new mortgage rules for 2014 that will affect home purchases

http://www.washingtonpost.com/realestate/the-new-mortgage-rules-that-are-likely-to-affect-your-next-home-purchase/2013/12/12/756fec90-5dba-11e3-be07-006c776266ed_story.html?tid=pm_pop The new mortgage rules that are likely to affect your next home purchase By Michele Lerner, Published: December 12 | Updated: Friday, December 13, 9:30 AME-mail the writer If you’re planning to buy a house next year — and unless you’re in a position to make an all-cash offer — chances are you’ll be affected by some significant changes occurring in the mortgage application process beginning in January. Several federal agencies are implementing new policies aimed at addressing lax underwriting standards that led to the housing market crash more than five years ago. The new policies could play a role in how much house you can afford. The policies require lenders to better verify that borrowers can afford the houses they are seeking to buy and can repay the loans. Some are intended to protect borrowers while holding lenders more accountable for their business practices. For instance, one set of rules requires mortgage servicers to provide consumers regularly with accurate information about their loan balances and fix mistakes quickly. The rules also prohibit servicers from starting the foreclosure process until 120 days after the borrower’s last payment. “By bringing back these basic building blocks of responsible lending and servicing the customer, we will improve conditions for consumers seeking to enter the market and for all those who are still struggling to pay down their existing loans,” Richard Cordray, director of the Consumer Financial Protection Bureau, said in prepared remarks made last week to the Consumer Federation of America. “By making the mortgage market work better, we will build consumer confidence and strengthen this essential foundation of our economy,” he added. Another big change affecting the Washington region is a Federal Housing Administration (FHA) plan to decrease the maximum loan amount for borrowers in this area beginning Jan. 1. The agency announced this week that its mortgages will be limited to a maximum of $625,500, down from $729,750. Metropolitan Washington has high-priced housing — about one in four homes in the region sells for $600,000 and above, according to RealEstate Business Intelligence, a subsidiary of Rockville-based multiple listing service MRIS. The FHA’s new loan limit next year will match the caps for conventional loans purchased by Fannie Mae and Freddie Mac. The FHA said in a statement that the agency wants to reduce the government’s role in mortgage lending to borrowers who are “underserved” — who either are low-income or have difficulty obtaining loans. The higher limits were put in as an emergency measure in 2008 and were supposed to last one year but were allowed to continue because of the lack of private loans. Borrowers who need a loan of more than $625,500 will have to get a jumbo loan, which typically requires a down payment of at least 20 percent. FHA loans are not only a little more flexible in terms of their qualification guidelines, but, more important for many people, they require a down payment of just 3.5 percent. “Switching on the fly from a down payment of 3.5 percent to 20 percent or more of the purchase price is not really an option for most people,” says Patrick Cunningham, vice president of Home Savings and Trust Mortgage in Fairfax. “It could be a $100,000 difference in money needed,” Cunningham adds. “Not something most people just pull out of the couch cushions.” Ability-to-Repay rules On Jan. 10, the Consumer Financial Protection Bureau will implement a new set of rules designed to address predatory lending practices that spurred a wave of foreclosures the past five years. Authorized by the Dodd-Frank Act, the “Ability-to-Repay” regulations are aimed at preventing lenders from approving mortgages for borrowers with questionable credit scores and poor debt-to-income ratios, and steering them into adjustable-rate loans or interest-only loans with little or no money down. The housing crisis emerged in part when rates on ARMs were reset upward. Millions of homeowners who were not completely qualified for their mortgages lost their properties in foreclosure because they could no longer afford them. The good news for borrowers is that the new rules will cap loan origination fees — they will be no more than 3 percent of the amount for mortgages of $100,000 and above. Currently, loan origination fees are not capped. However, to stay competitive, most lenders keep their fees low enough to attract customers yet high enough to make their business profitable. The rules establish a standard for what the government considers a “qualified mortgage.” Risky mortgages — negative-amortization, interest-only or balloon-payment loans — fall outside the qualified-mortgage standard. Lenders will be required to thoroughly verify consumers’ income, assets and obligations — or otherwise risk a lawsuit from borrowers who default on their mortgages. But while the regulations are intended to benefit consumers, some experts say that, like the Affordable Care Act, the changes may lead to complications and unintended consequences. One example they cite is a provision in the rule