What’s this I hear imortgage has a PMI Buster loan, that requires NO Monthly MI Payment???

   

That’s Correct!  Imortgage has the ability to wipe out the monthly private mortgage insurance (PMI) by buying out the premium upfront.  The interest rate is approximately 1/4% higher; but, the monthly savings could be very significant, depending on your loan amount.

Below is a summary of Private Mortgae Insurance (PMI) and how it works from a MSH.com article:

http://library.hsh.com/articles/more-tools-resources-and-info/mortgage-basics/how-mortgage-insurance-works

What is mortgage insurance?

It’s a financial guaranty that insures lenders against loss in the event a borrower defaults on a mortgage. If the borrower defaults and the lender takes title to the property, the mortgage insurer (MGIC, for example) reduces or eliminates the loss to the lender. In effect, the mortgage insurer shares the risk of lending the money to the borrower. (Mortgage insurance should not be confused with mortgage life insurance, which provides coverage in the event of a borrower’s death, or homeowner’s insurance, which protects the homeowner from loss due to damage from fire, flood or other disaster.)

Who is mortgage insurance for?

All home buyers can benefit. It allows them to become homeowners sooner, and it dramatically increases their buying power — excellent benefits from a buyer’s perspective. First-time buyers can use a low down payment to help them afford their first home, or to purchase a more expensive home sooner. Repeat home buyers can put less money down and gain significant tax advantages because they will have more deductible interest to claim. They can also use the cash they would have used for a large down payment for investments, moving costs or other expenses.

What does mortgage insurance do for borrowers?

Without the guaranty of mortgage insurance, lenders normally require a borrower to make a down payment of at least 20% of a home’s purchase price, which can mean years of saving for some borrowers. This large down payment assures the lender that the borrower is committed to the investment and will try to meet the obligation of monthly mortgage payments to protect his investment. With the guaranty of mortgage insurance, lenders are willing to accept as little as 5% or 10% down from borrowers. Mortgage insurance fills the gap between the standard requirement of 20% down and an amount the borrower can more easily afford to put down on a purchase. A low down payment also allows borrowers to purchase more home than they might otherwise be able to afford. Without mortgage insurance, a borrower who has saved $10,000 for the required minimum 20% down payment would only be able to purchase a $50,000 home.With mortgage insurance (and income and credit permitting), the borrower could make a down payment of only 10% and purchase a $100,000 home with the $10,000! Or put $7,500 down on a $75,000 home and use the remaining $2,500 for decorating, investing, or buying a car or major appliance. Mortgage insurance broadens a borrower’s options.

If you, a friend, a neighbor, a family member or co-worker have any questions regarding buying out PMI, purchasing a property and/or the pre-approval process, please feel free to contact us.

 Gregg Mullery
 

Spending more time Organizing your Desk than making Sales Calls?

Believe me, I know the feeling….  I just need to spend a little more time organizing my desk and my paperwork and my thoughts before I get to the tasks that really make me money – sales calls.  Before you know it, it’s time for lunch, and the priority money making tasks get pushed off even further.  The afternoon comes around and another delay (excuse) before the sales calls begin – why does this even happen to people?  Procrastination, the downfall of many good intentions. 

Below are 2 quick 2 minute videos from Tom Ferry that address the the issues:

http://www.youtube.com/watch?v=O20JRlRW0CY&feature=player_embedded

http://www.youtube.com/watch?v=k6Iy32MljKc&feature=player_embedded

I’ve been saying this for years:

A well thought out plan that is vigorously and swiftly executed, is far better than a perfect plan that was never implemented!  Strive for progress not perfection!

Just like all the Nike adds say – Just Do It! 

If you find yourself lacking motivation, give me a call and as a team we will work on getting you back on track.

