The answer is, not at all! The Federal Housing Administration was formed in 1934 to provide financing for low- and moderate-income buyers, and there is no requirement that they are first-time buyers. There is also no maximum income for buyers. FHA has become a useful choice for many buyers whose credit situation might make conventional financing more difficult and more expensive.
FHA loans require a minimum down payment and mortgage insurance for the life of the loan. Although it is not a first-time buyer program, it is very popular with these buyers, partly because many communities offer down payment and closing cost assistance for qualified first-timers whose income falls beneath certain limits. FHA is also an excellent choice for those buyers whose credit scores are at the lower end of the scale. While conventional loans require a minimum FICO score of 620, FHA generally accepts much lower scores.
FHA does have a potential disadvantage, and that is the way mortgage insurance (MI) is handled. Lenders require mortgage insurance to limit their risk any time the loan is for more than 80% of the property's value. With a conventional loan, a borrower can ask the lender to remove the MI once they can demonstrate that the loan is less than 80% of the property's value. With FHA, the mortgage insurance will be in place for the life of the loan. Borrowers pay MI in two ways: an up-front premium that's added to the loan and a monthly premium that is also added to the payment.
If you would like more information about FHA loans or you know someone who is shopping for a home loan, contact your Loan Originator today.
You look into your credit report and see that your score is not as high as you had expected. What could have gone wrong? Although you think you may have done everything right, some seemingly harmless actions could negatively affect your credit.
Paying off credit card debt & closing accounts — Paying off credit card balances is always a good idea, but in some situations closing them after your payment has been made can negatively affect your credit score. Fifteen percent of your credit score is determined by the length of time that accounts have been established so if you must cancel a card, be sure it is one with a short credit history. Also, be sure to keep a good mix of credit (at least 1-2 major credit cards) as that can account for 10% of your score.
Maxing out cards & paying them off after the next statement — Although you paid off your balance, your statement will still reflect the status of your card. Your credit report will show that you have maxed out your card even if you pay the full balance the day after it your statement posts. To avoid this, be sure to pay any high balances off before the next statement date. A best practice for keeping your credit score in tact is to keep balances below 30% of your available credit.
Making payments a day late — Unfortunately, a day late is a day late. Your credit report will not state how many days late your payment was so you will still receive a 30-day late penalty. Many credit card companies may also charge a late payment penalty or increase interest rates for being late on your payments. To avoid penalties, be sure to schedule monthly payments for at least the minimum payment due. This will keep you in good standing until you have the opportunity to make a larger payment or pay off the balance.
Paying off old collections — This may seem to be a good thing to do, but it may actually harm more than help. Credit scoring models lend more weight to recent activity so making this a current activity on your credit report may hurt your score. If you do plan on paying off old accounts, make sure that all agreements have been signed & the creditor will be giving you a letter of deletion.
There are always steps that can be taken to improve low credit scores. If you have any questions about credit scoring and how it will affect you during the mortgage process, contact one of our Loan Originators. They will be happy to help you get on track and on the road to homeownership!
Recent tax code changes could potentially affect the financial aspects of buying and owning a home. Several of the revisions impact areas likemortgage interest deductions and home equity loan deductions. To help clarify the updates, we’ve created a chart that shows the changes.
Exclusion of Gain on the Sale of a Primary Residence
Under the original proposed changes, homeowners would be required to live in a home for a minimum of five out of eight years to claim the capital gains exemption. It was decided however, that the current tax framework would remain the same: a homeowner who had lived in a home for a minimum of two of the previous five years wouldn’t pay anything in capital gain taxes if they sold their home.
How It Could Affect You: There are no major changes. The two of previous five years requirement will stay unchanged.
Mortgage Interest Deduction (MID): Under the initial proposal, the limit on the mortgage interest deduction (MID) would be reduced from $1,000,000 to $750,000.
How It Could Affect You: This proposal reduces the limit on deductible mortgage debt to $750,000 for new loans taken out later than December 14, 2017. Assuming a 20% down payment, reduction in the MID will only impact buyers who are purchasing a home in the price range between $938,000 and $1,250,000. Experts have mixed reactions, with some feeling that it will have little impact on the market and others feeling it could be potentially detrimental having a limit on the MID raising taxes for those who itemize.
State and Local Taxes (SALT)
The original proposal includes the elimination of the state and local tax deduction (including property taxes). Under the new tax code, itemized deductions of up to $10,000 for state and local property taxes and income or sales taxes.
