VA home loans FHA Loans ... News Updates and Commentary

We have come upon a Way to use your Tax Credit for your down payment

Give us a call or email, we'll review the details…

The American Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009.

1. Who is eligible to claim the tax credit?
   First-time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and before December 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner.

2. What is the definition of a first-time home buyer?
   The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.

3. How is the amount of the tax credit determined?
   The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.

4. How do I claim the tax credit? Do I need to complete a form or application?
   Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on Line 69 of their 1040 income tax return. No other applications or forms are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests.

5. What types of homes will qualify for the tax credit?
   Any home that will be used as a principal residence will qualify for the credit. This includes single-family detached homes, attached homes like townhouses and condominiums, and manufactured homes. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.

More to come next week. Until then have fun!

Ok, here it is… despite various efforts to stop the foreclosures, mortgage defaults are still on the rise. 87,000 in February, up from 68,000 in January, of those 55,000 were considered prime loans. Which, of course, means defaults on otherwise strong borrowers are now outpacing bad borrowers. How is that possible you ask? The subprime borrowers started defaulting in 2007, bailing on their responsibility early; they have already been weeded out.

Here is where it gets interesting… What sort of loans is everybody doing these days? FHA. Of course. Now FHA requires 3 years out of default. So all those people who bailed at the first sign of trouble will be coming back into the market in 2010. Last check rates were 5% and they are now purchasing their homes for $0.50 on the dollar. All those who have struggled and held on to their responsibility till the last minute? They won’t be able to get back into the market until a much later date, which means they most likely won’t be able to take advantage of the low rates, and most likely not be able to take advantage of the low prices.

There has been substantial argument what the rates and the economy will be doing in the next quarter. If you are considering an FHA Loan or a VA Loan purchase, many say do it now!

The current issue is not whether the housing prices or the rates are going lower, the bigger issue is qualifying for the loan. Minimum FICO for FHA Mortgage remains 600 as well as the minimum FICO for VA Mortgage, but they are starting to climb and getting qualified is becoming more difficult. Whether your credit is perfect or a little sketchy, VA Loans still remain your best bet. Most people take themselves out of the market because they think they will not qualify. Surprisingly, the greatest majority will qualify. Fill out the loan application, it will take only a few minutes to get qualified, if you don't happen to qualify, we have a free service that will put a plan together to get you qualified in the near future. Again, it is free.

On another note, With the Subprime market leading the foreclosure debacle, the new issue is the job market. Another 675 million workers lost their jobs last month compounding foreclosures. No doubt, we will not be out of this mess anytime soon. It seems everybody has heard about the Mortgage Loan Modifications. For those we have been unable to refinance, a loan modification has been a Great alternative route. Briefly, The government stimulus has set the guidelines to give lenders and servicers an incentive to reduce your mortgage principle balance and or interest rate between 31 and 38 percent of your income. This stimulus is expected to help some 9 million homeowners. More on this later.

If you have any questions about a VA Mortgage, FHA Mortgage, or Loan Modification, send an instant message from the website and we'll get right back to you.

As Always, we encourage your comments

The financial markets are closed today in observance of Martin Luther King Holiday. Tomorrow the new President will be sworn in. I don’t believe the ceremony or speech directly will affect the markets or rates, but the new administration, policies and new theories coming in the next couple weeks will likely create significant volatility in the markets, and therefore mortgage pricing.

There are only two significant reports coming this week. December’s housing starts report early Thursday morning, and Thursday’s Labor Department unemployment filings. The housing Report should not influence rates much, but the Labor department is expecting 548,000 new filings. A higher number is expected to be positive for bonds, thereby reducing rates. A lower number is considered negative. Since these are the only two reports expected to be released, I would overall expect a quiet week.

Refinancing is still a Great bet; on the home page you will see the national rates. The rule of thumb is that if your current rate is one percent above that rate, it is time to refinance. VA and FHA Streamline refinances take roughly 15 days and will save you thousands of dollars. Get in touch with us and we’ll make sure you are taken care of.

Next week we’ll talk about foreclosures and Loss Mitigation.

Have a great week!

So, it has been 167 days since our last post. I can’t imagine what excuse we might have. I have not come up with a good one. The only thing really worth note is that the rates have come down significantly and our Refinances and purchases have just exploded!

