Guest post by Gabriel Knight of Mortgagefit.com

Federal administration has announced perhaps the greatest news of the year for the struggling homeowners and foreclosure victims of NH. Five big banks, through an agreement with the U.S. federal government, have settled to pay over $43 million to the New Hampshire state government.

The amount will then be distributed amongst the victims of foreclosure, mortgage defaulters, and struggling homeowners who are putting their best effort to save their home. The banks are actually about to pay almost $25 billion as compensation towards mortgage settlement.

Five banks, which have been penalized for fraud and misconduct, are the nation’s topnotch mortgage lenders. The banks are Citigroup, Wells Fargo, Bank of America, GMAC and JP Morgan Chase. Each of the banks is accused for practicing shady financial tactic referred as robo-signing. They have foreclosed thousands of NH houses without reviewing the mortgage documents correctly. As per NH Attorney General, Michael Delaney, thousands of NH homeowners have become the prey of this disreputable practice. Over 65% of NH mortgages have been unfairly conducted by these 5 banks.

After suffering couple of homeless years, the unfortunate NH foreclosure victims are now likely to have some restitution through this mortgage settlement, at last. As per Mr. Delaney, the NH state is about to spend almost $4.6 million to compensate the homeowners who have lost their house through foreclosure after 1st January’08. Each of them is likely to get a lump sum of approximately $18,000.

Consumer spending continues to rise nationwide, fueled by jobs growth and a rosier outlook for the U.S. economy. Unfortunately for mortgage rate shoppers NH & MA, it may also lead to higher mortgage rates later this week.

Thursday morning (1/12/12), the Census Bureau will release its U.S. Retail Sales data for December. The report is expected to show an 18th consecutive monthly increase, with analysts projecting sales volume higher by 0.4 percent from November.

This would be double the increase from last month, which saw a 0.2 percent increase in Retail Sales.

The Retail Sales report tallies receipts collected by retail and food-service stores nationwide. When the sum of these receipts rise, it puts pressure on mortgage rates to do the same. The connection is straight-forward.

Time is running out to boost to your 2011 federal tax refund.

All you have to do is make your January 2012 mortgage payment while it’s still December.

It’s a simple tax strategy that works because of how mortgage interest is paid, and of how the U.S. tax code is written.

Different from rent which is paid for the month ahead (i.e. “you’re paying January’s rent”), mortgage payments are made only after mortgage interest has accrued (i.e. “you’re paying for money you’ve already borrowed from the bank”). This is called “paying interest in arrears” and U.S. tax code states that the mortgage interest is tax-deductible in its year paid, subject to limitations.

By making the January 2012 mortgage payment in December 2011, therefore, homeowners who itemize their on their tax returns can apply their January mortgage payment’s interest portion to their 2011′s tax returns.

The alternative is to pay the mortgage on schedule, and wait for April 15, 2013 to claim the credit.

For homeowners that pay electronically, the process is simple and there is still time. Edit your online bill pay program to have your mortgage payment post today.

According to Bankrate.com, a leading online aggregator of mortgage rate information, New Hampshire came in as one for the most affordable states in the nation in which to close on a home loan.

Bankrate.com, which regularly surveys thousands of lenders across the country to provide up-to-date information to consumers, recently surveyed all of the states regarding the overall costs of closing on a home. They ranked the states from most expensive in closing costs to least expensive and NH stood strong in Yankee thriftiness ranking 46th in closing cost expense. The survey encompassed one city in 49 states, two cities in California (Los Angeles and San Francisco) and the District of Columbia.

The survey, done in June of this year, asked up to 10 lenders for a good faith estimate on a $200,000 loan for a single-family home, assuming there was a 20 percent down payment and good credit. Costs include fees charged by lenders, as well as third-party fees for services such as appraisals and title insurance. The survey excludes taxes, property insurance, association fees, interest and other prepaid items.

Their mission was to average out the closing costs charged by the lending industry for a mortgage in each state.

The most expensive, perhaps not a surprise for those who have bought property there, was the state of New York with the closing costs averaging $6,183 for the pre-described loan, while New Hampshire came in at an average of $3,591.

The term seller concession is commonly used in a real estate transaction during negotiation where the buyer is requesting the seller to contribute funds from the proceeds towards the buyers closing costs. Typically this is determined as a percentage of the purchase price or a fixed dollar amount.

