.

Contact James K Barath in Northwest Indiana to Qualify for Your FREE FHA Home Loan Approval Today!

7 Weeks Left to Find Home and Up To $8,000 in Tax Credits

In November, Congress extended and expanded the First-Time Home Buyer Tax Credit program to include a subset of “move-up” buyers — homeowners that have owned and lived in their home for 5 of the last 8 years.

The credit ranges up to $8,000 per buyer. There’s now just 7 weeks left to take advantage.

To be eligible, home buyers must be under contract for a new home in Chesterton, Crown Point, Highland, Munster, Portage, Saint John, Schererville and Valparaiso no later than April 30, 2010, and must be closed no later than June 30, 2010.

In addition to meeting the deadline dates, there’s a basic set of requirements to be tax credit-eligible:

• You can’t purchase the home from a parent, spouse, or child
• You can’t purchase the home from an entity in which the seller is a majority owner
• You can’t acquire the home by gift or inheritance
• Each buyer in the purchase must meet eligibility requirements

There’s other criteria, too.

For one, the sales price on the subject property in Northwest Indiana cannot exceed $800,000. Homes sold for more than $800,000 are ineligible for the tax credit. Furthermore, households earning more than $125,000 as single-filers, or $225,500 for joint-filers, are ineligible.

You can read the complete eligibility requirements at the IRS website, or, you may just find it simpler to speak with your accountant about it. There are some nuances in qualifying for and claiming the tax credit on your returns and getting a professional’s opinion is always wise.

And lastly, don’t forget that government’s tax credit program is a true tax credit. It’s not a tax deduction.  This means that a tax filer whose “normal” tax liability is $3,500 and who is eligible for $8,000 in credit will receive a $4,500 refund from the U.S. Treasury.

If you’re currently in the House Hunt, mark your calendar for April 30, 2010. It’s 7 weeks away and you can be sure that as the date gets closer, buyer traffic is going to increase.  You may find sellers more willing to negotiate today than several weeks from now.

Contact James K Barath in Northwest Indiana to Qualify for Your FREE FHA Home Loan Approval Today!

Practical Home Buying Tips for Real Estate Investors

According to the the National Association of Realtors®, “distressed homes” represented nearly 2 of every fifth home sold in January 2010.  Clearly, real estate investors are taking advantage of good deals on cheap property even here locally in Northwest Indiana.  But there’s risk involved.

This NBC Today Show interview first ran in March 2009, featuring real estate expert Barbara Corcoran. Despite its age, the message remains relevant. Today may be a terrific time to buy a bank-owned home — just make sure you do your research first.  There’s plenty of ways for investors to get burned.

Some of the tips in the video include:

• Buy in your own backyard
• Start small, then build to a bigger portfolio
• Watch receipts — rent rolls don’t matter if tenants aren’t paying rent

Corcoran also gives pointers on how to evaluate a prospective tenant.

Foreclosures should represent a large number of 2010’s total home sales in Northwest Indiana and will offer interesting opportunities to bona fide real estate investors. be you jump in, make sure to watch the video. The rents you save may be your own. 

Remember, the stats and the data are from 12 months ago, but the advice stays meaningful.

Contact James K Barath in Northwest Indiana to Qualify for Your FREE FHA Home Loan Approval Today!

7 Ways to Improve Your Credit & Your Home Loan Rate

As mortgage lenders tighten approval standards nationwide and in Northwest Indiana, the importance of a good credit score is rising.  Credit scores not only make the difference between a mortgage approval and mortgage turn-down, but they also play a large role in determining your actual mortgage note rate.

In the 3-minute piece, the NBC Today Show talks about 7 ways that homebuyers ruin their credit — often by accident.  Some of the highlighted mistakes include:

• Closing open credit cards
• Making appliance buys on credit prior to closing
• Asking creditors to lower credit limits prior to closing

In general, a 740 FICO will insulate a borrower from the higher costs and/or rates associated with low credit scores.  Below 740, though, every 20 points adds to the damage.  Watch the video and apply what you can to your own situation.  The more you know, the more you can save.

Contact Benchmark Mortgage in Northwest Indiana to Qualify for Your FREE FHA Home Loan Approval Today!

What’s a Short Sale and Why This Option?

A “Short Sale” is when a home seller sells his home for a lesser amount than what is owed on his mortgage, and the mortgage lender agrees to accept the lesser amount in lieu of a full payoff.

