Answers to your Financing FAQ

Thinking about purchasing a new home, but unsure about the financing process? Scott Smith of Primary Residential Mortgage answers several of your FAQ including:
How do I apply for a home loan?
What do I need to apply for a loan?
How long will it take to get approved?
How are interest rates determined?
What is the difference between "locking" and "floating" an interest rate?

What To Make of The Headlines

The past month has been packed with Headlines which will be written about in the history books. Here are some of the headlines:

Debt Ceiling Deal Reached To Avert Default: The Huffington Post recapped the news that congress had passed a deal to raise our debt limit. This is like your credit card company increasing your credit limit allowing you to go deeper in debt. But at least you can meet your short term needs. This also included a plan to reduce spending by $2 Trillion...depending on who you ask. Apparently the S&P missed their estimates by about $2 Trillion. But haven't we all misplaced a trillion dollars here or there?

News of the debt ceiling was quickly replaced by news that S&P had downgraded the US credit rating for the first time in history. This is big news because the rate at which the US borrows money could increase. Ever have a credit card company increase your rate because you made a late payment on a different account?

What does all of this mean? In the short term all of the added uneasiness has lead to a rash of investors retreating to mortgage bonds, as investments, lowering long term mortgage rates. Here is a graph showing the improvement in mortgage bonds. These bonds work inversely to mortgage rates. So, as the graph increases, mortgage rates decrease.


It's certainly an understatement to say that mortgage rates are great right now. What's more important is that your purchasing power is greater than it has ever been. You know the stories our parent's tell of 18% mortgages, well the payment on a $100,000 loan at 18% is $1,507.09, while the payment on the same size loan at 4% is $477.42. What does this mean? Buying power at today's interest rates is approximately three times greater than it was in the early eighties. And you don't have to put up with the brown and yellow painted cabinets, shag carpet that requires raking, or faux wood wall paneling in your basement that they were opting for back then.

So, don't let the news or the headlines prevent you from making a great investment on a home for your family. It is still possible to get financing with zero down payment, and there is help for those with past credit challenges.

Contact kristi@mcarthurhomes.com for information on available homes, check out www.mcarthurhomes.com for neighborhoods where McArthur is building, or go to www.scottutah.com for more information on financing your new home.

Why Forbes Magazine says NOW is the Time to Buy

Forbes Magazine recently published an article outlining 9 reasons that now may be the best time ever to buy a new home. We all see signs of the economy improving, but it's always great to hear good news from a reliable source like Forbes. Check out their reasons-to-buy which include:

• Interest Rates at a 50-Year Low
• Rates Expected to Increase
• Low Down Payment Mortgages Available
• Lowest Home Prices in Years

Read the full article by Forbes Magazine HERE.
Then check out a McArthur Homes new home community near you!

How Does Your Real Estate Tax Bill Compare To Other Parts Of The Country?

Mortgage rates may be a function of free markets, but real estate taxes are a function of government. And, depending on where you live, your annual real estate tax bill could be high, low, or practically non-existent.
Compiling data from the 2009 American Community Survey, the Tax Foundation, a non-partisan educational organization in Washington D.C., published property taxes paid by owner-occupied households, county-by-county.
The report shows huge disparity in annual property taxes by region, and by state.
As a percentage of home valuation, Southeast homeowners tend to pay the fewest property taxes overall, while Northeast homeowners tend to pay the most. But statistics like that aren't especially helpful. What's more useful is to know how local real estate taxes stack up as compared to local, median household incomes.
Not surprisingly, real estate taxes are least affordable to homeowners in the New York Metro area. The 10 U.S. counties with the highest tax-to-income ratios physically surround New York City's 5 boroughs. The areas with the lowest tax-to-income, by contrast, are predominantly in southern Louisiana.
A sampling from the Tax Foundation list, here is how select counties rank in terms of taxes as a percentage of median income:

• #1 : Passaic County (NJ) : 9.7% of median income
• #6 : Nassau County (NY) : 8.6% of median income
• #15 : Lake County (IL) : 7.2% of median income
• #18 : Cheshire County (NH) : 7.1% of median income
• #70 : Travis County (TX) : 5.0% of median income
• #90 : Marin County (CA) : 4.6% of median income
• #110 : Middlesex County (MA) : 4.4% of median income
• #181 : Sarasota County (FL) : 3.9% of median income
• #481 : Douglas County (CO) : 2.4% of median income
• #716 : Maui County (HI) : 1.3% of median income

The U.S. national average is 3.0 percent.
The complete, sortable list of U.S. counties is available at the Tax Foundation website. For specific tax information in your neighborhood or block, give me a call 801-209-3850.

Utah Housing Loans

The Utah Housing Corporation provides low cost, low down payment financing to Utah homebuyers. They are able to provide financing by utilizing tax-exempt and taxable bonds, federal and state income tax shelters, conventional lending, federal and state grants, low-interest loans, and other forms of debt and equity.

Who would use a Utah Housing Loan?

