the arbor edge

A home mortgage is the single biggest purchase that most people will make in their lifetime. Yet, most people put more effort into pricing a flat screen TV than shopping for a mortgage. One of the reasons is the sheer complexity of something as small as the mortgage interest rate. There are so many factors that determine your interest rate, that it can be hard for the average consumer to know where to start when mortgage shopping. We’re going to break down what goes into determining your interest rate and how you can use that knowledge to shop for the best mortgage.


1. Know what factors determine an interest rate:

Credit Score

The first thing any lender looks at is your credit scores. Most mortgage lenders pull a tri-merge credit report. This is a credit report that shows all 3 major credit bureau scores. Lenders use the middle of those three scores to determine your qualifications. The higher the credit score, the lower the interest rate. To qualify for conventional or government loan programs, you’ll want to have greater than a 620 middle score. FHA pricing doesn’t vary much by score, but conventional loan pricing can vary wildly. For the very best rates, you’ll want to have a 740 middle score or better. To find out where you stand, start with getting your own free credit report at www.annualcreditreport.com. This report won’t give you the scores, though. For that, www.myfico.com has the closest model to the report mortgage lenders pull.

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The refundable tax credit of up to $8000 is available for first time home buyers (anyone who hasn’t owned a principal residence in the last 3 years) purchasing a primary residence before April 30, 2010.  In the case where a legal sales contract has been executed by April 30, 2010, the purchase would only have to be completed by June 30, 2010.

The refundable tax credit of up to $6500 is available for repeat home buyers who have owned a home for at least 5 consecutive out of the last 8 years.  This tax credit only applies to homes sold between November 6, 2009 and April 30, 2010.  In the case where a legal sales contract has been executed by April 30, 2010, the purchase would only have to be completed by June 30, 2010.

The income limits enacted on November 6, 2009 require a single home buyer to make less than $125,000 per year and for married couples filing jointly to make less than $225,000 per year to receive the full credit.

If you currently make more than the income limits, a partial credit may be available.  See the IRS website or speak to a tax professional for more information.

Any home type that will be used as a primary residence will qualify, but the home must be priced under $800,000 in order to claim either credit. New home builds also qualify for the credits, but the settlement must be completed by April 30, 2010.

Purchases must be made from an uninterested third party.  Purchases from relatives of the buyer or buyer’s spouse will not qualify for the credit.

Married couples can only claim the first time home buyer credit if both spouses qualify.  They may be eligible for the repeat home buyer credit, though.

Neither tax credit has to be repaid, unless the home is sold or is no longer used as the buyer’s primary residence with the first 3 years of purchase.  Qualified service members may be exempt from this requirement. 

To claim either credit, taxpayers must submit a copy of the HUD-1 settlement statement and IRS Form 5405. Home purchases made in 2010 can be claimed on an amended 2009 tax return.  See a tax professional for more details.

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The above information is for general use only and should not be construed as professional tax, legal or accounting advice.  This information is no substitute for professional tax or legal advice and a professional should be consulted before making any decisions.  This information is provided as-is and no warranties or guarantees are made as to the completeness, accuracy or timeliness of the information.

Buying a home is the single biggest purchase you will make in your lifetime. The process isn’t always easy, and little mistakes can lead to costly regrets down the line. Use this list of top 5 home buying mistakes to help you make all the right moves in your home purchase.

1. Not getting pre-approved for a mortgage
   It’s important to know whether or not you qualify for the financing you need. If you look at homes before knowing if you’re financeable and for how much, you could end up with a lot of time wasted.
   
   
2. Not using a buyer’s agent
   A buyer’s agent is a real estate agent that works exclusively for the buyer, negotiating the best possible price and watching out for only your interests in any contract. What’s the best part about using a buyer’s agent? It’s free to you, since the seller pays any real estate agent commission. Arbor Mortgage provides a list of Preferred Real Estate Agents during your pre-approval.
   
   
3. Not getting a home inspection
   Even if the house is brand new, there is bound to be something that needs attention, so never forgo a home inspection. A good inspector will look for possible costly problems, such as mold, structural issues, and hidden damage.
   
   
   
4. Not adding contingencies to your contract
   Never enter into a contract that doesn’t have contingencies in place to protect you. There should be an inspection contingency, allowing you terminate the contract if the house isn’t inspected to your liking. There should also be a financing contingency in case any problems occur with your mortgage financing.
   
   
5. Not researching the neighborhood
   You may be a young married couple now with no children, but what happens when the family starts to expand? How are the schools in the neighborhood? Is it safe at night there? Visit the home at all hours of the day and find out all you can about the town amenities and public works.
   
   

When purchasing a home, there are many aspects to consider that may make the moving process stressful. Arrange for the following to be handled before moving, so you can be sure to have a smooth transition.

• Notify Utilities
• Forward Mail
• Verify cell phone coverage
• Change locks
• Arrange home & lawn maintenance needs
• Test smoke detectors
• Change furnace filters

With these items arranged ahead of time, you can focus on the more important things; like planning the housewarming party!

In today’s shaky real estate and financial markets, it’s harder than ever to get approved for a mortgage. Mortgage application denials are often avoidable. Here are the top 4 reasons your mortgage application could be denied and how to avoid them.



1. Not getting pre-qualified
Always get pre-qualified for a home loan before you begin shopping. This will include a credit and income review and let you know what price range you should be shopping. Arbor Mortgage provides a free qualification in minutes. Knowing your qualifications up front will take a lot of guess work out of the process.

2. Changing or quitting your job
A stable job history is key to gaining mortgage approval. The underwriter will want to see a 2 year employment history. If you’ve started a new job, they will insist on seeing paycheck stubs from the new job, likely delaying your closing. Only change jobs during the mortgage process if it’s in the same line of work. Otherwise, wait until after you’ve obtained the mortgage.

3. Making a major purchase
Never finance a large purchase during the mortgage process. Buying a new car or boat, or maxing out your credit cards holiday shopping can greatly raise your debt to income ratio. When that ratio gets too high, your loan will be denied.

4. Not setting a budget
Purchasing a home isn’t just about a principal and interest payment on a mortgage. There are property taxes, homeowners insurance, maintenance, repairs and more. Know what you can afford and be aware of all the costs involved; from the mortgage payment to the utilities, to the cost of your first lawnmower.