The Home 
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comments

FHA loans drop off as housing market recovers

FHA LoanWhile the housing market is far from a complete recovery, it is making progress. The S&P Case-Shiller 20-City Composite Home Price Index rose 12 percent between July 2012 and July 2013, according to the most recent numbers, and just about every facet of the housing market is showing improvement. With the economic situation improving (albeit slowly), more buyers feel comfortable with their options and lenders are more open to extending credit.

With these changes, FHA loans, which had gained in popularity during the Great Recession, are dropping off. More homebuyers seem to be looking to conventional loans.


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 Banking 
4
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Is a No Cost Mortgage Really No Cost?

HUD-1The last few years have been dismal for the housing market and because of that, you may not be in the market as a buyer or a seller but someday you will and that someday may be sooner than you think. You may get a promotion, a transfer, or a new job. You may find a great deal on the home of your dreams or it may simply be time for a change.

Even if you won’t be purchasing a home in the near future, you could avoid mistake later by preparing yourself now. Most people who have purchased a home go in to the mortgage lending market with little or no knowledge of how it functions. We follow the lead of our real estate agent and end up taking their advice on what is the best option for us. We don’t do this in other areas of our life so why do we do it for what will probably be the largest purchase we make?

Let’s change that today. Let’s start learning a little about the mortgage lending market so when the time comes, you’re armed with the knowledge you need to ask the right questions.

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 Personal Finance 
13
comments

Return of the Adjustable Rate Mortgage

MortgageRight after the mortgage meltdown and the financial crisis, many people began shunning adjustable rate mortgages. Many of these mortgage products featured “teaser rates” that re-set after a few months, or that had other characteristics of subprime loans. However, as the economy recovers somewhat, and as borrowers look for good deals, ARMs are making something of a comeback.

The New York Times reports that ARMs that re-set five to seven years down the road, with a cap after the fixed rate period, are on the rise. One of the reasons that borrowers are looking into ARMs is due to their usually lower interest rates. The initial rate on an ARM is often lower than what can be had on a fixed rate mortgage, and it can mean some savings on interest. However, it is important to make sure that you can truly afford your mortgage — no matter what type you get.

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 Personal Finance 
48
comments

What if the mortgage interest deduction didn’t exist?

Welcome to the first edition of our What If? series, where we wonder aloud and ponder some of financial life’s great mysteries. This first edition will take a look at the mortgage interest deduction, one of our most popular tax deductions, because it was featured by the deficit reduction commission just last week.

First we’ll take a brief look at the deduction itself and then discuss what if it didn’t exist, followed by what if it went away? I think the two are vastly different questions and I hope you’ll chime in with what you think.

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 The Home 
96
comments

Should You Walk Away from Your Mortgage?

UnderwaterA lot of people are “underwater” on their mortgages, that is the value of their home is below the amount they still owe on their mortgage. Other people simply can no longer afford their monthly mortgage payments and are on the verge of being foreclosed on. Regardless of the reasons, some homeowners are considering walking away from their home and their mortgage and it’s important to understand what the actual costs are going to be.

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 Your Take 
53
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Your Take: Should People Get Homes for Free?

ForeclosureIf you’ve been following the latest round in the foreclosure mess, you’ve probably read about how some banks have lost the loan documents for some mortgages. The gist, as I understand it, is that after mortgages were signed, some of the larger banks would enter the data into the MERS registry (which is owned by large banks). The registry helps facilitate the process because banks won’t have to go to the local records office to record the loans, which saves them time. After registering the loans, oftentimes banks shred the paper documents to avoid duplication. (all this I learned from reading Business Week, but I can’t find the nice chart they used)

Well it turns out that last year, March 2009 specifically, a bankruptcy judge in Las Vegas decided MERS could be a beneficiary under a trust deed. Since then, supreme courts in other states found MERS had no standing in foreclosure proceedings under local state laws. Whoops.

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 The Home 
33
comments

How Homeowners Beat Renters in a Down Housing Market

Trendy Modern Northwest HomeI’ve been talking to a lot of people lately about home values. Many homeowners have seen their homes fall in value and they talk about how much money they’ve lost, how they can’t leave the house to seize other opportunities, how they won’t be able to sell for decades. In all the discussions, it seems there’s one thing that people focus on – purchase price. It happens when markets are good, it happens when markets are bad, and in both cases I think focusing on the purchase price is incorrect.

When markets are good, people say they bought a house for $100,000 and sold it for $400,000, implying they earned $300,000 of profit. The reality is that they didn’t – they paid interest and taxes and insurance, they paid agent commissions, they paid for repairs, etc. We forget that because it’s not the headline number. I think the same is true when markets are bad.

When the housing market is down, people focus on the purchase price without adjusting for tangible factors that improve their situation. As I thought about it some more, the more I realized that there’s a range of values, below the purchase price, where you may still come out “ahead” of renters if you were forced to sell.

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 The Home 
15
comments

What is an Offset Mortgage?

I’ve often looked across the pond at the UK for a few novel, if not simply different, personal finance ideas and am often surprised at some of the things they have that we don’t. For example, you can open an Roth IRA-like instrument known as an Individual Savings Account (ISA) but “invest” it in a regular savings account. In the United States, you generally have to invest the assets in your IRA in something other than a regular savings account (the closest you can get to something 100% safe is a money market fund or perhaps a Treasury fund).

Another financial creature that doesn’t exist in the United States, at least in the same shape, is that of an offset mortgage account. You have versions of it here, like the money merge account which is packed with fees and charges, but nothing as clean and simple as the offset mortgage accounts you can have in the UK.

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