that requires borrowers’ debt to make up 43 percent or less of their gross income. “People who are right on the line of qualifying right now may not qualify in 2014” because of the policies set by Dodd-Frank, says David Zugheri, executive vice president of Envoy Mortgage in Houston. In his prepared remarks, Cordray called it a myth that the new standard will prohibit lenders from issuing mortgages to borrowers who don’t meet the 43 percent debt-to-income ratio. Lenders, he said, would still have flexibility to make exceptions for buyers with excellent credit scores, significant assets or extenuating circumstances that make it difficult to verify income. This “particular claim is wrong in three ways,” Cordray said. “First, lenders can also rely on the standards for loans backed by [Fannie Mae and Freddie Mac] or federal housing agencies. Second, smaller local creditors can make the same kinds of solid loans they have always made if they choose to keep those loans in their own portfolio, as they often have done in the past. Third, lenders can simply use their own judgment when looking at your ability to repay, just as they always have done.” But some experts assert that lenders will be unwilling to make loans that don’t meet the qualified-mortgage standard. Because Fannie Mae and Freddie Mac won’t buy those mortgages, the lenders would be forced to keep them on their books. More expensive mortgages? Another criticism cited by some experts is that borrowers seeking conventional mortgages meeting the criteria of Fannie Mae and Freddie Mac may face higher fees. Fannie Mae and Freddie Mac announced this week that guarantee fees they charge to lenders for servicing their loans will rise an average of 14 basis points on 30-year fixed-rate loans, on top of the 10 basis point increases in both December 2011 and August 2012. Since lenders indirectly pass on the cost of paying the guarantee fees to consumers, Richard Green, director of the Lusk Center for Real Estate at the University of Southern California in Los Angeles, asserted that the change could have a negative impact on consumers’ ability to borrow money. The fees charged to consumers used to be roughly 11 to 13 basis points, and now they are about 50 basis points, says Green. A basis point equals 1/100th of 1 percent, so 100 basis points would be equal to a one percentage point change in an interest rate. He says they could go as high as 70 to 75 basis points in the coming year or two. Since borrowers are limited by qualified-mortgage rules to a debt-to-income ratio of 43 percent or less, higher mortgage rates and higher fees that increase the size of their housing payment make it more difficult for some borrowers to qualify for a loan. Zugheri says that new regulations and higher expectations for compliance with rules established by Fannie Mae and Freddie Mac are hitting some groups of borrowers harder than others, such as low- to moderate-income consumers. “If you have slightly spotty credit, your income isn’t clearly defined, your assets are hard to verify or the value of your home is difficult to appraise, you’ll have a hard time getting credit and you may not qualify at all,” Zugheri says. Difficulties for the self-employed Doug Benner, vice president and sales manager of 1st Portfolio Lending in Rockville, says the hard line requiring a maximum debt-to-income ratio of 43 percent will make it especially harder for self-employed borrowers who have trouble documenting their income. “If you don’t have a W-2 to prove your income, it’s very difficult to get a loan, but the data shows that a larger percentage of the population is self-employed or doing contract work and they should be able to get loans,” Benner says. Benner says loans with reduced documentation were a good fit for self-employed borrowers, but regulations have eliminated those programs. Benner says he knows of borrowers with high net worth, perfect credit and a home valued at $2 million with $1 million in home equity who were unable to qualify for a mortgage because they lacked the documentation to prove their income meets the debt-to-income ratio. “It won’t get better, either, because state legislation in Maryland and the QM [qualified-mortgage] rules all say that borrowers need to prove their ability to repay a loan based on cash flow,” Benner says. Zugheri says the bigger problem right now in the housing market is that overregulation and capped compensation mean that many lenders will drop out of the business. Ultimately, he says, less competition among lenders will lead to higher fees and higher mortgage rates, which will hurt the housing market and particularly affect low- to moderate-income borrowers who have a harder time affording a loan. “As the rule is written, the most a lender can charge for an $80,000 loan is $2,400, while the most they can charge for a $500,000 loan would be $15,000,” says Zugheri. “Some of the fixed costs are the same no matter what size loan you make, so some mortgage companies will just stop making smaller loans or will do fewer of them because they may even lose money on them.” “The biggest issues that bite everyday people are rising guarantee fees, the difficulty of self-employed people to get a loan and the concern about loan buybacks,” says Green. “Unfortunately, nothing’s changing those things anytime soon.”

