DC CLOUT "DC Area Real Estate Buzz"

Should I Buy a Washington DC Home, Now?

If you purchase a home today and finance a $500,000 mortgage with a 30 year, fixed loan a 5.75%, the principal and interest payment would be about $2,917,86 per month.

If you wait to purchase, interest rates will most likely rise above today’s historically low rates. For example, under the same $500,000 mortgage referenced above with and interest rate of 7.25%, the principal and interest payment would rise to about $3,410.88 per month.

The difference between these two loans is $493.02 per month. Over the life of the loan, you would be paying an extra $177,486 in interest on the same mortgage amount.

Using the same above example, what would happen if the home market softened to the extent that you could purchase the same home and only need to finance $450,000 at 7.25%? The principle and interest payment would be $3,069,79 – a monthly payment still higher than if you purchased a more expensive home at today’s low rates or $54,695 more over the life of the loan.

Tax Savings

With the $500,000, 5.75% loan above, the interest paid on average over the life of the loan is $18,327 per year. If you are in a 35% tax bracket, your Federal tax savings from interest would be 6,415 per year. If your state?DC tax bracket is 10% that would be a n additional savings of $1,832 per year for a total tax savings of $8,247 per year or $687 per month.

Equity Build-Up

In the unlikely event that the house you finance for $500,000 today does not appreciate over the next 30 years, you would still obtain a significant amount of equity build-up with each mortgage payment. On average over the life of a $500,00, 30 year fully amortized loan, the equity build-up equates to $16,666 per year or $1,389 per month.

With the combined total from tax saving of $687 plus the equity build-up of $1,389 per month, you are losing approximately $2,076 per month by doing nothing.

Contact Al at dcrealtor@live.com  call 301/452-2278  so we can get you started NOW!

This Weekend Interest Rates

February 18th, 2011
CONFORMING - 30 YR FIXED (UP TO $417,000)
FULLY AMORTIZED - PITI	5.000%		0PTS
4.750%		1PT
HB CONF - 30 YR FIXED ($417,001 TO COUNTY LIMIT)
FULLY AMORTIZED - PITI	5.125%		0PTS
4.875%		1PT
FHA - 30 YR FIXED…REGULAR & HIGH BALANCE!
REGULAR FHA - Up to $417K or County Limit
30 YEAR FIXED	4.750%		0PTS
4.500%		2PTS
REGULAR FHA - 5/1 ARM - Up to $417K or County Limit
1/1/5 CAPS - GREAT PROGRAM!	4.250%		0PTS
3.750%		1PT
HIGH BALANCE FHA - $417,001 TO COUNTY LIMIT
4.750%		0PTS
4.500%		2PTS
VA LOANS 100% Vary by County
REGULAR VA - (LOANS UNDER $417K INCLUDING FUNDING FEE!)
4.750%		0PTS
4.500%		2PTS
HIGH BALANCE VA - ($417,001 - COUNTY LIMIT)
4.750%		0PTS
4.500%		2PTS
HOMEPATH, FANNIE MAE FORECLOSURE LOAN, ONLY FANNIE REO
No Mortgage Ins. with 3% down and 680 Credit Score	5.375%		2PTS
USDA - GURANTEED RURAL HOUSING - ZIP CODE RESTRICTIONS
Income restrictions apply - 100% Financing	5.000%		0PTS
CALL TODAY 866-PCR-MORT
Rates and terms are subject to change without notice. This is not to be construed as an advertisement to offer credit as defined by section
226.2(d) of regulation Z. This information is for the sole use of real estate professionals and is not intended for public use. Rebate may not be
offered in such cases where the seller is paying all closing costs. **CHECK COUNTY FOR

Evaluate Your Adjustable-Rate Mortgage

An adjustable-rate mortgage, or ARM for short, is attractive to homeowners because the introductory interest rate is often lower than rates on traditional fixed-rate loans. That translates into lower monthly payments. ARMs can make sense if you plan to sell your home or refinance your mortgage before the introductory rate expires.

Just keep in mind that there’s no guarantee you can sell or refinance in time, especially if real estate markets are depressed or the lending environment is tight. If you’re a current homeowner with an ARM, look into your loan options long before the rate resets. A day spent investigating alternatives could save you thousands.

Get to know your ARM

Review your ARM’s original paperwork to familiarize yourself with the conditions of the loan. Focus on these four areas as you go through the documents.

Index: Lenders use a widely followed index as the basis for the interest rate you pay on an ARM. A common index is the London Interbank Offered Rate, or LIBOR, the rate major world banks charge each other for loans.