Obviously it is the perfect time to purchase or refinance. Most of the country still has depressed housing prices, and the rates are still unbelievably low. So it seems everybody who still has a job, or expects to continue to have a job, is applying for a loan.

Which brings us to the Good News / Bad News. According to the Associated Press and CNBC, The financial services industry is witnessing yet another bubble burst, this time it is within the industry itself. 32,000 jobs are expected to be cut, adding to 533,000 jobs cut in November. The largest unemployment numbers since 1974. Read the AP Article Here.

What does all this mean to the mortgage industry? Well, opinion is mixed. What is clear is that much of it will depend on what comes out of the regulation. In the end, I’m confident, the U.S. economy will remain vibrant, but I do hold reservation. I believe in free market, and those who know me well, have had the pleasure of listening to me on my soap box. Any new regulation will determine if the sector remains vibrant, the lawmakers have a job on their hands.

Next week brings us the release of a couple of important releases for the markets to digest. The most important data of the week comes during the latter part and can cause a great deal of movement in the markets and mortgage rates. We will get a first peek at November's holiday sales to help gauge how holiday retail spending looked and a key consumer inflation reading.

Have a Great Week!

Yesterday, we discussed a little how to read your credit report. You have your highlighter ready and you've made copies of your credit report. If you've been studying your credit report, you'll notice that each report is different. You will also notice the codes in the leftmost column

Experian is pretty straightforward, anything marked with an * is a negative credit indicator.

Trans Union is a little more difficult, but still fairly comprehensive. The easiest way to look at it is with the codes. Anything higher than I1, M1 or R1 (such as I2 or R9) is a negative credit indicator.

Equifax is similar to Trans Union Anything higher than I1, M1 or R1 (such as I2 or R9) is a negative credit indicator.

1. any item rated higher than I1, M1, or R1 (such as R2 or I9).
2. any item proceeded by a ">>>>" icon.
3. any item listed as repossession, foreclosure, profit and loss write-off charge-off, paid profit and loss write-off, paid charge off, settled, settled for less than full balance, or included in bankruptcy.
4. any collection amount, whether paid or not.
5. any court account, including a lien, judgment, bankruptcy chapters 11, 7, or 13, divorce, satisfied lien, or satisfied judgment.
6. any item showing one or more thirty, sixty, or ninety day late payments in the column to the far right.
7. any inquiry.

Those I2 and R9 codes - what do they mean?

R- Revolving (usually a credit card)

I - installment (like home or auto loan)

R1 or I1 = pays as agreed never late

R2 or I2 = 30 days late

R3 or I3 = 60 days late

R4 or I4 = 90 days late

R5 or I5 = 120 days late

R7 or I7 = making regular payments under wage earner plan

R8 or I8 = repossession

R9 or I9 = charge off

Generic Codes

What it means:

O = Open (entire amount due each month i.e. AMEX)
R = Revolving (payment amount variable i.e. VISA)
I = Installment (fixed number of payments i.e. Auto loans)

0 = Approved, no rating
1 = Paid as agreed
2 = 30+ days late
3 = 60+ days late
4 = 90+ days late
5 = 120+ days late or collection
7 = Making regular payments under wage earner or similar plan
8 = Repossession
9 = Charged off to bad debt

J = Joint
I = Individual
U = Undesignated
A = Authorized User
T = Terminated
M = Maker
C = Co-Maker/Co-Signer
B = On behalf of another person
S = Shared

So let's get out our markers and highlight any negative items on our credit reports. Tomorrow, we'll discuss "what to do with those negative Items" and how to challenge the bureaus.

 

Earlier, we discussed a little about your credit report, the Fair Credit Reporting Act, and the Federal Trade Commission. Go Here To review Today, we are going to begin the step of how to analyze your credit report.

The first thing to do is get a copy of your credit report from each of the three major CRAs: Equifax, http://www.equifax.com; Experian, http://www.experian.com; and TransUnion, http://www.tuc.com. There are many ways to receive a new report. The Law says you are entitled to received one free report each year. NOTE: The Credit Bureaus are not required to give out your Score for free, just your report. give me a call, we'll discuss some alternatives.

When you first receive your Trans Union and Equifax credit reports, you will be totally lost. The information is coded in a way that is not immediately readable by the average consumer. Each credit report should arrive with a key that interprets the codes and indicators on the credit report. Sit down with the credit report and the key and study it until you understand what each number and code means.