By way of example, a Short Sale may be appropriate for a home seller in Crown Point, Chesterton, Munster, Saint John, Schererville or Valparaiso whose mortgage balance is $250,000 but whose home wouldn’t sell for more than $220,000.  Rather than pay the $30,000 difference to the lender at the time of sale, the seller enters into an agreement with the lender by which all sale proceeds are paid to the bank and the deficient balance is forgiven.

Short Sales are a preferable alternative to foreclosure but the process still harms both parties. For one, the seller is penalized with a derogatory tradeline on credit for not fulfilling a mortgage obligation. And, two, the lender is forced to take a loss on a mortgage loan.  Versus an executed foreclosure, however, Short Sale damages are relatively limited on both sides.

For this reason, Short Sales are sometimes considered “the economical alternative” to default in Northwest Indiana.

The process of getting a Short Sale approved varies from lender-to-lender and can be time-intensive. Home sellers in Highland, Portage and Valparaiso should not go at it alone — speaking with a real estate agent about the proper protocol is usually the best place to start.  And sellers should be aware of how a Short Sale on their credit can impact future borrowing.

Current Fannie Mae guidelines prevent short-selling homeowners from obtaining new mortgage financing for a period of 2 years.

Contact Benchmark Mortgage in Northwest Indiana to Qualify for Your FREE FHA Home Loan Approval Today!

100 Days Left To Claim Your Homebuyer Tax Credit

November 6, 2009, Congress voted to extend and expand the First-Time Home Buyer Tax Credit program.  There’s 100 days left to claim it.

The expiration date of the up-to-$8,000 tax credit has been pushed forward to spring, requiring homebuyers in Northwest Indiana to be under contract for a home no later than April 30, 2010, and to be closed no later than June 30, 2010.

In addition, “move-up” buyers  who wish to purchase a home in Chesterton, Crown Point, Highland, Munster, Portage, Saint John, Schererville and Valparaiso were also added to the program’s eligibility list meaning you don’t have to be a first-time home buyer to be eligible for the tax credit.  If you’ve lived in your home for 5 of the last 8 years, you meet the IRS requirements.

Move-up buyers are capped at a total tax credit of $6,500.

The tax credit’s basic eligibility requirements remain the same:

• You can’t purchase the home from a parent, spouse, or child
• You can’t purchase the home from an entity in which they’re a majority owner
• You can’t acquire the home by gift or inheritance
• All parties to the purchase must meet eligibility requirements

The new law includes some notable updates, however. 

First, the subject property’s sales price in Northwest Indiana may not exceed $800,000. Homes sold for more than $800,000 are ineligible.  And, also, household income thresholds have been raised to $125,000 for single-filers and $225,500 for joint-filers.

And lastly, don’t forget that the program is a true tax credit — not a deduction.  This means that a tax filer in Northwest Indiana who’s eligible for the full $8,00 credit and whose “normal” tax liability totals $5,000 would receive a $3,000 refund from the U.S. Treasury at tax time.

The complete list of qualifying criteria is posted on the IRS website.  Review it with a tax professional to determine your eligibility.  Then mark your calendar for April 30, 2010.

There’s just 100 days to go.

Contact Benchmark Mortgage in Northwest Indiana to Qualify for Your FREE FHA Home Loan Approval Today!

Moving to a New City? Check the Local Cost of Living First

It’s not only the real estate markets that differ from town to town – the Cost of Living does, too.

Insurance costs, tax bills and just plain, day-to-day living will dent a household budget differently depending on where that household is. It can be a nerve-wracking fact for families moving across state borders.

As an aid for the budget-aware, Bankrate.com keeps a Cost of Living Comparison Calculator on its website. The calculator asks 3 questions: (1) Where do you live now, (2) To where you are moving, and (3) What is your salary. It then spits out a detailed, 58-item cost comparison list between the two cities.

Some of the key costs compared include:

• Everyday groceries
• Energy bills
• Routine healthcare
• Home ownership
• Clothes
• Sporting goods

The Cost of Living Comparison Calculator is thorough, with data culled from the ACCRA. You’ll be surprised at how granular the list can get. On the ACCRA website, you can buy a similar report for $5.

On the Bankrate.com site, the data is free.

Need more expert advice? Ask the team of Certified Mortgage Planning Specialists at Benchmark Mortgage.

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