Have The Finances Ready?

Austin Texas Real Estate: Do not buy the cart before the horse which is a common mistake with Buyers. The first step in finding your new home is knowing the big picture of your financial situation. Getting a feel of your income, debts, and expenses you will have a better idea of how much to borrow and what you can afford.

Institutions need this information so they are going to look at your home records. Plus you should include financials for every person involved in the purchase of the house. Below are some documents that need to be prepared for the lender:

Bank Statements: Lenders will need copies of your bank statements. They need proof of money that you putting down unless it is a gift. Bank statements are need for all parties especially if you are married.

Paycheck Stubs: Banks are interested in your average income. They want to see your monthly paycheck but how much you have earned in the last two to three years. Regular employment is also more important to lenders so have good reason if you have moved around on multiple jobs.

Tax Records: Always keep the last five years of income tax records for lenders and in case you are audited. What is important about tax records is that lenders can get an exact idea of your income to your expenses. This falls into your debt ratio which is an important formula for loan approval.

Credit Report: Every financial institution will need to see your credit report for the loan application process. It lists all of your debts your history on how timely you are with payments. The credit report and application are very important part of the process.

Dividends and Investments: Lenders will consider your investment portfolio and long investment dividends are very helpful when other items above are not as good when evaluating your income.

Alimony and Child Support: Payments for child support or divorce settlement are included income. Lenders will want to see a copy of your divorce settlement as proof of payments payments.

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Credit History

Lenders will need to see a copy of your credit report. It will have all your long term debts like mortgage, credit cards, automobile and loans as well as your payment history.

It is a good idea to obtain a copy of your credit report months before you apply for a loan so you can find possible problems with your credit before you get pre-approved. Federal law guarantees that you have access to your credit report that can be obtained from the website or national firms that handle credit reports.

Credit Report Errors
Credit reports often contain errors or wrong information. If this is an issue you will need to contact the reporting creditor to have the problem resolved and can be a slow process so be patient.

Late payments
Majority of problems with the credit report are related to late payments. With a history of late payments you will need to document the reasons. A slow payment history will not always get you turned down for a loan but you could have to pay a higher rate of interest.

Bankruptcies and foreclosures
Bankruptcy on your credit report is not a good thing but that doesn't mean you still can't obtain a loan. It may stay on your credit report for 7 to 11 years lenders will consider the circumstances surrounding a bankruptcy. If you have re-established good credit since the bankruptcy a lender will be more interested to approve your application.

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LOANS

Austin Texas: Buyers have choices for loans. There are many types of loans but here are a few that are popular in the real estate industry.

While the choices may seem overwhelming the goal is really simple. You need to find a loan that works with current financial situation and your future goals. This article discusses common loan types you should talk about with lenders to decide the right loan for you.

Categories
Loans fall into 3 categories: adjustable rate, fixed rate and hybrid loans with a combo of both.

Adjustable mortgages differ from fixed mortgages since rates and monthly payment can change. Since the rate for an adjustable is connected to the Treasury Securities that fall or rise over time. Adjustables usually have caps or limits so the rate does not rise above a certain adjustment With low introductory rates adjustables are the most accepted alternative to fixed rate mortgages. 

Fixed rates carry the same rate for the complete. These mortgages have been popular among buyers, because the fixed payment is to budget. Fixed rates are common in 30yr and 15yr terms but lenders have offered 20yr and 40yr loans.

Hybrids combine features adjustable and fixed. Hybrids start with a fixed rate for a length of time and later change to an adjustable. Some hybrids do not have rate caps for the first period.

Balloon Payment
Balloon payment is a loan with a large final payment at the completion of the loan - ie after 7 years of payments the remaining balance is paid off.

Time
If you stay in a home for 10 years or more a traditional fixed rate will be your best choice. If you own a home for 5 years or less then the adjustable will make the best financial sense.

Conventional Loan
A conventional loan is offered by a private lender. Conventional loans are harder to qualify for than government loans, they have less paperwork and do not have a maximum amount. 

VA and FHA
Government loans like FHA and VA are designed for home ownership for people who may not be able to qualify for a conventional. FHA and VA loans have lower ratios than conventional loans and require smaller down payments.

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Austin Texas Real Estate Closing Costs

Fees for buying or selling a home are called closing costs. These fees are assigned to either the buyer or the seller and some costs are negotiable.

Seller’s Costs
The seller’s most important closing cost is paying off the remaining amount of their loan. Before the closing, the escrow officer will contact the lender for the amount needed to close out the loan. Other costs include transfer taxes, title insurance, prorated property taxes, doc stamps on the deed and broker’s commission.