How It Could Affect You: Experts agree that higher taxed regions will be primarily impacted, as those homeowners now have a cap on these deductions. Some people might choose to live in one state over another because of taxation. This could impact demand on housing in some states.
What Does It Mean for Buyers?
Many families consider homeownership an essential part of the American Dream, and don’t necessarily purchase a home simply for the tax advantages. So even with the tax code changes, the main reasons people purchase homes (stability, freedom, building equity) are unlikely to be affected. If you are considering purchasing a home, speak with your McGlone Loan Originator to review how the new code will impact you.
The Federal Reserve’s (the Fed) actions indirectly impact the prices you pay for gas, rent and even your groceries. For years, the prospect of a higher national interest rate has loomed over prospective homebuyers. Now that the Fed has decided to increase the federal interest rate in December of 2017, something that had not happened since the 2008 financial crisis, it’s important to understand how recent and future rate increases will affect mortgage rates.
Mortgage Interest Rates
We’ve already begun to see an increase in residential mortgage interest rates. The rate for a 30-year fixed mortgage hit 4% in 2017. Some analysts are projecting we could reach the 4.5-5% range in 2018. In other words, the longer buyers wait, the more expensive it may become to purchase a home.
There are several reasons for this, but one of the biggest is the federal funds rate. If the Fed thinks prices are rising too quickly, they raise interest rates. The Fed lowered the federal funds rate to stimulate the economy during the 2008 recession. That lowered interest rates and propped up the economy.
Whether you’re looking to purchase or refinance a mortgage, rates are relatively low at this point, historically speaking. If you’re on the fence, this is a great time to lock in a rate.
Refinancing and Adjustable Rate Mortgages (ARMs)
Many homeowners with adjustable rate home equity lines of credit may be affected. Unlike an adjustable rate mortgage, home equity loans will reset immediately rather than once each year. While it won’t be a drastic change in 2018, those concerned with the escalation of rates might want to consider converting the balance into a fixed rate option will rates are still relatively low.
Mortgage rates are not directly impacted by the federal funds rate, but the interest rate you can obtain on a home equity line of credit (HELOC) is. However, there are ways to manage home equity debt in an environment of rising rates. One option is to refinance into a fixed-rate home equity loan.
We understand that every financial situation is unique. No matter your situation, you can speak with a Licensed Loan Originator who can go over your scenario and give you the best possible options to help you out in 2018.
This delicious cheesecake is the perfect size for two people to share after a Valentine’s Day meal. It is made in a 4-inch spring form pan. If you don’t have one, feel free to skip the crust and just use the filling to make individual cheesecakes with already made pie crusts.
For the Cheesecake
- 8 oz cream cheese (room temperature)
- 1/3 cup granulated sugar
- 1 egg (room temperature)
- 1 tsp vanilla
For the Crust
- ¼ cup graham cracker crumbs (you could also use biscotti, chocolate wafer cookies, or whatever you like)
- ½ tbsp melted butter
For the Strawberry Syrup*
- ½ cup water
- ¼ cup granulated sugar
- 1 tbsp corn starch
- 1/8 tsp vanilla extract
- 1 cup frozen strawberries (thawed)
- Preheat the oven to 350 degrees.
- Press graham cracker mixture into bottom of 4 inch springform pan and bake for 5 – 7 minutes.
- While the crust is baking, beat the cream cheese until smooth. Beat in the sugar, then the vanilla, and then the egg. Make sure to scrape the sides so everything is incorporated.
- Pour into 4 inch springform pan. Bake for 20-25 minutes until the edges are lightly golden and the middle still has a wiggle to it. Turn the oven off and leave the cheesecake in with the door closed for a half hour. Take the cheesecake out and leave it on the counter 10 minutes. Before putting it in the refrigerator, gently run a thin knife between the edges of the pan and the cheesecake. Cover and refrigerate for at least four hours before serving.
- Before serving the cheesecake, combine the water, sugar, and corn starch in a small saucepan over medium low heat. Stir continuously until fully combined.
- Add the vanilla extract and strawberries. Continue to cook, breaking up the strawberries slightly until the sauce is the consistency you want.
- Remove from the heat and allow to cool slightly before topping the cheesecake and serving.
*You can also buy strawberry syrup at the store to save time, or just top instead with fresh strawberries.