How do Mortgage Credit Certificates Work?

Mortgage-Credit-Certificate

Mortgage-Credit-CertificateThe Mortgage Credit Certificate Program is a fantastic way to maximize tax credits when taking out a mortgage to purchase a home. The Mortgage Credit Certificate also known as MCC is available in Orange County, Los Angeles County and the Inland Empire. Scott Schang of Broadview Mortgage in Long Beach explains why you should take advantage of the Mortgage Credit Certificate.

Homebuyer Tax Credit

A Mortgage Credit Certificate, commonly known as MCC, is a dollar for dollar tax credit similar to the first time homebuyer tax credits we saw in 2008 and 2009, that will directly reduce the amount of taxes you will have to pay, or get refunded at the end of the year.

The math for MCC programs is the same all over, but I’m going to specifically focus on the The State of California MCC offered through the California Housing Finance Agency (CalHFA).

The CalHFA Mortgage Credit Certificate is a tax credit program that offers a federal income tax credit, which can reduce your federal income tax liability. This credit creates additional net spendable income which you may use toward your monthly mortgage payment.

Dollar for Dollar Tax Savings

Most homebuyers know that one of the greatest benefits of homeownership is the tax deduction you receive from paying interest on a mortgage loan.

If you have never owned a home, you may be currently filing a 1040 EZ tax form and only taking standardized tax deductions. Once you own a home, you will most likely start itemizing your deductions to realize even greater tax savings at the end of each year.

Mortgage interest is one of the most powerful tax deductions that qualified tax payers can deduct from your net taxable income at the end of the year.

You will always want to consult a tax professional to fully understand tax deductions and itemization opportunities. I am neither a tax consultant, nor tax professional. I am only sharing publicly available information that can be found with little effort online.

Ok, with the disclaimers out of the way, let’s get down to the business of keeping more of your hard earned dollars in your pocket!

How to Calculate Your Tax Savings

First, let’s calculate what your tax deduction would be by simply buying your home.

Loan Amount: $300,000

Interest Rate: 4.5%

Yearly Interest: $13,500

Now, we are going to take advantage of a 20% Mortgage Credit Certificate so that we can realize this tax savings today.

Here’s what that looks like:

Yearly Interest: $13,500 x 20%

= 20% MCC: $2,700

*Maximum MCC tax credit that can be used in any given tax year is limited to $2,000 if the MCC credit is greater than 20%. Consult your CPA or accountant for details. Also see: IRS Tax Form 8396

After subtracting the MCC tax credit of $2,700, you now have $10,800 that you can deduct from your net taxable income on your yearly federal tax return.

Mortgage interest is used to reduce your taxable income, and in some cases can keep you from pushing up into the next higher tax bracket. This is just one of the incredible benefits of homeownership.

Now it’s time to put our MCC tax credit of $2,700 back on the table. As you’ve noticed, by deducting the MCC credit amount from your total mortgage interest deduction, you have a lower mortgage interest deduction, right?

So you’ve increased your net taxable income by $2,700. If you’re in a 15% tax bracket, that just cost you $405 that you will either have to pay, you will not get back when you file your federal tax return.

Bummer, right? Not at all.

This $2,700 is a dollar for dollar tax deduction that you get to use when your taxes every year that you own this home. For instance, if owe $3,000 in federal taxes at the end of the year, you apply the Mortgage Credit and you now only owe $1,000.

If you have overpaid your taxes, and are expecting a refund at the end of the year, you just increased your refund by $2,000!

Not such a bummer after all, right? A $400 investment that gives you a return of $2,700 is not bad at all! In addition to putting more money in your pocket, you are earning equity on your home every day that you drive up that driveway, and that puts money into your retirement plan!

Again, I would like to stress, you should always consult a tax professional to fully understand tax deductions and itemization opportunities. I am neither a tax consultant, nor tax professional. I am only sharing publicly available information that can be found with little effort online.

This is Just the Beginning

We have only just scratched the surface of the benefits and savings you will realize when using a Mortgage Credit Certificate. I cannot possibly cover all of the benefits in a single article, so this will be more of a series.

