If you are a first time homeowner, or not owned a home as your primary residence for the past 3 years, you could be able to benefit significantly from a VHDA Mortgage Credit Certificate (MCC).
It's actually significant. Most people will take the interest they pay on their mortgage and deduct that from their taxable income. So, they wont pay taxes on the money earned that went to the mortgage interest. These savings depend on the tax bracket you are in. The MCC credit will let you take 20% of the interest you pay off of your total tax bill. You are then able to deduct the rest of the interest in the normal way.
The video below spells out the savings pretty well. If you don't want to watch it, here are some screen shots that will explain the savings.
This is what the normal deduction would look like. They are simply reducing their gross income by the interest they paid on their mortgage. This leaves them owing $6,000 in tax.
Now lets look at how their taxes would look like with an MCC credit.
Here we can see that their income and mortgage interest are still the same. However, they are only able to reduce their taxable income by 80% of the mortgage interest they paid because the other 20% is being applied through the MCC credit. As you can see, the total taxes they owe are $1,700 less with the MCC.
If you are interested, be sure to watch the video below. Also check out VHDA's website for more information:
There has been a lot of hype surrounding the change of the settlement documents. As you can read in my previous blog, a lot of people were predicting worst case scenarios. Now that the change is here, what has actually happened? What as a consumer do we actually need to know?
There can be a lot of factors that go into play when selecting a mortgage adviser. You ultimately want an adviser who will find you the lowest and most reliable rate. It may help you to ask your friends and family as to who they recommend. In addition, asking other real estate professionals, such as myself, can be helpful when selecting a mortgage adviser.
Be sure your mortgage adviser knows and understands the property or area in which you intend on purchasing. This can be very important in order to ensure there are no surprises before closing.
Here are two of my recommendations:
Integrity Home Mortgage Corp
Park View Federal Credit Union
If you are not familiar with the new closing documents, named TILA RESPA Integrated Documentation (TRID), that were supposed to come on August 1st, check out my blog that describes them and the delays that were expected.
Just as in Mathematics, do two negatives (delays) make a positive? That is just what the Consumer Financial Protection Bureau is hoping by delaying TRID to October 1st. As you can see in my previous blog entry listed above, a lot of mortgage institutions were expecting delays in closings and were even apprehensive that some transactions would not close at all. As the deadline approached, the National Association of Realtors and the lending institutions grew increasingly concerned as their software was not on track for a timely integration in preparation for the change.
So, if you were planning to close in August, you can be assured that your closing will not be affected by the new closing forms. The question stands: Will there be enough time to make a smooth transition in October? Will there still be delays in closings?
The Consumer Financial Protection Bureau is requiring all lenders to begin using new closing documents on August 1st. The new documents are an attempt to make the process smoother and offers more consumer protections. The short hand for these forms are TILA RESPA Integrated Documentation. The even shorter hand is TRID.
As with any change, there are people who welcome the adoption and there are people who are more hesitant to change. Regardless of personal preferences surrounding change, what are the logistics of this upcoming change? How are lenders affected by this process? And what will this mean for the consumers?
The NAR asked lenders these questions in the 1st quarter Survey of Mortgage Originators. Unsurprisingly, the survey found that lenders were spending time and money to be in compliance with the change. In addition, 60% of those surveyed said that they still have unanswered questions.
The majority of of lenders state that they expect some transactions to be delayed. More shockingly, 26.7% percent of lenders surveyed think that some transactions will be delayed and some will not close at all.
It is important to keep in mind that these stats are coming from opinions of mortgage originators. As mentioned earlier, everyone has their own perspective on change which influence their perception of how this may play out. I would venture to say that while these changes may cause short term delays, they will not have significant impacts on the real estate market long term.
Are you considering buying your first house? You are probably wondering how much money you will need to invest in your first home.
While, each mortgage program is different and the money you will need also depends on the house you buy, I can break things down for you to give you an idea.
In most cases, there are three major expenses that you will need to include in your calculations: Earnest money, down payment, and closing costs.
Earnest money is essentially a deposit upon making an offer. This deposit displays how serious you are in buying the house. This money will go towards your closing costs and/or down payment at closing. However, if you decide to walk away from the contract (in a way that is not supported in the contract) this money could be disbursed to the seller. Feel free to ask me for more information on how to protect earnest money when making an offer.
How much? This varies greatly in different markets. In Rockingham county, it somewhat depends on the purchase but between $500 and $2,000 is common. One way to strengthen your offer is by offering higher amounts of earnest money.
The down payment really depends on the type of mortgage you go with. This is best explained in detail by a mortgage adviser, contact me for my recommendations.
At the moment, you can get a house with as little as 3% down. If you don't put 20% down on a house, you will likely pay PMI (Private Mortgage Insurance) until you have 20% equity in the house.
Again, closing costs can vary. In Virginia, the Realtor fees are paid by the seller. The buyer is responsible for paying the costs associated with processing the paperwork. This can be around 3-4% of the purchase price. However, talk to a mortgage adviser for a better estimate given your price range.
Buyers commonly ask for sellers to cover closing costs as part of the negotiation. Keep in mind that this expense directly affects what the sellers net.
Are you thinking of moving from renting to owning? You probably have a lot of questions. One of them being, what is a Mortgage? What does it cover and how is it different than rent?
Most mortgages have four parts.
The first part of the mortgage is the principal. This is what is one of the main positive differences between a mortgage and rent. When you pay the principal, you are paying down what you owe on the house. When you have no more principal, you have a fully paid for house!
Interest is what you are paying the bank to lend you the money to buy your house. You will want to talk to a mortgage adviser to see what the current rates are and what the amortization schedule will look like. In a nut shell, when you have a high amount of principal, the amount of interest you pay on that principal is higher. As you pay down the principal the amount of interest you pay becomes less. You will have consistent payments, only the bulk of the payment will shift from interest to principal the longer you pay on your house.
You will be required to obtain homeowner's insurance when obtaining a loan. This will help protect you from loss as a result of fire, smoke, theft, etc... Often, you can find good deals bundled up with your car insurance. The monthly fee will often be encompassed in your mortgage payment.
Finally, your mortgage will cover property tax. Each house has a tax assessed value. The owner will be responsible for paying the property tax. Harrisonburg's tax is $0.69 per $100 (See below for Broadway and Timberville). So, if you own a $100,000 property, your yearly tax would be $690. Conveniently, you will pay a chunk of the tax per month as a part of your mortgage payment.
Broadway's tax rate is $0.71 per $100.
Timberville's tax rate is $0.755 per $100.