Wait!... Don't write on your original credit report -- yet. Make all of your notes on a copy of the report. You may be sending your original report with your dispute letter, so you should make at least two copies of each new report. The original goes with the dispute, one copy is for notes, and the other copy is what you will send in to the credit agency.

Gather a yellow and orange highlighter pen. Whenever you identify a negative listing, mark the listing in yellow on your scratch copy of the credit report.

Very often, it is difficult to tell if an item on the credit report is negative or positive. The following table will help you identify every negative listing on your credit reports.

Ok, so now you are ready. Tomorrow we will discuss What all those codes mean. Take the time to study your report, it will make you satisfied that you know exactly what you are looking at, and that knowledge will help you as you go through this process. Repairing your credit is not an overnight fix. It requires some diligence and patience. Good credit is sexy, it just makes you feel good, and is definitely worth the two hours per month you will put into it during the repair process.

Feel Free to comment and if you'd like to jump ahead, go to www.veteranslendingcenter.com/disputingcreditreports

It is time to start working on our credit. As we discussed the other day, Credit Standards are tightening across the board. The first to tighten were the exotic programs, now that tightening is making its way to FHA and VA Mortgages, and the FHA and VA home loan requirements.

Your credit report is a record of your credit activities. It lists all of your credit card accounts and loans, the balances as well as your payment history. It is this Payment History rather than your score that most FHA and VA mortgage lenders look at when applying for a home loan. Your credit report also shows if any action has been taken against you because of unpaid bills such as a lawsuit or bankruptcy filing. Since businesses use this information to evaluate your applications for credit, insurance and employment, it’s important that the information in your report is complete and accurate, especially if you plan to make a big purchase like a home mortgage.

The Fair Credit Reporting Act (FCRA), enforced by the Federal Trade Commission (FTC), is designed to promote accuracy and ensure the privacy of the information used in consumer reports. Under the FCRA, both the credit reporting agency (CRA) and the organization that provided the information to the CRA (usually the credit card company) must correct any errors or incomplete information in your report. Next week we'll begin analyzing the report and perhaps discuss bad credit home loans. Read More...

On to the business of the day, "The beige book" came out reporting that economic conditions remained "generally weak". Seven of the 12 districts describe conditions as "sluggish" or "soft, compared with nine on the last report. This appears to be good news showing the economy is "stable" or "little changed". The good news is This should indicate that rates for the time being will continue to remain low. The bad news is with the better than expected economic news, the markets rallied pushing the bond market down and increasing today's rates. Tomorrow the Consumer price index is coming out. With larger than expected unemployment filings, the fear is that the bond market may see that inflation is a threat, which would cause a large sell off which would drive the price of the bonds down, which in turn would cause interest rates to rise. Read More ...

Keep in touch with your loan officer this week

There has been more industry buzz regarding FHA and VA Mortgages. This whole economic adjustment has been about "re-aligning" back to "normal". We received notification that some of our lenders are no longer accepting credit scores under 600. on a tri-merge both applicants lowest score cannot be less than 600. this is not really shocking, the industry has been moving in this direction for several months, but now they are trying to include VA and FHA first time home buyers. So far we have not been affected, regardless of your credit score, fill out a short app and we can still get you a home. But just in case the scenario gets worse, in the next few days, I would like to talk about how to improve your credit and credit cores, how they relate to your VA or FHA mortgage. Regardless of what your score is, chances are there is room for improvement and it just feels good to watch it rise.

A little about rates today, Last Friday, James Bullard, St. Louis Fed. President said, "Given the current economic environment and the outlook for the next 18 months, my view is that policy is appropriately calibrated at this time…." He was speaking at the Wisconsin school of business, and referencing Federal Reserve rate cuts. The Federal Reserve rate cuts were pre-emptive and designed to stimulate the economy, His opinion is to be patient, let the rate cuts do their job. Today's rates turned the bond market down sharply as investors moved away from inflation sensitive investments. This was not unexpected, and if I've been talking with you regarding rates, I most likely told you to wait and see what happens Tuesday afternoon. Well, it turns out "Wednesday will be the day the Beige Book gets released, and if it is showing slow economic activity, the bond market may thrive and rates should drop shortly afterward"… read more

Lets keep our fingers crossed Tuesday and Wednesday look good!

Send in your comments, and let's have a fun week!

Thanks Jim