Expected Price Growth Strongest in West and South Markets

Expected Price Growth Strongest in West and South Markets

Buy a Home NOW in Ocean City MD: Refi Costs Could Rise Next Year. Ask for a FREE OCMD Market Report.

EXPERTS PREDICT HOME LOAN REFINANCE RATES WILL RISE IN 2014

[Curious about Homes in Ocean City MD?    Ask for a FREE 'Homes by Email' portal.  Search on your own time. A gift from ShoreFun4U-Susan Antigone at Long & Foster Real Estate.] Refi Costs Could Rise Next Year Interest rates and other home loan costs could rise in the year ahead, making it more expensive to refinance your mortgage or purchase a new home in 2014, mortgage market experts say. Mortgage Bankers Association Chief Economist Jay Brinkmann predicts interest rates will rise above 5 percent in 2014 and to 5.5 percent in 2015. The monthly payment on a 30-year, $100,000 mortgage is: $477.42 at 4 percent $536.82 at 5 percent $567.79 at 5.5 percent If rates do rise, homeowners looking to pull cash from their homes may decide it's cheaper to use a home equity loan or line of credit rather than refinancing their whole mortgage, Brinkmann said. Loan Fees Could Go Up Meanwhile, you could also be paying more for your mortgage next year because mortgage market giants Fannie Mae and Freddie Mac are looking to raise their fees. Fannie Mae and Freddie Mac loans usually have lower interest rates because the government guarantees the loans. But lenders pay a fee for that guarantee and if Fannie Mae and Freddie Mac raise lender fees, lenders could pass those increases along to homeowners

H&R Block - 3 Things to do NOW to Save at Tax Season 2014 [visit my facebook page H&R Block Tax Information/IRS News for latest tax updates as they arrive]

 3 Things to Do Now To Save At Tax Season

• By Alison Flores - Lead Tax Research Analyst, The Tax Institute (TTI)
• Dec 4th, 2013
• Tax Nitty Gritty, Taxes in the Wild, TaxTip

Don’t wait until you’re filing your tax return to think about taxes. Spending a moment now can help you come out ahead next spring. Here are the top three things you can do now to save time and money at tax time.

1. Can you defer any income until next year (or even later)?

• This helps you out if you expect to be in the same or lower tax rate bracket next year.
• Almost everyone is eligible to defer income by increasing (or beginning) contributions to a retirement plan. Whether it’s a 401(k) through your employer or a traditional IRA, the impact is the same; you get to postpone paying tax on that income. If your employer offers a retirement plan and you aren’t participating yet, check to see when you can start participating. If you aren’t participating in an employer-sponsored retirement plan, a traditional IRA might be the best fit for you. If you are eligible, you can make contributions to a traditional IRA for 2013 anytime between now and April 15, 2014. The maximum deductible contribution to a traditional IRA in 2013 is $5,500 ($6,500 if you are age 50 or older).
• There are other ways you might be able to defer tax.
  • Investors may benefit from selling stocks or other investments at a loss to offset their gains.
  • Some business owners have a couple of other options; one method of deferring income is to wait until late in the year to bill your clients. If that’s not the right solution for your business, consider whether purchasing equipment this year rather than next year makes sense.

2. Will you benefit by prepaying bills?

• If you are among the one-third of Americans who can benefit by itemizing deductions for expenses such as home mortgage interest, real estate taxes, state income taxes, and charitable contributions, consider paying those expenses before the end of the year.
  • Making charitable contributions now is one of the easiest ways to increase your itemized deductions. Whether you are donating cash, household furnishings, or appreciated stock, this can be a tax-saving move.
• If you are in college or have a child in college, prepaying tuition due in January might help your bottom line if it increases your allowable education credit. The American Opportunity Credit may be available with regard to qualified expenses for students in the first four years of college; the Lifetime Learning Credit may be available for the expenses of students who do not qualify for the American Opportunity Credit, such as graduate students.

3. Did you make enough payments (through withholding or estimated taxes) through the year?

• If you had a life change during the year (for example, got married or divorced, lost a job or got a new job) you may need to update your income tax withholding or check to see whether you should make estimated payments. Your employer might have withheld too little taxes, leaving you with an unexpected balance due and possibly exposing you to penalties and interest. Do a quick check now to avoid surprises at tax time. If you have an unexpected balance due, increasing your withholding can help you cover some of the unexpected costs and may shield you from penalties and interest. And knowing what to expect helps you plan and budget for tax time.

Tax planning isn’t just for the rich and famous. You can benefit by taking a look at your income and expenses and applying these techniques to save money on taxes.

First Time Homebuyers - Avoid the Pitfalls. Susan Antigone-ShoreFun4U in Ocean City MD can help you with your beach homes for sale.

Buying a home for the first time can be daunting. Avoid the pitfalls.