Margin: This is the percentage you pay above or (rarely) below an index. “LIBOR plus 2,” for example, means you’ll pay an interest rate two percentage points above LIBOR. If LIBOR is 4% and your margin is 2%, then your mortgage rate is 6%.

Interest Rate Cap: This limits the amount your rate can increase in a given timeframe. Periodic caps govern how much your rate can increase from one period to the next, such as from year to year. Lifetime caps set the maximum amount the rate can rise above the introductory rate during the loan’s duration.

Adjustment Period: This is how frequently your rate changes.

Once you understand the terms of your ARM, think about how long you plan to live in your home. If it’s less than five years, then you may benefit from refinancing into another ARM. If you hope to stay in your house for the long haul, a fixed-rate mortgage may be a better deal for you.

Evaluate your refinancing options

Now it’s time to consider what actions to take before your ARM resets to a higher interest rate. Start by determining your monthly payment once your introductory rate expires. An online ARM calculator can help. If you can handle the new payment, then your job is done. But if it’s more than you can afford, explore alternatives.

A common tactic is to refinance into a loan with a lower monthly payment. Look into 15- or 30-year fixed-rate mortgages, since the payments will be steady and predictable. Also explore a new ARM, such as a 5/1 ARM, which can also have a 30-year term but offers a low fixed rate for five years before resetting in the sixth year. Use this worksheet to keep track of loan terms and compare mortgages, both adjustable and fixed, to each other.

Let’s say you need to refinance a $200,000 loan for 30 years. According to the U.S. Federal Reserve, a 30-year fixed-rate mortgage at 6% interest will cost you $1,199 a month. If you refinance into a 5/1 ARM with an introductory 4% rate, monthly payments for the first five years will be $955. Saving $244 a month—or about $14,640 over five years—sounds hard to beat, right?

The problem is, the monthly ARM payment can increase starting in the sixth year. Assuming the periodic rate cap is 2%, the rate may rise to as high as 6% in Year 6. At that point, your payment would go up to $1,166, which is still $33 less than the 30-year fixed. In Year 7, though, you could get hit with another 2% rate increase. That would bump your payment up to $1,390, or $191 more than the fixed-rate amount.

It can get worse if you’re living in a rising-interest-rate environment. If the lifetime cap on your loan is 8%, your rate could eventually be as high as 12%—the introductory 4% plus 8%—yielding a monthly payment as high as $1,865. That’s nearly double the introductory payment. Suddenly, that $1,199 payment on a 30-year fixed looks pretty good if you’re planning to own your home for a long time. If you plan to sell within five years, the ARM is a better choice.

Face the realities of refinancing

Refinancing an ARM isn’t free, so take into consideration closing costs and breakeven points. You might save $200 a month with a refinance, but if the upfront costs are, say, 5% ($10,000 on a $200,000 loan), you wouldn’t break even for a full 50 months. The Federal Reserve says typical closing costs on a refinance range between 3% and 6%. Also make sure there’s no prepayment penalty on your ARM, or you might find yourself eating that cost as well.

As you evaluate your options, be realistic about the future. Is your job secure? Will late payments or too much debt hurt your credit score? Could lending markets turn so tough that even borrowers with outstanding credit can’t get loans? These scenarios might prevent refinancing indefinitely.

Take safeguards just in case you find yourself on the losing end of an ARM gamble. Start by setting aside a portion of the money you’re saving on an ARM during the introductory period. That way, if the ARM resets before you can refinance, you can use the savings to pay down your principal. That should lower your monthly payment, even with a higher interest rate. When needed, cut expenses or generate extra income to eat away at your loan balance.

Accept the fact that you may have to sell your property. Use the proceeds to purchase a less expensive home, or rent until you’re in a better financial position. If you absolutely can’t meet your monthly payments, and you can’t sell, then talk to your lender about a loan modification.

Barbara Eisner Bayer has written about mortgages and personal finance for the past 15 years for Daily Plan-It, Motley Fool, and Nurse Village, and is the former Managing Editor of Mortgageloan.com and Credit-land.com. She enjoys the flexibility of adjustable-rate products, but is temperamentally a fixed-rate kinda gal.

Courtesy of Al Matlock Washington DC Realtor  contact Al at dcrealtor@live.com  301/452-2278

Find the Home Loan that Fits Your Needs

Understand which mortgage loan is best for you so your budget is not stretched too thin.