Stay tuned for other articles that will cover:

First time homebuyer requirement
Military Veteran exceptions
Income and sales price limits
Using MCC to lower your debt to income ratio (DTI)

Working with an Experienced Realtor

With over 15 years experience in real estate, I have helped my clients succeed with their real estate needs. I can answer, or find the answer to most of your real estate questions. There is a lot to know in real estate and you may just have a question. I can give you the answers and know how to fight through the hurdles of complicated situations that others may not have the experience, or patience to figure out.

If you would like to explore buying or selling a home in or around Orange County, or if you would simply like to see what I can offer you or ask questions, shoot me an email directly, or give me a call anytime.

Please call me, Diego Loya 714-989-6040 and I will be more than happy to assist you.

This article originally posted on Find My Way Home.

A Complete Guide to FHA Mortgage Insurance Alternatives

As FHA mortgage insurance rates continue to sky rocket, leaving more and more home buyers with fewer home loan options, private mortgage insurance comes to the rescue.

After 2007, private mortgage insurance became more more difficult to qualify for and was not a great alternative to the low cost of FHA financing and the then, much lower cost of FHA mortgage insurance.

Today is a different story.  Private mortgage insurance has relaxed qualifying guidelines almost in direct reaction to the constricting of FHA costs.

Whereas FHA only offers one option for mortgage insurance, PMI offers several flexible options to meet almost any home buyer or homeowners high loan to value financing needs.

5 Private Mortgage Insurance Solutions Available Now

1.  Annual Mortgage Insurance is your typical monthly mortgage insurance premium that is paid monthly and included on your mortgage statement.  It is calculated as an annual premium, divided into 12 equal payments and included in your payment.

As of today, PMI annual mortgage insurance is anywhere from half to two-thirds the cost of FHA annual premiums.

2.  Split Premium PMI closely resembles the way that FHA mortgage insurance is structured, except that private mortgage insurance only has one rate, that’s the annual premium.  FHA requires an up front premium in addition to the annual (monthly) premium.

Split Premium PMI takes the lower cost of the annual, and splits it into a small up front fee, and an even lower annual fee.  This is a great option for reducing your monthly mortgage insurance payment significantly.

3.  Single Premium PMI is typically higher than annual private mortgage insurance, and is paid in full at the closing of escrow.  The result is that you have no annual, or monthly mortgage insurance payment to worry about.  If you’re using a buyer assistance program, getting gift funds from a relative, or getting a seller or broker credit, this is a great option for wiping out PMI completely.

4. Lender Paid Mortgage Insurance (LPMI) is a great option for “rolling in” the cost of mortgage insurance into the interest rate, resulting in lower upfront costs, and higher monthly payments.

While the lure of not having mortgage insurance is appealing, keep in mind that you are unable to remove the PMI at a later date and that you will have to continue to pay the higher interest rate until you refinance the loan.

5. Community Lending Programs like the Broadview BCA home loan allows for discounted private mortgage insurance rates for low to moderate income borrowers.  Thing is, low to moderate is still pretty high.  In Orange County California, if you make less than $98,000 a year, you could be eligible for deep discounts on your mortgage insurance.

Private mortgage insurance is available for both home buyers and home owners wishing to refinance up to 97% loan to value.

A Complete Guide to FHA Mortgage Insurance Alternatives was originally posted on FindMyWayHome.com.

 

 

Community Access Loan is FHA Mortgage Insurance Alternative

With FHA Mortgage Insurance costs increasing in 2013, home buyers are desperately seeking out alternatives to increase buying power and reduce mortgage payments.

The Broadview Mortgage Community Access loan is that alternative.  This is a conventional loan program that does require private mortgage insurance (PMI) offered at a special discounted rate.

The discounted PMI of the Community Access loan is about half of the monthly MIP required on all FHA loans.  With FHA threatening to make mortgage insurance permanent, this program still allows PMI to be removed once the principle balance reaches 80% of original loan amount.

Better than FHA?

There are many features of the Community Access loan that beat out FHA even before underwriting guideline changes were announced.