Gregg Mullery

@iMortgageLB

iMortgageLongBeach@gmail.com

FHA Mortgage Insurance Increases – Another Consequence of the Temporary Payroll Tax Cut

 

Not only have conventional mortgage rates increased due to the temporary payroll tax cut; but, FHA payments are due to increase beginning April 1, 2012.  Is this really how the government plans on stimulating the economy?  You may not realize that the temporary payroll tax cut actually cuts the funds that are earmarked for Social Security and is funding the cut by increasing payments on individuals buying homes. 

Is cutting the amount of money earmarked for Social Security really a “Tax Cut” or more like robbing from Peter to pay Paul?  Is underfunding the Social Security fund really a tax cut, or a political twist on words?  I guess there wasn’t any political fat to cut off the budget, so they tacked the “Tax Cut” on the backs of Americans trying to jump start the economy by purchasing homes.

 From a press release on Hud.gov:  http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2012/HUDNo.12-037

“The Temporary Payroll Tax Cut Continuation Act of 2011 requires FHA to increase the annual MIP it collects by 0.10 percent.  This change is effective for case numbers assigned on or after April 1, 2012.  FHA is also exercising its statutory authority to add an additional 0.25 percent to mortgages exceeding $625,500.  This change is effective for case numbers assigned on or after June 1, 2012.

The UFMIP will be increased from 1 percent to 1.75 percent of the base loan amount.  This increase applies regardless of the amortization term or LTV ratio.  FHA will continue to permit financing of this charge into the mortgage.  This change is effective for case numbers assigned on or after April 1, 2012.”

If you, your friends, neighbors, family members or co-workers are looking to utilize FHA financing, please have them contact us within the next few weeks before the higher mortgage insurance factors kick in.

Gregg Mullery

@iMortgageLB

iMortgageLongBeach@gmail.com

Most Common Mistakes 1st-Time Homebuyers Should Avoid

  

Some homebuyers believe that just because they feel they can afford a mortgage payment, they are ready to buy a property.  Financially, they may think they are ready; but, buyers need to watch out for these  most common mistakes that can derail their purchase transaction.

From a Bankrate.com article:

http://www.bankrate.com/finance/real-estate/5-first-time-homebuyer-mistakes.aspx#slide=1

Below are the  most common mistakes:

1) Looking for a home first and a loan later,

“Homebuying doesn’t begin with home searching. It begins with a mortgage prequalification — unless you’re lucky to have enough money to pay cash for your first house.Often, first homebuyers “are afraid to get prequalified,” says Steve Anderson, a broker and owner at Re/Max Benchmark Realty in Las Vegas. They fear the lender may tell them they don’t qualify for a mortgage or they qualify for a loan smaller than expected. “So they pick a price range out of sky and say, ‘Let’s go look for a house,’” Anderson says.And that’s not how it should be done. Yes, it’s more fun to go look at houses than to sit in a lender’s office where you have to expose your financial situation. But that’s a backward approach, Conarchy says.“You get preapproved, and then you find a home,” he says. “That way you’ll make a financial decision versus an emotional decision.”

2) Not getting professional help,

“New to the homebuying game? You’ll need a reputable real estate agent, a good loan officer , and perhaps a lawyer.

Venturing into this process alone, without professional help, is not a good idea, says Anderson. While every rule has its exception, generally, first-time buyers should not try to deal directly with the listing agent, he says.

It’s crucial to find a professional who will give you “truly independent advice,” Conarchy says.

“You are about to make what is possibly the largest single investment of your lifetime,” Castellanos says. “You want to make sure it’s done right.”

3) Exhausting entire savings on the down payment,

“Homebuyers who put 20 percent or more down don’t have to pay for mortgage insurance when getting a conventional mortgage. That’s usually translated into substantial savings on the monthly mortgage payment. But it’s not worth the risk of living on the edge, says Conarchy.

“I’d take paying for mortgage insurance any day over not having money for rainy days,” he says. “Everyone — especially homeowners — needs to have a rainy-day fund.”

4) Furniture and car shopping before the deal closes,

“You have prequalified for a loan. You found the house you wanted. The contract is signed and the closing is in 30 days. Don’t celebrate by buying furniture or a car, if you plan to finance those purchases.”