There are a couple of things to keep in mind when discussing seller concession. If you are a buyer it is recommended you have a conversation with your loan officer to determine what are “allowable closing costs” that will be covered in this seller concession amount. Sometimes if you have an agreed upon seller concession amount for example an amount of $5,000 but only have $4,370 in “allowable closing costs” the remainder of those funds is left on the table and cannot be used. All monies within the real estate transaction have to be accounted for on the HUD statement therefore the buyer needs to understand they will not receive any money from a seller credit that isn’t used as that is not legal. It is imperative to know what the allowable closing costs are upfront in order to be best prepared for the transaction.

Transfer tax is a tax on the sale, granting or transfer of real estate or an interest in real estate. The tax applies to both buyer and seller, and each pay tax at the rate of $7.50 per $1,000 of the sales price; i.e, $1500 on a sale of $100,000 with buyer and seller each paying $750. The tax is paid at closing, and stamps are affixed to the deed at the County Recorder’s Office.

Transfer tax is generally tax deductible when paid on your primary residence. As always, consult a tax professional with your specific questions.

For questions regarding transfer tax or any other closing/title question, feel free to call:

Karen Kelley, President
Broker’s Title & Closing, LLC
(603) 434-1414

Discount points are fees paid to a lender in order to purchase a lower interest rate. This process is also known as a “rate buydown” and the net result is a lower monthly mortgage payment over the life of the loan.

One point is 1% of the loan amount. So the cost – paid at closing – for one point on a loan of $100,000 is $1,000. Typically, one point will lower the interest rate .25% to .375%, depending on the type of loan.

Does it make sense to consider purchasing discount points? That depends on a number of factors. Usually, it is best to avoid discount points if you will be in the home less than four years, are applying for an adjustable rate mortgage or plan to refinance within a few years. Discount points are generally a good idea if the homebuyer plans to remain in the home over five years and is not planning on refinancing in the near future.

When considering discount points, it’s best to conduct a break-even analysis. This is done by calculating the monthly mortgage payment with no points, then subtracting the monthly mortgage payment with points. The difference is the monthly savings. Then divide the cost of the discount points by the savings. The result is the number of months until the homebuyer breaks even.

In the most simplistic of terms, it’s almost exactly what it says: a mortgage set up in “reverse”. Also known as HECMs (Home Equity Conversion Mortgages), they are home loans made to individuals age 62 or older, whereby they can tap into the accumulated equity built up over time in their home. Many seniors find it financially burdensome to live on a fixed income and pinch pennies from Social Security check to Social Security check to pay utility bills, cover the cost of groceries and medications. Yet, many of these same retirees own homes valued in the hundreds of thousands of dollars that they never plan, or want, to sell. In years gone by, unless they sold the property, there was no way to get any equity out of it without incurring a mortgage which would just mean yet another monthly payment to deal with. Then along came the idea of the reverse mortgage…

Buying a home is probably one of the largest financial decisions you’ll make during your lifetime. If you are not in a position to pay cash for a home, then you’ll want to be sure you are obtaining a mortgage under the best possible terms.

As a loan originator, I speak daily to borrowers who just want to “shop” for the best rates. Although rates are an important factor in choosing a lender, it shouldn’t be the sole reason for your decision.

In my opinion, the most important factor in choosing a lender is to find someone you are comfortable with. It is not the loan originators responsibility to determine your loan for you. However, they should assist you by providing enough details and options to make an informed and educated decision for yourself. In addition, the person you select should be readily available throughout the process, and be able to supply you with answers and explanations anytime questions arise.

Of course, interest rates will play a large roll in your decision as well. The following are key factors in determining what rates are offered…

Effective 4/18/11, the FHA is again increasing their annual mortgage insurance premiums. Most borrowers who are using the FHA loan for maximum financing (currently only 3.5% down) are paying 90 basis points on a monthly basis. As of 4/18/11, this will increase to 115 basis points. Here is an example.

Today: Loan amount of $200k would have a monthly PMI fee of $150/mo.
4/18/11: Loan amount of $200k would have a monthly PMI fee of $192/mo.

As you can see, this increase is fairly significant, and may ultimately decrease a buyer’s purchasing power… especially if they are shopping at the upper end of their qualifying range. Using more of the monthly payment towards principle and interest puts buyers in a higher price range, and may give them a better tax advantage.

Also remember that as this date nears, you’ll want to be sure that you re-visit your numbers with your lender to be sure they are still appropriate.

If you would like any additional information, or are interested in getting pre-approved, please contact me. I’m happy to help!

Tammy Verani
Senior Loan Consultant
Prospect Mortgage
One Verani Way, Suite 1C
Londonderry NH 03053
Office: (603) 552-9801
Fax: (603) 218-6288
Cell: (603) 505-5752
Tammy.Verani@Prospectmtg.com