Some of biggest differences include:

  • 3% down payment compared to 3.5% with FHA

  • Reduced monthly mortgage insurance rates

  • No up front mortgage insurance

Qualifying Highlights

The Community Access loan is primarily targeted toward home buyers and home owners that could use a little extra help.

Income Limits – In the State of California borrower’s income must not exceed 140% of the Area Median Income (by County).

Southern California Income Limits*

  • Los Angeles County – $98,140

  • Orange County – $98,140

  • San Diego County – $106,260

  • San Bernardino County – $88,620

  • Riverside County – $88,620


Maximum Loan Limits – Due to Private Mortgage Insurance restrictions, the maximum loan limit for this program is $417,000.  There is no maximum purchase price as long as your loan doesn’t the maximum loan limit.

Down Payment Assistance Available – The Community Access loan can be used with California Housing Finance Agency homebuyer assistance program.  CHDAP is the State of California’s assistance program that provides up 3% of the purchase price to be used for down payment or closing costs.

CHDAP also has income and sales price limits, so it’s important to let your loan officer know you would like to use this program so we can check limits on both programs.

The Community Access loan has many qualifying flexibilities that make this affordable loan program stand alone when compared to FHA financing.  Currently, private mortgage insurance restrictions do not let us take full advantage of all of the features of this loan program.

Community Access Loan is FHA Mortgage Insurance Alternative was originally posted on FindMyWayHome.com.

Will FHA Streamlines Go Away in 2013?

Homeowners with a FHA insured mortgage may be eligible for a special refinance program that offers reduced cost, and reduced documentation refinancing options.
The FHA streamline refinance program allows home owners to reduce their interest rate to current market rates if:

  • At least 6 payments have been made on your current FHA mortgage
  • No late payments in the past 3 months
  • No more than 1 late payment in the past 12 months
  • You are currently employed
  • You can improve your payment by at least 5%

FHA Streamline Benefit Killers

Benefit is a term used for meeting the minimum FHA streamline refinance eligibility criteria of improving your current payment by at least 5%.  The future of this program hinges primarily on the ability to continue to gain benefit from refinancing.

Interest Rates Increase
For almost a year now, interest rates have been dropping to a point where we may have seen the absolute bottom.  Currently, interest rates are sitting at a 3 months high with the average national interest rate on a 30 year fixed mortgage at 3.34% after .70% in lender fees according to the most current Freddie Mac Primary Mortgage Market Survey.

The biggest threat to benefit lies here, with the interest rate.  In 2012, over 1 million FHA mortgages were used to either purchase or streamline refinance to a lower interest rate.  That means that over 1 million home owners have loans with the lowest interest rates in history.

It appears that interest rates can’t possibly go lower as they have been hovering at these rates for nearly 6 months, experiencing slight increases recently as a result of uncertainty around the Presidential elections of 2012 and the more recent “Fiscal Cliff” scares.

As the economy improves, interest rates will increase.  This is an undeniable fact of economics 101.  Once interest rates increase, FHA streamline refinances go away.

Increasing interest rates are not the only streamline refinance killer facing home owners today, even if interest rates stay exactly where they are today, and mortgage insurance premiums increase as scheduled, this could alienate hundreds of thousands of homeowners by moving the 5% benefit qualification out of reach.

FHA Cost Increases Expected in 2013
Some of the 2013 money raising strategies that were suggested in the HUD report, as well as proposed by members of Congress include:

My advice?  Run the numbers.  You have nothing to lose by speaking to a lender to compare what you have now to what might be available today.

Will FHA Streamlines Go Away in 2013? was originally posted on Find My Way Home.

FHA Home Loans Changing in 2013

Perhaps you have heard already that the FHA will further change its overall look in the coming year. I’ve already started to see Facebook comments about FHA and many of them are just rumors. The truth can be described easily as it applies to the real estate industry:

1) The Annual Mortgage Insurance Premium (MIP) is going to go up by 10 basis points = 24.13/monthly for a purchase of 300,000. That means your buyer will qualify for about 4,500 less than before if he/she was buying at their absolute maximum.