If you, a friend, a neighbor, a family member or co-worker have any questions regarding purchasing and the pre-approval process, please feel free to contact us.

Gregg Mullery

@iMortgageLB

iMortgageLongBeach@gmail.com

Supplemental Property Tax Bill …… What is That?

 

If you have just purchased your first home, you may not have been told that in addition to paying annual real estate property taxes, you may be required to pay supplemental property taxes.  You may now be wondering, what are  supplemental property taxes, why do I have to pay them, how much is the tax and when are they due?

Here is the skinny on real estate supplemental property taxes from the Los Angeles County Property Tax Portal:   http://lacountypropertytax.com/portal/list/faq.aspx?faqID=47

“In addition to annual taxes, you may be responsible for paying supplemental property taxes. State law requires the Assessor to reappraise property upon a change in ownership or new construction. The supplemental assessment reflects the difference between the new assessed value and the old or prior assessed value. If the property is reassessed at a higher value than the old assessed value, a supplemental bill will be issued. If the property is reassessed at a lower value than the old assessed value, a refund will be issued.

“The taxes are prorated based on the number of months left in the fiscal year from the date of ownership change or the new construction completion date. If the change in ownership or new construction occurs between January 1st and May 31st, two supplemental tax bills will be issued. The first supplemental bill will be for the remainder of the fiscal year, and the second supplemental bill will be for the fiscal year that follows.

The supplemental tax bills are  mailed directly to the owner, and you are responsible for the payments.  If you have an impound account established with your lender, you will need to contact your lender to see if there is enough money to cover the supplemental taxes. 

I’ve attached interactive links below so that you may understand the difference between the annual tax bill and the supplemental bill.

Annual Tax Bill:  http://lacountypropertytax.com/portal/bills/annualbill.aspx

Supplemental Tax Bill:  http://lacountypropertytax.com/portal/bills/suppbill.aspx

If you have any questions regarding supplemental property taxes, feel free to contact me.

Gregg Mullery

@iMortgageLB

iMortgageLongBeach@gmail.com

Recourse or Non-Recourse Loans, Mortgage Debt Forgiveness – What Language are you Speaking?

         

Did you know that in the State of California mortgage loans are classified as either “Recourse” or “Non-Recourse” loans?  Ok, so you are asking what ‘s the difference and why does it even matter – in plain English please …….

Non-Recourse loans are considered purchase money transactions type loans when you buy a property.  Recourse type loans are any types of loans attached to your property after the purchase.  If you refinanced your property (cash-out or no cash-out), or if you added a 2nd mortgage (HELOC) to your property, these would be considered “Recourse” loans. 

A lender can only go after the collateral (your house) attached to the mortgage on a non-recourse loan.  On a recourse loan, the lender may go after your property and any or all your personal assets.

From an article at About.com Banking:  http://banking.about.com/od/loans/a/recourseloan.htm

“Recourse loans are loans that allow the lender to come after you in case you default. You can contrast recourse loans with non-recourse loans, which create more risk for lenders. Let’s take a look at recourse loans, how they work, and how to identify them.

Recourse Loans – The Recourse

Recourse loans get their name from the fact that lenders have power. They are allowed to go after you for amounts that you owe – even after they’ve taken collateral. If you default on a recourse loan, the lender can bring legal cases against you, garnish your wages, levy bank accounts, and try to collect the amount you owe.

A legal action to collect money after foreclosure is generally called a deficiency judgment.

Non-Recourse Loans

A non-recourse loan does not allow the lender to pursue anything other than collateral. For example, if you default on your non-recourse home loan, the bank can only foreclose on the home. They generally cannot take further legal actions against you. The bank is out of luck even if the sale proceeds do not repay the loan.”