The basics of mortgage financing

The most important features of your mortgage loan are its term and interest rate. Mortgages typically come in 15-, 20-, 30- or 40-year lengths. The longer the term, the lower your monthly payment. However, the tradeoff for a lower payment is that the longer the life of your loan, the more interest you’ll pay.

Mortgage interest rates generally come in two flavors: fixed and adjustable. A fixed rate allows you to lock in your interest rate for the entire mortgage term. That’s attractive if you’re risk-averse, on a fixed income, or when interest rates are low.

The risks and rewards of ARMs

An adjustable-rate mortgage does just what its name implies: Its interest rate adjusts at a future date listed in the loan documents. It moves up and down according to a particular financial market index, such as Treasury bills. A 3/1 ARM will have the same interest rate for three years and then adjust every year after that; likewise a 5/1 ARM remains unchanged until the five-year mark. Typically, ARMs include a cap on how much the interest rate can increase, such as 3% at each adjustment, or 5% over the life of the loan.

Why agree to such uncertainty? ARMs can be a good choice if you expect your income to grow significantly in the coming years. The interest rate on some—but not all—ARMs can even drop if the benchmark to which they’re tied also dips. ARMs also often offer a lower interest rate than fixed-rate mortgages during the first few years of the mortgage, which means big savings for you—even if there’s only a half-point difference.

But if rates go up, your ARM payment will jump dramatically, so before you choose an ARM, answer these questions:

• How much can my monthly payments increase at each adjustment?

• How soon and how often can increases occur?

• Can I afford the maximum increase permitted?

• Do I expect my income to increase or decrease?

• Am I paying down my loan balance each month, or is it staying the same or even increasing?

• Do I plan to own the home for longer than the initial low-interest-rate period, or do I plan to sell before the rate adjusts?

• Will I have to pay a penalty if I refinance into a lower-rate mortgage or sell my house?

• What’s my goal in buying this property? Am I considering a riskier mortgage to buy a more expensive house than I can realistically afford?

Consider a government-backed mortgage loan

If you’ve saved less than the ideal downpayment of 20%, or your credit score isn’t high enough for you to qualify for a fixed-rate or ARM with a conventional lender, consider a government-backed loan from the Federal Housing Administration or Department of Veterans Affairs.

FHA offers adjustable and fixed-rate loans at reduced interest rates and with as little as 3.5% down and VA offers no-money-down loans. FHA and VA also let you use cash gifts from family members.
   
Before you decide on any mortgage, remember that slight variations in interest rates, loan amounts, and terms can significantly affect your monthly payment. To determine how much your monthly payment will be with various terms and loan amounts, try REALTOR.com’s online mortgage calculators.

More from HouseLogic

Evaluate Your Adjustable Rate Mortgage

Show Your Support for FHA

Other web resources

How much home can you afford?

Why ask for an FHA loan?

G.M. Filisko is an attorney and award-winning writer who’s opted for both fixed and adjustable-rate mortgages. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.

For answers to all home buying question contact me at dcrealtor@live.com

5 Factors That Decide Your Credit Score

Credit scores range between 200 and 800, with scores above 620 considered desirable for obtaining a mortgage. The following factors affect your score:

1. Your payment history. Did you pay your credit card obligations on time? If they were late, then how late? Bankruptcy filing, liens, and collection activity also impact your history.

2. How much you owe. If youowe a great deal of money on numerous accounts, it can indicate that you are overextended. However, it’s a good thing if you have a good proportion of balances to total credit limits.

3. The length of your credit history. In general, the longer you have had accounts opened, the better. The average consumer's oldest obligation is 14 years old, indicating that he or she has been managing credit for some time, according to Fair Isaac Corp., and only one in 20 consumers have credit histories shorter than 2 years.

4. How much new credit you have. New credit, either installment payments or new credit cards, are considered more risky, even if you pay them promptly.

5. The types of credit you use. Generally, it’s desirable to have more than one type of credit — installment loans, credit cards, and a mortgage, for example.

For more on evaluating and understanding your credit score, visit www.myfico.com.

How to Get the Extended Home Buyer Tax Credit

You’ve decided to purchase a home and take advantage of the Extended Home Buyer Tax Credit. Here's what you have to do to get your benefit:

1. Close on your home purchase between November 7, 2009 and April 30, 2010, or have a binding written contract by April 30, 2010 and close by July 1, 2010.
   
2.  Decide whether to: 
   • apply the credit to your 2009 tax return, filed on or before April 15, 2010;
   •  file an amended 2009 return; or, 
   • apply the credit on your 2010 return, filed on or before April 15, 2011.
3. Attach documentation of purchase to your return.

