Three Myths and Misconceptions about Mortgages

If you have been learning about mortgages and various aspects of having a mortgage, you may have run into some myths and misconceptions. But do not be fooled by misinformation. Here are some common myths and the truth behind them.

There is a lot of misinformation in the mortgage industry floating around.  If you are considering buying a home or already own a home and have been considering refinancing, this information can lead you down the wrong path. In fact, these myths and misconceptions can end up costing you thousands of dollars or prevent you from owning a home. Here are some of the more common pieces of misinformation that you should be clear about when you decide to buy a home.

1. The Mortgage Interest Deduction isn’t going to be around for long.
One of the main benefits of having a mortgage is the major tax deduction that you can take advantage of when it comes time to do your taxes each year. But in the last couple years, there have been many people saying that this deduction may not last much longer. The National Commission on Fiscal Responsibility and Reform even recommended that this deduction be reformed in order to significantly reduce the size of the deduction.

The fact of the matter is this: While major changes were proposed regarding the Mortgage Interest Deduction, economists and housing industry experts have pleaded the case with Congress against imposing reform on this major tax benefit. They argue that it would only lead to a further crippling or the housing market which is something that nobody wants – including Congress. For this reason, the Mortgage Interest Deduction is going to be safe for quite some time.

2. Without equity, you can refinance your mortgage.
If you don’t have much equity built up in your home, you’ve probably heard from some people that you can’t refinance your mortgage. This is a common misconception that homeowners who are underwater in their mortgage are simply stuck. In some cases, you may be stuck in your situation. But there are some instances in which you have a couple options. For one thing, if your mortgage loan is secured by Fannie Mae or Freddie Mac, you may be able to refinance your mortgage for as much as 125 percent of its current market value. That means that if you have a $100,000 mortgage, you might be able to get your loan refinanced for an amount up to $125,000.

Another option that you might be able to take advantage of if your mortgage is not backed by Fannie or Freddie is the FHA “Short Refi” program. This program, however, is only available if you are current on your mortgage payments and if you need to refinance your mortgage loan for up to 115 percent of its current market value. At last check, only a few hundred people have applied for this refinancing program so you will probably have a good chance of benefitting from it.

3. If you lost your job, you should just let the bank take back your home. While being able to document your income is typically a requirement in order to get a refinance or a loan modification, there are some programs designed to help you if you have lost your job and your income. These programs are most prominent in the states that have been hit the hardest by the weak housing market, such as California, Nevada and Michigan.

The United States Treasury Department has a fund titled the Hardest Hit Fund and it allocated nearly $8 billion to the hardest hit states. Troubled homeowners can get as much as $3,000 each month for up to three years to help avoid foreclosure for those homeowners who have lost their jobs. If you have lost your job and need help paying your mortgage, you can contact the appropriate agency in your state to inquire about what is available for you.

With all of the mortgage problems and troubled homeowners in the United States, you should know the truth about your mortgage and the help and programs that are available to you. With the information above, you are in a better position to make an educated and informed decision about or you.

Check out the best mortgage and mortgage refinance rates in your area here.

With all of the mortgage problems and troubled homeowners in the United States, you should know the truth about your mortgage and the help and programs that are available to you. With the information above, you are in a better position to make an educated and informed decision about deducting your mortgage interest on your taxes, refinancing your underwater home and getting financial help for your mortgage if you have lost your job.

It has Been Awhile, But Mortgage Rates are Over the 4 Percent Mark

Mortgage rates have been below 4 percent for the last several months, but they recently went up. What does this mean for the mortgage industry?

It’s been awhile since mortgage rates for a traditional 30-year fixed rate mortgage have been above the 4 percent mark, but it happened this past week. According to Freddie Mac, the average rate for a 30-year fixed rate mortgage is now at about 4.08 percent for well qualified buyers. That’s a 0.2 percent increase from the 3.88 percent that these mortgage rates stood at about two weeks ago.

The last time that mortgage rates for a 30-year fixed rate were above the 4 percent mark was in October of 2011. But don’t expect this increased rate to decrease the interest in the housing market which is starting to experience a resurgence, even if it is minimal. Although Freddie Mac expects these rates to increase to as much as 4.5 percent by the end of this year, the impact that the higher rates will have on the housing market will be tempered by several factors, including the following:

  • The rates are still at historic lows. While these rates aren’t record lows, they are still much lower than they have been in years past. When you consider that the average mortgage rates were slightly above 7 percent for the greater part of the two decades spanning from 1990 to 2010, the 4.5 percent mortgage rates still look very attractive for today’s home buyers.
  • Home prices are still very low. In 2006, home prices were at their peak. But today, you can buy a house for a price that is more than 30 percent off of what the same home probably cost just 5 or 6 years ago. When you consider this huge discount, a 4.5 percent mortgage rate simply doesn’t seem that bad for many home buyers.
  • Since mortgage rates are on a bit of an upswing, some of the home buyers who have been considering buying a home may spring into action so they can get their mortgage rates locked in before they go higher.

There is some other good news in the housing industry, too. The number of homes sold in February increased by 9 percent when compared to the figures of homes sales in February of 2011. There were also signs of growth as the number of building permits for new single family homes increased last month to their highest rate in nearly two years. This figure is a good indicator of future construction so that’s definitely good news for the housing market and the economy in general.

Also, rates for a fixed 15-year mortgage are still below 4 percent. The average went from 3.16 percent to 3.3 percent which is just a small jump. The 15-year mortgage rates have quite a ways to go before they reach the 4 percent mark so there’s a good chance they will stay below 4 percent at least through the end of the year.

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Three Things that Can Screw Up the Closing Process

The closing process for buying a new home can be an exciting experience. Unfortunately, there are some things that can keep the closing process from actually happening.

It is more difficult than ever to get a mortgage these days. Unfortunately, many first time home buyers and even some experienced home buyers think that once they get approved for a mortgage, the closing is a sure thing. But until you sign those final papers at closing, it is never 100 percent certain that you will be the new owner of that property that you are planning to buy. Here are three common things that can go wrong at closing which can keep you from buying the house that you want.

  1. One Final Credit Check
    If your credit is good enough to get approved for the mortgage loan, make sure you keep it that way at least until the closing process is complete. Avoid making major purchases that you will be financing, such as cars, boats or other things because this can bring your credit score down by increasing the debt to income ratio, which is a major factor in determining your score. Also, make sure you continue to pay your bills on time throughout the buying process. Any negative changes in your credit score before closing can put the purchase of your new home in jeopardy.
  2. Don’t Quit Your Job
    One of the worst things that you can do between being approved for a mortgage loan is to quit your job. If you don’t have a job with a verifiable income at the time of closing, the entire deal could be off. Even if you have a better job offer with a higher salary, it is important to have a secure job because it makes you look more financially stable to the lender. If it is at all possible, see if you can hold off on starting a new or better job until after the closing process is complete and you have signed those final papers.
  3. Having Improper Documentation
    When you arrive to sign your papers at closing, it is important to have all of the documentation that is required to make the sale final. Your mortgage lender will tell you what you should have in hand when you are closing, but some of the basic documentation you will need includes recent pay stubs, current tax returns, bank statements and more. If you simply forget the proper paperwork, you may be able to postpone closing on the house. But if you do not have the proper documentation at all, the process may be halted all together.

When you go through all the trouble of getting a mortgage loan, it would be a shame to get all the way to the point of closing on the house and then having the entire process shut down because you did something that you didn’t even know would mess up the process. By knowing what mistakes to avoid, you can have a smooth and successful closing on your home.

See the best mortgage rates here.