Mortgage Rate News

When one thinks of financial planning moves, foreclosure isn’t normally at the top of the list. Much like 20 years ago no one would have put bankruptcy on a list of financial planning tools. However, bankruptcy has been considered a viable financial planning option in some circles for more than a decade now, even with the bankruptcy rules passed a few years ago. Now it looks as though foreclosure may be heading into the realm of financial planning as well.

Inman News offers insight into how foreclosure is increasing as a mortgage trend — and not just among the financially strapped:

Not only the social stigma, but also the financial pain of foreclosure has diminished. Landlords reportedly have put out the welcome mat for former homeowners despite their impaired credit. Everyone seems to acknowledge that even a foreclosure will drop off a credit report in a matter of a few years, and that then these walk-away homeowners will be ready and able to get new mortgages and purchase new homes. Expect them to do so just in time for the next upturn in the housing cycle.

In non-recourse states, lenders can’t pursue former homeowners for unpaid mortgage debt after foreclosure. And now that much of this forgiven debt can be excluded from taxable income, those who walk-away from a mortgage often can avoid the federal income tax liability as well. Not even the all-mighty Internal Revenue Service can touch these folks.

This probably isn’t going to do much for “economic stimulus.” If a home’s value falls, and the mortgage payments no longer seem worth the hassle, foreclosure is becoming the option of choice. It frees up the money used on a mortgage payment, and, much like cutting your losses from a poor investment choice, it cuts you free. Yes, it will show up on your credit score, but, like bankruptcy, it will eventually disappear.

Tags: financial planning, smart financial planning, home mortgage loan, mortgage foreclosure,
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While a home mortgage may not exactly be an investment, it can have certain benefits. Indeed, most people cite the home mortgage for some of its tax benefits, many of them deriving from deductions related to interest. Here are some of the tax benefits that come with a home mortgage:

1. Interest paid. When you make mortgage payments, a large portion of that each month goes to interest, especially at the beginning of the home loan. You can deduct a portion of that mortgage interest on your tax form.
2. Mortgage points. Sometimes, you can pay points to get a reduction in the interest rate that you pay. In addition to mortgage interest being tax deductible, you can get some tax advantage for points.
3. Home improvement. When you take out a home equity loan, for home improvement or otherwise, you are getting a second mortgage. This can mean that the loans you take out to improve your home, as long as they are based on the equity in your home, may be tax deductible.
4. Mortgage tax credit. In addition to home mortgage tax deductions, there is a mortgage tax credit that you can use in some cases.

Before taking any of these tax benefits from your home mortgage, however, it might be a good idea to check the IRS Web site to ensure that you do things properly. You may also consult with a knowledgeable tax attorney or accountant.

Tags: home equity loan, home mortgage tax benefits, home mortgage loan, home loan,
second mortgage, mortgage interest, mortgage blog

One of the most venerable home mortgage loan programs is the FHA home loan program. This program, administered through the Federal Housing Administration is designed to help homebuyers get approved for better loan terms. Now, with the current housing downcycle making things more difficult in terms of lending, and would-be homebuyers wary, the Mortgage Relief Act just passed by the House is changing some of the FHA home loan rules.

The new rules have lifted the ceiling on loan amounts in the program to $417,000. This means that homes in higher-priced markets can be bought using the FHA home loan program. Additionally, things are made easier for homebuyers with the new rule that reduces the amount required for a down payment. Now, instead of a 3% down payment, one only needs 1.5% of the home purchase price as a down payment.

A Sedona real estate blog points out that, even with the new rules, there are still caveats to the FHA home loan program:

However, FHA home loan rules do require that you have reasonably good credit, and a down payment is still necessary.

Your debt-to-income ratio will also be examined before you are approved for the FHA home loan program. The nice thing about the restrictions of the FHA home loan is that buyers using the program are much more likely to see their loans through, since the requirements demand a certain level of financial solvency and creditworthiness. Additionally, it prevents many homebuyers from getting homes that they cannot afford, since the interest rate is a fixed rate, and the mortgage is usually a traditional mortgage. No artificially tinkering with the debt-to-income ratio by giving a loan with a teaser rate, or an interest only loan.

While the new FHA rules are unlikely to help those facing foreclosure, they should help those buying a new home, especially first time homebuyers in high priced real estate markets.

Tags: FHA home loan, new FHA rules, home mortgage loan, mortgage loan blog,
Mortgage Relief Act, FHA home loan program