Federally Insured Mortgages offer lower down payments than conventional mortgages. FHA mortgages also offer flexibility in qualifiying requirements and seller assistance.

Benefits of FHA Financing:

• Available on 1-4 unit and FHA approved condominiums.
• Down payment requirements as little as 3.5%.
• Down payment does not have to be borrower’s own funds. The full 3.5% down payment requirement can be 100% gift funds from family member, borrower’s employer and even a close friend.
• Any closing costs including origination fee, discount points, Up Front Mortgage Insurance, Buydown costs and prepaid items can be paid by the seller up to 6% of the purchase price.
• Private Secondary financing is permitted by charitable organization, government agencies and family members.
• Less restrictive credit guidelines allowing credit scores as low as 640.
• No reserve requirements on 1 and 2 family properties. Three months reserves are required on 3 and 4 family properties from borrower’s own funds.
• When purchasing a 2-4 unit property, 85% of rental income can be added to the qualify.
• Non-owner occupants are allowed on single family homes and condominium purchases (ie. Parents cosigning).

As you can probably tell, FHA loans are ideal for those borrowers who may have limited down payment resources, and/or an acceptable, but less than perfect credit score, or limited credit history.

FHA loans do require some specific appraisal and inspection requirements which you can review in this document: FHA Info That You Should Know

If you are wondering if an FHA loan is right for you, or if you are a real estate professional who may need more details on the FHA programs for your Burlington Vermont area real estate clients, please give us a call at 802-658-5599 x3111.

Even though home prices have been dropping in many parts of the country, the long-term data can be used as evidence that even with conservative appreciation your bottom line costs are significantly less than when renting.

Factoring in the tax benefit that home-owners receive is another bonus that improves the bottom line cost of owning your home.

Also keep in the mind that the costs of owning a home have been steadily declining while rents have been steadily increasing!

Your Home = Your Savings Account

Additional irrefutable evidence is that home owners pay down the principal more and more with each payment. This loan reduction is essential a forced savings account because the value of your payments accumulates in the equity of your home.

If you’re the type of person who is renting because you’re not sure now is a good time to invest in home-ownership, give us a call at 800-499-6371 and we’ll run the numbers for your individual situation. You’ll probably be thrilled to discover how dramatically your financial future can improve.

Let’s start with some of the latest stats on Housing Affordability:

• The monthly mortgage payment for a median-priced single-family home is now $700, compared to $1,140 in 2006 — a decline of nearly 40 percent!
• Mortgage payments now account for only 13 percent of monthly median family income, the lowest percentage on record (since 1971).
• Price declines and low mortgage rates have resulted in a ratio of monthly mortgage payments to median family income that is the lowest on record.

If you are a potential seller, one consequence of this record affordability is that you may be able to sell your home to a home buyer who would not have ordinarily been able to afford your home a few years ago. While the overall housing market is still struggling, the increase in housing affordability is seen as a bright spot for people now looking to sell or buy a new home.

If you need a mortgage in this climate, do not be deterred by various media reporting that you need a 20% down payment to qualify.

You don’t always need 20% down to qualify for a mortgage:

Many people do not realize that funding sources exist from the FHA, RD, VA and VHFA that still allow for low, or even no, down-payments. In addition, if you have good to excellent credit, you can also get ‘conventional’ mortgages with as little as 5% down by utilizing Private Mortgage Insurance (PMI).

If you would like to take advantage of the record housing affordability, and would like to know what your payments would look like, give me a call today at 802-658-5599 or check in with me online at www.vtmortgageadvisor.com .

Mark Chaffee

Vermont Mortgage Advisor

802-658-5599

You want to help your child with the purchase of their new home but you are worried you will have to pay a ‘gift tax.’ What exactly is this tax and how does it work. Well, to start, the IRS defines a gift as “any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money’s worth) is not received in return.” In other words, if you give someone something of value and don’t receive an equal value in return, you’ve given them a gift.

How are gifts taxed?

Gifts that you or your child receives are not considered income, and don’t get reported on your tax return. That being said, you can’t simply dodge taxes by calling your income a gift. If, for example, you receive a “gift” in return for services rendered, it’s not a gift.

So what’s all this talk about gift taxes? The gift tax actually applies to the donor, not the recipient. The whole point of this tax is to prevent individuals from transfer their estate to others before their death, thereby avoiding the estate tax.

Exclusions from the gift tax

There is an annual gift tax exclusion that currently stands at $13k/recipient. In other words, you’re allowed to give away up to $13k  per recipient per year, to as many recipients as you wish, without any tax implications. This limit is effectively doubled for married couples, who can jointly give gifts up to $26k/year total to a single recipient.

As importantly, there is also a second, $1M lifetime limit of gifts in excess of the $13k annual limit before the gift tax is triggered. If you exceed this limit, then you’ll either have to pay the gift taxes that year, or use up a portion of this lifetime limit that would otherwise be used to offset the estate tax upon your death.