2) FHA Mortgage Insurance will return to being a permanent part of any FHA loan. In the last few years FHA had allowed for the MI to simply drop off (after 7 years) or be requested to have removed (after 5 years if the equity was there). Who remembers when that was the case before? This means for the borrower that they will need to refinance out of the loan entirely if they want to get rid of the MI.
Bottom line: FHA needs the money. They are in a 16.3 Billion Dollar hole. They are also technically out of compliance with their charter, which requires them to have a 2% reserve amount at all times. Something they have not had for 4 years now.

More may be in store but for now that’s it! Not much to it.

Some good news? RATES are expected to hold at relatively low levels in 2013!

 

Widen your Brea home search and see every home for in Brea: Brea Homes For Sale

When Can You Buy a Home Again After Foreclosure

So your ready to buy again but you’ve had a foreclosure and you ask yourself these questions.

How long do I have to wait? How do I qualify? What steps to I need to take to be eligible? Can I be a first time buyer again?

What a difference a couple of years can make. You probably qualify to purchase a home NOW! Plus, you have options. You can take advantage of low down payments with ridiculously low interest rates plus even qualify as a first time buyer.

Interested. Read on.

Your Ready to Buy Again

You’ve gone through hell of losing your home to foreclosure. Moving out of the home, your home, was a hard thing to do. Dealing with the bank and all the notices, mail, phone calls. It was not a pleasant experience. Now, some years have passed, you’re renting or living with someone. You’ve been able to restart, rebuild, save a little. The desire to be a homeowner is still there, never was lost. Only thing holding you back is, “How long do I have to wait? How can I qualify?”

How Do You Qualify to Buy Again?

Qualifying to buy after a foreclosure is no different than qualifying a FHA mortgage under any other circumstances:

    • You must have steady employment in the same line of work for 2 years
    • You must be able to show the probability of continued employment
    • A minimum 640 FICO score is required
    • FHA requires a minimum 3.5% down payment
    • 36 months must have passed since the foreclosure date

How do I Know When I’m Eligible?

The 3 year waiting period starts the exact date the deed of trust is transferred from your name to the bank’s name. This happens right around the end of the foreclosure process.

This information is easy to find. It’s public record and can be found by going to the county recorder office or your county may have an online website with that information, you can search there. Or even easier, contact us and we can look it up in our systems and tell you right over the phone.

First Time Home Buyer Eligibility

Here’s where the story gets juicy. This is the definition of a 1st Time Buyer:

    • A person has not owned a home in the past 3 years.

That’s it!

Ironically, this is also the waiting period to buy again after foreclosure. Now, you may be eligible for down payment and closing cost assistance the State of California or other incentives. There are restrictions that we can let you know for specific properties and income and purchase price limits.

 

How Do Historic Low Interest Rates Sound?

Interest Rates Fall

Interest Rates Continue to Fall as Buyers Flock to the Improving Real Estate Market

In case you missed it, the Federal Reserve Board announced last week that they would be infusing $40,000,000,000 (billion) more into mortgage backed securities on a MONTHLY basis. The immediate effect on rates was dramatic and there is potential for more rate declines (believe it or not) once the additional infusions begin to take place.

Here is what rates look like at the moment:

30 Year Fixed FHA and Conventional = 3.375% – no points
5/1 ARM = 2.75% No Points

JUMBO
30 Year Fixed = 3.875% with a .5% credit (on a 700,000 loan that’s $3,500)
5/1 ARM = 2.875%

In case there was any doubt, these are all new historic lows. I have my seat belt, do you?

Contact your favorite lender and see what they can do for you. Call us to discuss your real estate needs. We are happy to point you in the right direction.

 Current Homes for Sale in Brea

To See Homes in Other Price Ranges: Search HERE

To See Homes For Sale in Other Areas: Search HERE

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How Soon Can I Purchase After a Short Sale?

About Short Sales

The facts about how long buyers must wait before obtaining financing.

A common question home buyers have today is: How long must I wait before obtaining financing after a short sale? Below is an overview by loan type of this important information.