Buyer Costs
Lenders provide the buyer with a good faith estimate of their closing costs. The fees vary to many factors including the type of loan and the terms of the purchase contract. Some of the closing costs paid in advance. Other buyer closing costs include title insurance, down payment, pre-paid insurance, doc stamps on the note, loan fees, hazard insurance and mortgage insurance.

Prorations
Certain costs are often distributed between buyer and seller. Prorations are for property taxes because property taxes are paid at the end of the year when assessed. If a home is sold in OCT the sellers will have lived in the house for eight months and the taxes will not come due until the following year. The taxes are prorated to for the amount of time the seller has lived on the property in comparison to the buyer for the year.

Negotiating Costs
Escrows can include closing costs in their negotiations. An example would be if the buyers did not like the carpet and request the seller pay for the replacement but would like to choose the brand and color so the seller releases the amount to the buyer. Also if a buyer is short of funds for repairs they may pay full price and but receive the necessary amount at closing.

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Real Estate Refinancing

Austin Texas Real Estate: Refinancing your home can be a good way to bring down your mortgage payment, raise money or merge debts with high interest rates. However, you need to do your homework before deciding to refinance. One important factor is the difference between current interest rates and the rate of your original loan. Also homeowners need to take into account the amount of time it will take to recoup the costs of refinancing.

When to refinance

You should refinance your home if interest rates fall more than 2 points below your existing mortgage rate because refinancing usually involves most of the same closing costs as the original loan. Anything less than 2 percent the savings on your monthly mortgage payment might not be significant enough to be worth your while.

Is it worth it
If it costs $4,000 to refinance a house, and the monthly mortgage payment is lowered by $120 it would take almost 4 years for the savings to cover the costs of refinancing.

In addition, you may be able to roll the closing costs of a refinance loan into the new note. You don't avoid the closing costs, but instead pay them back over time along with the rest of the loan. Refinancing usually lengthens the time it takes to pay off your house. If you are 2 years into a 30-year mortgage and then refinance with a new 30-year loan you'll end up making payments on the house for 32 years. If the monthly savings are substantial enough you still could end up paying much less over the long haul with the new loan.

Adjustable Rate Mortgages

Rising interest rates might influence you to covert your ARM into a fixed-rate loan if you plan to stay in your house for several more years. You may plan to move in a year or two and find a lender who is willing to offer you dramatic interest rate savings with an ARM. In this case it might make sense to switch from a fixed-rate loan to an ARM.

Equity
With enough equity you can refinance in order to take cash out of the property. Lenders will typically allow you to borrow against the equity you've built in your house. These types of loans are also called home equity loans.

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Erasing Government Programs That Slow the Recovery of the Real Estate Market

Austin Texas Real Estate:  Republicans are planning to kill several White House plans aimed at keeping borrowers close to foreclosure in their homes.

The plans on the being threatened include the Home Affordable Modification Program, the Neighborhood Stabilization Program, the Federal Housing Administration Refinance Programs and the Emergency Homeowner Relief Fund and would save about $38 billion.

The mortgage modification program has faced criticism because of the lack of success and is only delaying what needs to happen plus slowing the recovery. The constant delay could force the real estate market to delay for years. The natural cleansing of the capitalist market needs to take place with artificial delays.

Another other issue at hand is fining numerous banks for robo signing. If the government does succeed in fining the banks this will incite litigation among millions and delay more foreclosures that will happen over time anyway. This will freeze up banks equity because they cannot clean their books and will need reserves for litigation.  All this forces the banks to work on their internal safety rather than producing more loans to help the market recover. 

Always let the market naturally correct itself and do not interject money programs to try to heal the downfall because all that is left is less government funds and a slower recovery.

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Don’t Touch That!

The Presidents recently released budget plans to reduce high income earner’s tax deduction for mortgage interest payments. The plan is for taxpayers in the 33% and 35% tax brackets would only be able to deduct their mortgage interest payments at the 28% rate. It would affect those with taxable income of $250,000 and up and bring in $321 billion over 10 years. Commissions have called for eliminating the deductions in the past. But the proposals have gone nowhere and the same outcome is expected this year. The real estate industry for the mortgage interest deduction are making it clear to both Congress and the White House that they strongly oppose any limits to the deductions. The real estate industry is concerned that capping the deduction will hurt the housing market from rebounding. By curtailing the deduction costs the Treasury Department would raise an estimated $131 billion a year and it would also cut the size of eligible mortgages up to $500,000. This is not good for real estate agents but hopefully the NAR will stand up against these new proposals.

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