Documentation of Purchase

Details concerning the precise documents required to confirm your purchase have not yet been released. When this information becomes available, we will include instructions and links to the appropriate forms.

When to Apply the Credit

Buyers purchasing homes on or before December 31, 2009 may claim the credit on their 2009 tax returns.

Buyers purchasing in 2010 will have the option to:

•  Claim the credit on their 2009 return, even if the purchase is completed after December 31, 2009;
•  File an amended return for 2009 if their purchase is completed after April 15, 2010; or,
•  Claim the credit on their 2010 tax returns.

Applying the Credit to Your 2009 Taxes

You will need to do three things to claim the credit on your 2009 tax return:

1. Fill out Form 5405 to determine the amount of your available credit;
2. Apply the credit when you file your 2009 tax return or file an amended return;
3. Attach documentation of purchase to your return or amended return.

source  nar

provided by Al Matlock   'DC's Condo Guy'  and  DC Clout DC's Home Buying and Selling Resource Center.

Homebuyers Tax Credits Comparison Chart

click image for larger view....

soruce nar

provided by Al Matlock  dcrealtor@live.com

What You Can Do to Improve Your Credit

Credit scores, along with your overall income and debt, are big factors in determining whether you’ll qualify for a loan and what your loan terms will be. So, keep your credit score high by doing the following:

1. Check for and correct any errors in your credit report. Mistakes happen, and you could be paying for someone else’s poor financial management.

2. Pay down credit card bills. If possible, pay off the entire balance every month. Transferring credit card debt from one card to another could lower your score.

3. Don’t charge your credit cards to the maximum limit.

4. Wait 12 months after credit difficulties to apply for a mortgage. You’re penalized less for problems after a year.

5. Don’t order items for your new home on credit — such as appliances and furniture — until after the loan is approved. The amounts will add to your debt.

6. Don’t open new credit card accounts before applying for a mortgage. Too much available credit can lower your score.

7. Shop for mortgage rates all at once. Too many credit applications can lower your score, but multiple inquiries from the same type of lender are counted as one inquiry if submitted over a short period of time.

8. Avoid finance companies. Even if you pay the loan on time, the interest is high and it will probably be considered a sign of poor credit management.

courtesy of DC's Condo Guy  

Short Sales Tips for Sellers

If you're thinking of selling your home, and you expect that the total amount you owe on your mortgage will be greater than the selling price of your home, you may be facing a short sale. A short sale is one where the net proceeds from the sale won't cover your total mortgage obligation and closing costs, and you don't have other sources of money to cover the deficiency. A short sale is different from a foreclosure, which is when your lender takes title of your home through a lengthy legal process and then sells it.

1. Consider loan modification first. If you are thinking of selling your home because of financial difficulties and you anticipate a short sale, first contact your lender to see if it has any programs to help you stay in your home. Your lender may agree to a modification such as: Refinancing your loan at a lower interest rate; providing a different payment plan to help you get caught up; or providing a forbearance period if your situation is temporary. When a loan modification still isn’t enough to relieve your financial problems, a short sale could be your best option if:

• Your property is worth less than the total mortgage you owe on it.
• You have a financial hardship, such as a job loss or major medical bills.
• You have contacted your lender and it is willing to entertain a short sale.

2. Hire a qualified team. The first step to a short sale is to hire a qualified real estate professional and a real estate attorney who specialize in short sales. Interview at least three candidates for each and look for prior short-sale experience. Short sales have proliferated only in the last few years, so it may be hard to find practitioners who have closed a lot of short sales. You want to work with those who demonstrate a thorough working knowledge of the short-sale process and who won't try to take advantage of your situation or pressure you to do something that isn't in your best interest. A qualified real estate professional can:

• Provide you with a comparative market analysis (CMA) or broker price opinion (BPO).
• Help you set an appropriate listing price for your home, market the home, and get it sold.
• Put special language in the MLS that indicates your home is a short sale and that lender approval is needed (all MLSs permit, and some now require, that the short-sale status be disclosed to potential buyers).
• Ease the process of working with your lender or lenders.
• Negotiate the contract with the buyers.
• Help you put together the short-sale package to send to your lender (or lenders, if you have more than one mortgage) for approval. You can’t sell your home without your lender and any other lien holders agreeing to the sale and releasing the lien so that the buyers can get clear title.

