The FHA Announces Two Big Changes That Will Cost Borrowers Thousands More

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For the longest time homebuyers have relied on FHA loans to obtain mortgages using just 3.5% down. These government-backed loans have historically helped borrowers that otherwise might have had a hard time getting a loan to become homeowners. All FHA loans require the borrower to pay Private Mortgage Insurance, a premium paid each month by the buyer to insure the lender against default. FHA covers the insurance.

In light of financial troubles and exhausted reserves, the FHA recently announced that it would be changing its program. The two biggest changes have to do with the amount of premium due each month as well as the length of time these premiums are due.

Increased PMI Premiums To Take Effect April 1, 2013

Right now, all borrowers that put less than 20% down on their FHA loan are expected to pay 1.25% of the loan amount each month but effective April 1 of this year, the monthly premium amount goes up to 1.35%. On a $200,000 home that increase amounts to about $17 each month.

PMI To Be Charged for the Life of the Loan For Minimum Down Payment Borrowers

The second change will have a lot more impact on borrowers. As of right now, all FHA loan holders are required to pay PMI until they either have 22% equity on their home or for the first five years of the loan (with a minimum PMI payment period of 5 years). As of June 3^rd 2013, borrowers that put less than 10% down will be required to pay PMI for the life of the loan. Furthermore, if borrowers do pay 10% down, they would have to continue with PMI for at least a minimum of 11 years.

Buyers Must Be Under Contract By March 25, 2013 To Avoid Lifetime PMI

The mortgage industry expects a flood of new FHA applications, especially prior to April 1^st since for FHA loans that have a case # assigned by April 1^st, the lifetime PMI change will not apply. What this means to you as a buyer is that you should aim to be under contract by March 25^th so that you can get your FHA case # back by April 1^st. This does not mean that you need to close on your loan prior to April 1^st of this year.

Conventional Loans Will Likely Become More Popular

With these adjustments to the program, conventional loans will likely become more popular. Consider this comparison of a FHA loan with a conventional on a home priced at $200,000, once the changes have taken place:

Type of Loan	Down Payment	Monthly Mortgage Insurance
FHA	$7,000	$220
Conventional	$10,000	$113

Looking at the above example, there would be a savings of $1,300 each year by opting for a conventional loan.

Changes Being Made to Rebuild FHAs Financial Reserves

There are two reasons for these changes. First, the FHA is trying to recover its reserve and second, the organization expects to reduce the number of FHA loans it insures with the expectation that more borrowers will turn to conventional loans.
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If you would like to find out more about this, or better yet if you want to avoid having to pay month after month for the life of your FHA loan, contact us today and we will help you find your new home. Don’t wait – this one is huge.

Getting a Finance Check-Up Can Go a Long Way

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Are you thinking about buying a new home or refinancing the home you are currently living in? Now is a great time to do either, but before you sign the dotted line, you should give your finances a check-up.

By taking the time to determine the health of your finances, you are assuring that you are in an optimal place to take such a big step. Just like going to an experienced physician is the best way to determine if you have a clean slate of health, to discover the true picture of your credit, income and assets before making a decision on your home, it is best to visit an expert in the mortgage world. What will this mortgage expert look at? To get the clearest understanding of whether or not you are in good financial health, a mortgage expert will look at your income, your credit debt, your savings, your work history, as well as some other factors. Whether you receive a clean bill of financial health or if there are some factors that may need a little extra work to get them to a level to best suits you, it is great to know just where you stand.
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So, if you or anyone you know is looking to refinance or buy a new home, send them to the Mortgage Doctor so they can get a financial check-up. I’ll walk you through all of the steps you must take to become a shining example of great financial health. So give me a call at (402) 301-4500 today to schedule an appointment with The Mortgage Doctor!

Updated Tax Law Changes as of 1/3/2013

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Congress has passed a few late tax laws and we want to ensure that you have the most up to date, accurate tax information. The fiscal cliff deal Congress agreed on contains tax provisions that will affect taxpayers in 2013 and beyond. Here are some highlights:

  

Payroll taxes: For 2013, wage earners will again pay a 6.2% payroll tax on the first $113,700 in wages since the deal did not extend the 4.2% rate that had been in place for two years. This means workers earning the national average salary of $41,000 will receive $32 less on every biweekly paycheck.

  

Tax rates: Taxes are going up on individual filers with incomes above $400,000 and couples above $450,000. They will pay 39.6% on income above this threshold, up from the 35% rate in place since 2001. All other current income tax rates ranging from 10% to 33% are now permanent.

Investment taxes:  Rates on capital gains are affected by both the new law and the Affordable Care Act.  Based on taxable income they will be as follows:

    SINGLE                                                                  MARRIED FILING JOINTLY

Taxable income                  Tax rate on capital gains              Taxable income

                                        and qualified dividends

0 to $35,350                                       0%                          0 to $70,700

$35,351 to $200,000                            15%                         $70,701 to $250,000

$200,001 to $400,000                          18.8%                       $250,001 to $450,000

Over $400,001                                    23.8%                       Over $450,001

Family tax breaks: Tax breaks important to families have been extended for five years. They include:

• American Opportunity Education Tax Credit- a partially refundable education credit of up to $2,500 a year for the first four years of college
• Child Tax Credit of up to a $1,000 credit for each child under age 17
• Earned Income Tax Credit which provides a credit for working Americans with low to moderate incomes
• Expanded dependent care credit allows certain taxpayers to deduct up to 35% of expenses to a maximum of $6,000 for two children (permanently extended)

Itemized deductions/personal exemption: Single filers making over $250,000 and married couples making over $300,000 will be limited in personal exemptions and itemized deductions. Those filers with incomes above $422,500 will not qualify for a personal exemption and will be further limited on itemized deductions.

Alternative Minimum Tax (AMT): Many filers in the "middle class" will be protected from AMT since the income exemption levels will be permanently adjusted for inflation. We expect to receive more details here.

Estate taxes: The exemption for estate taxes remains at $5.12 million and will be indexed to inflation going forward. However, the top rate rises to 40%, from 35% for those in the highest income bracket.

Marriage penalty: Married couples will continue to receive a standard deduction that's twice that of individuals. The income ranges for the 10% and 15% tax brackets for marrieds are also double those for singles.

Debt forgiveness: Homeowners who receive principal forgiveness or go through a short sale or foreclosure will not have to pay tax on the amount of debt forgiven since the deal extends this 2007 act by one year.

Tax breaks: The deal extends several tax deductions including:

• State and local sales taxes.
• Teachers can continue to get a $250 break on school supply expenses.
• Eligible students can continue to deduct tuition and other education-related expenses.
• Individual Retirement Account holders who are older than age 70.5 can continue to request tax-free distributions for charitable purposes.
  
  
  This Article Thanks to : Patrick J. O'Malley