Dubbed “liar loans” by industry critics, stated-income mortgage programs allow applicants to bypass standard underwriting requirements for W-2s or copies of personal and corporate income tax records.

The 4506-T form authorizes the lender or the investor providing the money for the mortgage to obtain transcripts from the IRS summarizing income and tax data for as many as four years.

Until now, the process of faxing in 4506-T requests to the IRS and obtaining transcripts has been paper-driven and non-electronic.

But now, with the IRS promising to provide electronic transcript tax data within one to two business days in an electronic format, more lenders are likely to run income checks before closing — even on loans to applicants who are not self-employed or using stated-income programs.

Typically lenders want to see two years of returns, so the IRS policy change means costs will jump by $9 per loan application.

Though lenders will be able to deal directly online with the IRS, most are expected to continue working through third-party vendors such as Veri-tax, who can handle large volumes of requests per month, but at a higher cost.

For example, some large wholesale lenders have required borrowers to sign the forms, but not date them or indicate the tax years to be checked.

With income checks likely to be faster and more frequent in the new electronic format, it will be more important than ever for home mortgage applicants to follow the IRS instructions on Form 4506 to a “T.”

Even if the loan officer insists that it’s the mortgage company’s standard procedure — or worse, a precondition for obtaining the loan itself — never sign an incomplete 4506-T. (Read More)

Source: Washington Post

Tags: Mortgage Tips

Alternatively, they could refinance their first mortgage and pull out an additional $70,000 to pay off the credit line.

According to Freddie Mac, the congressionally chartered mortgage investment giant, roughly nine out of 10 refinancings this year have involved cash-outs, many of them to pay off variable-rate credit lines.

They telephoned their lender and asked to convert their variable-rate credit line into a fixed-rate mortgage note with a fixed term.

But the answer was even better than yes: The rate was fixed well below the 8.25 percent bank prime that the floating credit line was tied to, and there were no fees involved.

Both the J.P. Morgan Chase and Citibank home equity groups now let floating-rate credit line customers divide their accounts into as many as five separate “baskets” with different terms and rates, anytime, at zero cost.

For such borrowers, a cash-out refinancing might not be as attractive as a rate lock on the $50,000 credit line balance.

Bottom line on floating-rate credit lines: Even if your bank hasn’t told you about it, check out your fixed-rate options.

Depending upon your primary mortgage amount, interest rate and the size of your credit line, locking in a fixed rate on a credit line you thought could only go up might be your best move. (Read More)

Source: Washington Post

Tags: Mortgage Tips

The 10-year Treasury note is among the most widely watched indicators of long-term interest rate trends, but investors will often look at the so-called “swap rates” that banks charge each other when trading long-term and short-term loans. But looking at historical movements in the federal funds rate along with the yields on 10-year Treasury notes and the 30-year fixed mortgage rate helps to show how little connection exists between the federal funds rate and long-term mortgages. (Read More)

Source: NY Times

Tags: mortgages, federal reserve, Mortgage Tips

Tags: Mortgage Tips

Front-end ratio

The housing expense, or front-end ratio, shows how much of your gross (pretax) monthly income would go toward the mortgage payment.

• As a general guideline, your monthly mortgage payment, including principal, interest, real-estate taxes and homeowners insurance, should not (Read More)

Source: The Seattle Times: Real Estate

Tags: Mortgage Tips

Tags: Mortgage Tips

“In most situations, the interest rate on a second home is the same as a primary residence,” said Doug Perry, a senior vice president at Countrywide Home Loans, one of the nation’ s biggest lenders.

“It’s an acknowledgment that people have more second homes now,” he said.

According to the Realtors’ group, of the owners who have bought vacation homes since 2003, 23 percent used the proceeds from other real estate sales to finance their purchases, and 19 percent used equity or sales proceeds from their primary residences.

When a vacation house is bought by several people — two couples, perhaps — tax deductions are simply split in line with the ownership shares, he added.

But too often couples or disparate family members do not weigh the factors that can complicate multiparty vacation home ownership, said Mr. Romano of Shelter Rock.

Among other things, if one person has a credit rating that is significantly different from those of the other prospective owners, snags can result.

Mr. Romano said that he discusses how one person’ s financial situation could affect his or her ability to carry the costs of the venture and how it could raise the borrowing cost for the whole group. (Read More)

Source: NY Times

Tags: Home Buying, Home Selling, Mortgages, Mortgage, Mortgage News, Real Estate, Real Estate Tips, Real Estate News

Tags: Mortgage News, Mortgage Tips