It depends on the loan you want to get to purchase real estate. For instance on a Fannie Mae loan the waiting time is 3 years but may go as long as 7 years depending on the loan to value ratio.

If you’re going after a FHA loan, 3.5% down. You’ll have to wait 3 years after a short sale to be able to qualify for a loan. Quick Tip: There is no time restriction if the borrower made all their monthly payments during the short sale and 1 year prior to the short sale.

If you want a VA loan, you will have to wait 2-3 years. There are no definite rules yet but assuming it will follow the other loan types

If you would like more information of financing timelines visit our other article:

Want to Purchase a Home After a Short Sale, Foreclosure or Bankruptcy?

Guidelines may change according to Fannie Mae, Freddie Mac or government authorities. It is always best to speak with a real estate professional about your real estate concerns. If you have real estate legal questions, it is best to speak with a real estate attorney. If you do not know one, contact us and we can provide a non partial list of local real estate attorneys.

If you have any questions about these timeframes or if you would like additional information, please call us today.

Mortgage Rates Drop After Fed Announcement

Interest Rates FallMortgage rates abruptly dropped last week after the Fed unveiled a third round of large-scale asset purchases known as quantitative easing or QE3.  Although the dollar amounts announced today are smaller than QE1 and QE2, the Fed deviated from past easing announcements and opted for open-ended buying this time.  Not only that, but the buying is exclusively in Mortgage-Backed-Securities (MBS), unlike previous iterations which have had significant Treasury components.

What all this means to real estate is that interest rates for mortgage loans fell and may continue that trend as long as the Fed keeps this up. Bottom line: This is a fantastic time to by real estate or refinance your existing home.

This Weeks Best Interest Rates

30 Year Fixed Rate Loan – 3.375%

15 Year Fixed Rate Loan – 2.625%

FHA/VA Loan – 3.625%  FHA conforming loan amount is $362,000, but it is available up to $625,500 (loan amount may vary per county). Minimum requirement with 3.5% down payment.

Jumbo Loan

30 Year Fixed Rate Loan – 3.625%

15 Year Fixed Rate Loan – 2.75%

New Jumbo Conforming loan amount is up to $625,500 with 20% down payment

Interest rates vary day by day and hour by hour so check with your lender to see what the current best mortgage rates are.

Homes For Sale in North Orange County

Personalize your search and have access to over 100,000 homes for sale in your area within the Multiple Listing Service  HERE  

Our real estate listings are updated every couple of hours as they become available on the market through the MLS, Multiple Listing Service.

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How Much Can I Buy with an FHA Loan

FHA LoanIf you looking to purchase a home using an FHA (Federal Housing Administration) loan because you are looking to put a lower down payment, there are limits on how much you can buy. As you probably already know the minimum down payment needed for an FHA loan is 3.5 percent.

Depending on the county you will be purchasing in the loan limits vary. Here’s a breakdown of the FHA loan limits and the maximum purchase price which includes the 3.5 percent down payment.

FHA

County                                Purchase Price                                 Loan Limit

Los Angeles / Orange                  $756,218                                                              $729,750

San Bernadino / Riverside            $518,135                                                              $500,000

San Diego                                  $722,798                                                              $697,500

FHA stands for Federal Housing Administration; the FHA is an arm of the Department of Housing and Urban Development (HUD). The primary focus of the FHA is to encourage homeownership in the United States. To do this, the FHA insures mortgages against borrower default. By insuring mortgages, the FHA makes homeownership possible for a broader range of buyers.

To qualify for an FHA loan borrowers must meet certain criteria. The FHA requires that borrowers pay the initial mortgage insurance payment and make subsequent premium payments every year. In addition, borrowers are subject to the credit standards established by the FHA. Although FHA mortgage insurance grants flexibility in lending terms, there are limits to the amount of a mortgage loan and type of property. According to the FHA, loan amounts vary by conditions in the borrower’s area. The FHA insures mortgages on single homes and buildings that contain one to four housing units, as long as one of the units is owner-occupied.

FHA purchase price based on minimum down payment of 3.5% effective 2009. These loan limits were updated January 10, 2012. The loan limits may and will change in the future. Contact us for any updates.

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