3. Begin gathering documentation before any offers come in. Your lender will give you a list of documents it requires to consider a short sale. The short-sale “package” that accompanies any offer typically must include: 

• A hardship letter detailing your financial situation and why you need the short sale
• A copy of the purchase contract and listing agreement
• Proof of your income and assets
• Copies of your federal income tax returns for the past two years

4. Prepare buyers for a lengthy waiting period. Even if you're well organized and have all the documents in place, be prepared for a long process. Waiting for your lender’s review of the short-sale package can take several weeks to months. Some experts say:

• If you have only one mortgage, the review can take about two months.
• With a first and second mortgage with the same lender, the review can take about three months.
• With two or more mortgages with different lenders, it can take four months or longer.

When the bank does respond, it can approve the short sale, make a counteroffer, or deny the short sale. The last two actions can lengthen the process or put you back at square one. (Your real estate attorney and real estate professional, with your authorization, can work your lender’s loss mitigation department on your behalf to prepare the proper documentation and speed the process along.)

5. Don't expect a short sale to solve your financial problems. Even if your lender does approve the short sale, it may not be the end of all your financial woes. Here are some things to keep in mind:

• You may be asked by your lender to sign a promissory note agreeing to pay back the amount of your loan not paid off by the short sale. If your financial hardship is permanent and you can’t pay back the balance, talk with your real estate attorney about your options.
• Any amount of your mortgage that is forgiven by your lender is typically considered income, and you may have to pay taxes on that amount. Under a temporary measure passed in 2007, the Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act, homeowners can exclude debt forgiveness on their federal tax returns from income for loans discharged in calendar years 2007 through 2012. Be sure to consult your real estate attorney and your accountant to see whether you qualify.
• Having a portion of your debt forgiven may have an adverse effect on your credit score. However, a short sale will impact your credit score less than foreclosure and bankruptcy.

For more useful articles visit  DCClout.com  The Buyers and Sellers Resource Center 

Specialty Mortgages: Risks and Rewards

In high-priced housing markets, it can be difficult to afford a home. That’s why a growing number of home buyers are forgoing traditional fixed-rate mortgages and standard adjustable-rate mortgages and instead opting for a specialty mortgage that lets them “stretch” their income so they can qualify for a larger loan.

But before you choose one of these mortgages, make sure you understand the risks and how they work.

Specialty mortgages often begin with a low introductory interest rate or payment plan — a “teaser”— but the monthly mortgage payments are likely to increase a lot in the future. Some are “low documentation” mortgages that come with easier standards for qualifying, but also higher interest rates or higher fees. Some lenders will loan you 100 percent or more of the home’s value, but these mortgages can present a big financial risk if the value of the house drops.

Specialty Mortgages Can:

Pose a greater risk that you won’t be able to afford the mortgage payment in the future, compared to fixed rate mortgages and traditional adjustable rate mortgages.
Have monthly payments that increase by as much as 50 percent or more when the introductory period ends.
Cause your loan balance (the amount you still owe) to get larger each month instead of smaller.

Common Types of Specialty Mortgages:

• Interest-Only Mortgages: Your monthly mortgage payment only covers the interest you owe on the loan for the first 5 to 10 years of the loan, and you pay nothing to reduce the total amount you borrowed (this is called the “principal”). After the interest-only period, you start paying higher monthly payments that cover both the interest and principal that must be repaid over the remaining term of the loan.
  
• Negative Amortization Mortgages: Your monthly payment is less than the amount of interest you owe on the loan. The unpaid interest gets added to the loan’s principal amount, causing the total amount you owe to increase each month instead of getting smaller.
  
• Option Payment ARM Mortgages: You have the option to make different types of monthly payments with this mortgage. For example, you may make a minimum payment that is less than the amount needed to cover the interest and increases the total amount of your loan; an interest-only payment, or payments calculated to pay off the loan over either 30 years or 15 years.
  
• 40-Year Mortgages: You pay off your loan over 40 years, instead of the usual 30 years. While this reduces your monthly payment and helps you qualify to buy a home, you pay off the balance of your loan much more slowly and end up paying much more interest.
  
  Questions to Consider Before Choosing a Specialty Mortgage:
  
• How much can my monthly payments increase and how soon can these increases happen?
• Do I expect my income to increase or do I expect to move before my payments go up?
• Will I be able to afford the mortgage when the payments increase?
• Am I paying down my loan balance each month, or is it staying the same or even increasing?
• Will I have to pay a penalty if I refinance my mortgage or sell my house?
• What is my goal in buying this property? Am I considering a riskier mortgage to buy a more expensive house than I can realistically afford?

For more useful articles visit  DCClout.com  The Buyers and Sellers Resource Center