What about the mortgage debt forgiveness you mentioned, you may be thinking.  This specifically has to do with a short sale, or selling your house for less than what is owed to the bank or lender.  Mortgage debt forgiveness has to do with the IRS not taxing the cancelled debt.   If the lender subsequently cancels what you owe, the IRS requires that you report that debt as income because the duty to repay it no longer exists. 

The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence.  This provision applies to debt forgiven in calendar years 2007 through 2012.

From an article on IRS.gov site:  http://www.irs.gov/individuals/article/0,,id=179414,00.html

“The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.

This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.

More information, including detailed examples can be found in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. Also see IRS news release IR-2008-17.

The following are the most commonly asked questions and answers about The Mortgage Forgiveness Debt Relief Act and debt cancellation:

Is Cancellation of Debt income always taxable?
Not always. There are some exceptions. The most common situations when cancellation of debt income is not taxable involve:

  • Qualified principal residence indebtedness: This is the exception created by the Mortgage Debt Relief Act of 2007 and applies to most homeowners.
  • Bankruptcy: Debts discharged through bankruptcy are not considered taxable income.
  • Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you. You are insolvent when your total debts are more than the fair market value of your total assets.
  • Certain farm debts: If you incurred the debt directly in operation of a farm, more than half your income from the prior three years was from farming, and the loan was owed to a person or agency regularly engaged in lending, your cancelled debt is generally not considered taxable income.
  • Non-recourse loans: A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral. That is, the lender cannot pursue you personally in case of default. Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income. However, it may result in other tax consequences.

These exceptions are discussed in detail in Publication 4681.

What is the Mortgage Forgiveness Debt Relief Act of 2007?
The Mortgage Forgiveness Debt Relief Act of 2007 was enacted on December 20, 2007 (see News Release IR-2008-17). Generally, the Act allows exclusion of income realized as a result of modification of the terms of the mortgage, or foreclosure on your principal residence.

What does exclusion of income mean?
Normally, debt that is forgiven or cancelled by a lender must be included as income on your tax return and is taxable. But the Mortgage Forgiveness Debt Relief Act allows you to exclude certain cancelled debt on your principal residence from income. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.”

If you, a friend, a family member or co-worker have questions on these topics, or when you would be able to purchase another property after a short sale or foreclosure, please contact me.

Gregg Mullery

@iMortgageLB

iMortgageLongBeach@gmail.com

FHA Extends Waiver of Anti-Flipping Regulations – What does that even mean…..?

 

What is a less than 90 day flip?  What does that have to do with a buyer looking to utilize FHA financing to purchase one of these flips?  As the big black box above implies, the less than 90 day flip waiver is a “Big Deal”!  This allows buyers with a minimum of 3.5%  downpayment the ability to purchase completely remodeled, turn-key, like new homes. 

The investors are able to purchase homes in need of updating and/or repairs, the opportunity to remove the potential eyesore on the block and turn the neighborhood around in a very short period of time – lese than 90 days.

From Press Release HUD No. 11-292 from HUD.GOV:  http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2011/HUDNo.11-292

“This extension is intended to accelerate the resale of foreclosed properties in neighborhoods struggling to overcome the possible effects of abandonment and blight,” said Galante.  “FHA remains a critical source of mortgage financing and stability and we must make every effort to promote recovery in every responsible way we can.

Since the original waiver went into effect on February 1, 2010, FHA has insured nearly 42,000 mortgages worth more than $7 billion on properties resold within 90 days of acquisition.

FHA research finds that in today’s market, acquiring, rehabilitating and reselling these properties to prospective homeowners often takes less than 90 days.  Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.”

Imortgage is one of very few lenders that is extremely knowledgable in the intricacies, guidelines, details and the funding of  the FHA less than 90 day flip.  We work with some of the largest investor groups in Los Angeles and Orange Counties.  If you are an investor looking for an “Expert” less than 90 day flip lender to handle your transactions, or if you are a buyer looking to utilize a FHA loan on a flip, please contact me directly.

Gregg Mullery

@iMortgageLB

iMortgageLongBeach@gmail.com