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First Time Homebuyer Pitfalls to Avoid

[Susan Antigone - ShoreFun4U in Ocean City MD at Long & Foster can help you choose the right vacation home for your family.  Condominium, Single Family, Townhome - homes for sale at the beach are affordable and varied. Waterfront or inland.  Call and ask for a FREE market report.  Call or email and ask for a FREE Beach Homes on Email.  Be the first to know what comes on the market.]

September 11, 2013

Find out the most common problems first time homebuyers run into when getting a mortgage for their first home and our insider tips for success in our latest infographic.

As a Mortgage Broker based in Southeast Michigan, we have helped our fair share of people embark on their first home buying adventure. Buying a home is often the biggest financial decision you will make in your life. With the new territory comes a lot of different ways you can hurt your chances and make the process more difficult than it should be.

We have compiled our list of the 12 most common mistakes and misconceptions first time homebuyers have when looking to get financed for a new home. If you can avoid these pitfalls and follow our tips for success, you will be well on your way to homeownership. If you are interested in posting this infographic on your own website or sharing it with your friends on social media, simply check out the bottom of the inforgraphic for ways you can do that!

 

Buying a home for the first time can be overwhelming. Avoid the Pitfalls.

First Time Homebuyer Pitfalls to Avoid September 11, 2013Kirk ChivasOne CommentBuying A Home Find out the most common problems first time homebuyers run into when getting a mortgage for their first home and our insider tips for success in our latest infographic. As a Mortgage Broker based in Southeast Michigan, we have helped our fair share of people embark on their first home buying adventure. Buying a home is often the biggest financial decision you will make in your life. With the new territory comes a lot of different ways you can hurt your chances and make the process more difficult than it should be. We have compiled our list of the 12 most common mistakes and misconceptions first time homebuyers have when looking to get financed for a new home. If you can avoid these pitfalls and follow our tips for success, you will be well on your way to homeownership. If you are interested in posting this infographic on your own website or sharing it with your friends on social media, simply check out the bottom of the inforgraphic for ways you can do that! Please use the HTML code below to embed this graphic Created by First Commerce Financial. Please use the above code unaltered or include a citation of this site as the original source.

What will your electric bill look like this winter? Avg Monthly Electric Bill by State.

Average Monthly Electric Bill by State Ocean City MD is sometimes warmer than inland because of the water. But the electric company charges in the end make the real difference. Homes for sale at the beach do well in winter. Keep your temperaturer set at 55 degrees and visit during the holidays. The average monthly electric bill for residential properties in Hawaii was $203.15, the highest in the nation for 2012, according to recently released data from the U.S. Energy Information Administration (EIA). The average residential electric bill, by contrast, in New Mexico was $74.62, the lowest in the nation. In the contiguous United States, the South Atlantic region had the highest average monthly electric bill at $122.71, while the Pacific region (California, Oregon, and Washington) had the lowest. The EIA is the government agency responsible for the collection and dissemination of energy information. EIA conducts an annual survey of the electric power industry. Results from the survey are used to estimate the average residential monthly electric bill by state. The four categories of electric industry consumers tracked by the EIA are residential, commercial, industrial, and transportation. Residential consumers account for the largest share of electric industry sales at 37.2% with commercial consumers a close second at 35.9%. Industrial consumers account for 26.7% of sales. In addition to being the largest category of consumers, residential consumers generally pay the highest prices. The average retail price paid by U.S. residential consumers in 2012 was 11.88 cents/kWh. The average retail price paid by commercial consumers was 10.09 cents/kWh while industrial consumers paid 6.67 cents/kWh. The EIA also provides estimates of average residential monthly consumption and price by state. The average residential monthly price is given cents per kilowatt hour. A direct link to the 2012 statistics is provided below. 2012 Average Monthly Bill – Residential Electric In 2012, the state with highest average monthly consumption was Louisiana at 1,254 kilowatt hours. The state with the lowest average monthly consumption was Maine at 531 kilowatt hours. The New England region had the lowest average monthly consumption. According to the EIA, over 80% of the homes in the Northeast rely on heating oil for space heating instead of electricity. In 2012, the state with the highest average retail price was Hawaii at 37.34 cents/kWh. The state with the lowest average retail price was Louisiana at 8.37 cents/kWh. The electric bill is a large part of the residential energy expenditures. Understanding differences in electric consumption and price by state is useful for home builders as energy efficiency is becoming a more desired feature. However, homeowners do expect a reasonable period of payback. A recent NAHB study examining home buyer preferences found that nine out of ten buyers would pay a 2 percent to 3 percent premium for a home with energy-efficient features and permanently lower utility bills. Homeowners in states with higher electrical prices are more likely to be interested in residential power production, like solar.