Gift tax returns and the gift tax rate

If you exceed the annual exclusion of $13k/recipient, you’ll have to file a gift tax return. But remember, you still won’t have to pay the gift tax until you reach the $1M lifetime limit. What happens once you exceed your $1M lifetime limit? How much will you owe?  At that point, the gift tax rate is, essentially, the estate tax rate and the amount owed will depend upon the estate tax rates in force at that time.

Your credit score is also referred to as your “FICO score”. FICO is an abbreviation for the “Fair Issac Company, the developer of the original scoring model. The credit score that FICO gives you in a number between 300-850, with a higher number being a better score. The score is based on many factors, such as past late payments, debt utilization, and the age of your active accounts. However, how the final score is exactly calculated has not been released, as it is a trade secret closed protected by Fair Issac Co.

It is very important that you know and understand your credit score before you start evaluating mortgage loan options.

Two Ways to Get Your Credit Scores:

1. Go to www.myfico.com and sign up to obtain your credit score directly from FICO. Be careful that even though you can obtain your score for free you must then cancel your free trial within 10 days to avoid being charged for 3 months of service.

2. Use www.creditkarma.com. CreditKarma is a truly free way to obtain, and monitor, your credit score over time. CreditKarma is supported by advertising partners that advertise credit cards, loan programs, and more so that you can use the website free of charge. Credit Karma also offers you advice on how to improve your credit score by analyzing the different factors that make up you total score (length of credit history, hard credit INQUIRES, late payments, etc.)

You can also get your credit report free, once per year, but with no scores, from the government sponsored website www.AnnualCreditReport.com.

It is important to note that while your credit score is a key component, it is not the only factor that a lender considers when approving a mortgage. Be sure to contact us, before you shop for a new home in the Burlington area so you already know how to improve your chances of qualifying for the loan that is ideal for you.

Mark Chaffee

Vermont Mortgage Advisor

802-658-5599

• FHA is 6% regardless of down payment.
• Conventional is 3% if the down payment is less than 10%, 6% if the down payment is 10% or more but less than 25% and finally, 9% if the down payment is 25% or more
• For jumbo loans, if the down payment is less than 20%, the maximum contribution is 3% and if the down payment is 20% or more, the max is 6%.
• For VA loans, the seller can pay all non-recurring costs and up to 4% for anything else.
• If you are purchasing investment property, the maximum amount that can be paid is simply 2%.

Many folks are not aware of the last bullet and, often, contracts are written up with excess contributions that need to be corrected prior to loan submission. Keep in mind that these contributions can only be for acceptable closing costs and pre-paid expenses. More on that later.

If you are saving for a new home, you may feel that it will take you
forever to come up with the cash necessary for the down payment and closing costs. Before you delay your purchase any longer, make sure you check into the latest low down and no down mortgage products. You may find that your dream is much closer to a reality than you imagined. If you have acceptable credit and a steady job, you may not need a lot of cash to purchase a home. Some loan programs still allow you to put as little as 0 down if you are a veteran or are buying in an area designated as ‘rural’ by the USDA. For example, in Vermont, the Vermont Housing Finance Agency (VHFA) still offers a 100% financing program when combined with Rural Development’s mortgage insurance. If you are a veteran you can also obtain 100% financing through the VA’s loan program. If you don’t meet the above criteria you can purchase with as little as 3.5% down using Federal Housing Administration (FHA) financing and all of this money can even be a gift from family. By doing a pre-purchase credit check you can verify if you qualify for any of these programs or if you need to work on resolving any credit problems before you begin your search for a home. Buyers who thought they were years away from the purchase of a home are often pleasantly surprised to find that they don’t have to wait to begin their search.

If you would like to improve your scores before you buy or refinance, simply contact me for a free consulation. I will make sure you will receive the info you need to effectively maximize your scores.

When a marriage ends in divorce, the lives of those involved are changed forever. During this time of upheaval, one thing that shouldn’t have to change is the credit status you’ve worked so hard to achieve. Unfortunately, for many, the experience is the exact opposite. Unfulfilled promises to pay bills and a breakdown in communication can lead to unwanted credit issues. These issues may affect your ability to refinance your current loan or purchase a new home. The good news is it doesn’t have to be this way. By taking a proactive approach and creating a specific plan to maintain your credit status, you can ensure that “starting over” doesn’t have to also mean rebuilding credit. The first step is to obtain a valid copy of your credit report. Once you’ve gathered the facts, it’s time to make a plan: Can you purchase a new home now or will you have to wait until everything is finalized? Can you refinance the house to pay off your spouse and consolidate debt? These are some of the questions that a trained mortgage professional can assist you with. Divorce is difficult for everyone involved. By having professional advice, both legal and financial, you can ensure that your credit remains intact.