Are you a first time buyer* with a 3.5% down payment?
FIRST HOME loans are geared to first-time homebuyers who have access to personal or family financial resources to pay all of their down payment and closing costs. FirstHome loans may also be used to purchase homes in Targeted Areas of Utah.

Are you a first time buyer* with no down payment?
FIRSTHOME PLUS offers financial assistance for first-time homebuyers who do not have personal or family finances with which to pay their down payment and closing costs. These costs generally average 5% - 6% of the home purchase price. Applicants can borrow up to 6% of the amount of their first mortgage to cover this 5% - 6%.

Are you a Veteran?
VEP-FirstHome PLUS offers financial assistance for Veteran homebuyers who do not have personal or family finances with which to pay their down payment and closing costs. These costs generally average 5% - 6% of the home purchase price. Veterans can borrow up to 6% of the amount of their first mortgage.

Are you a single parent?
SINGLE PARENT FirstHome PLUS loans assist single parents who have previously owned or co-owned their own residence and have primary custody of at least one minor dependent. These applicants need to borrow funds from UHC to pay all or a part of their down payment and closing costs.

Not a first time buyer or single parent but still want low cost financing?
Utah Housing provides financing for move up buyers withing its targeted** areas.

Scott Smith at Academy Mortgage has been providing Utah Housing Loans for many years; helping Utah first time homebuyers to purchase new homes. If you are interested in more information or to apply today, call Scott 801-209-3850.

Here are some helpful links:
McArthur Homes Available Homes
Utah Housing Income Limits
Utah Housing Purchase Price Limits
Homebuyer Counseling and Training

*The federal government classifies a first time buyer as someone that has not owned or co-owned a home in the previous three years.

**The federal government has designated certain neighborhoods as Targeted Areas. There are two advantages to buying a home in a Targeted Area:
1) There are no restrictions on former home ownership.
2) Higher income limits are accepted.

Check Out This Credit Repair Video

Remember, McArthur Homes is offering FREE Credit Repair from Nitro Credit from those who purchase a new home. For more information, email kristi@mcarthurhomes.com.

The Low Down on Credit Scores

Credit scores can be confusing and frustrating. The good news is that once you understand how to build your credit, your credit score can be your best friend. Check out the table below to see how building good credit can save you thousands of dollars on your new home.  I've also posted some information on how your credit is calculated. Thanks to Nitro Credit for all the helpful info. They are experts at credit repair!

Want to learn even more about building your credit? Join McArthur Homes and Nitro Credit for a FREE Credit Repair Seminar on November 6th at 10:00am. Located at the Thanksgiving Meadows Clubhouse, 3790 N. Bluegrass Blvd, Lehi Utah. For more information email jesse@mcarthurhomes.com




Our lives revolve around credit and FICO scores but sadly some people never realize it until it is too late. The chart below shows how much more someone with a lower credit score would pay over the term of a 30-year conventional mortgage loan for $200,000.
(5/2009)

Credit Score	Interest Rate	Cost of Your Credit
720-850	4.75%	$0.00
700-719	5.125%	$16,668.00
640-699	5.67%	$41,392.80
600-639	6.5%	$79,506.00

Your credit score is calculated based on credit-related information contained in your credit file. This information is analyzed in five different ways to produce a three-digit FICO score.

1. Payment History:
    35% of your score is based on paying your credit related accounts. Late payments and other negative marks drop your score quickly.
2. Credit Utilization:
    30% of your score is based on how much credit you have and how are you using it. If you are close to utilizing the maximum amount of credit limit provided you, this can reflect negatively on your score.
3. Length of Credit History:
    15% of your score is based on good payment history over a period of time.
4. New Credit Inquiries:
    10% of your score is based on the number of inquires coming from creditors.
5. Types of Credit:
    10% of your score is based on having different types of credit accounts such as home mortgage, vehicle, credit cards, etc.

Why all the Buzz about Interest Rates?

So if you haven't heard everyone talking about LOW INTEREST RATES, you may be living in a cave. Interest rates are down as low as 4.375%. Compared to average rates of 7% that is a huge savings and compared to the 18% interest rates that my parents got on their first home in the 80s it seems downright unbelievable!

But what does that really mean to you? Interest rates can seem kind of obscure and not totally relevant to your bottom line. Here are some hard numbers to show you just how big a deal this really is:

$119,531 ... That's the amount of money you could save on a $200,000 loan over the life of the loan with a 4.375% Interest Rate vs. the historical average of 7%. (A bigger loan amount would mean even bigger savings.)

$14,232 ... That's the additional yearly income you would need to qualify for the SAME LOAN with 7% interest rates instead of today's low 4.375%.

$332.03 ... That's the bottom line savings in your monthly payment with a 4.375% rate vs. a 7% rate on a $200,000 loan.

So if you're waiting for the "perfect time" to purchase your new home, THINK ABOUT THIS: Buying now means you can get MORE HOUSE FOR LESS MONEY per month and you will SAVE MONEY ON EVERY MONTH OF EVERY YEAR on your payments until you pay off your home loan. Is there a $14K raise in your near future? Do you have an extra $120,000 that you'd like to throw away on interest payments? If not, now may be the perfect time for you to invest in a new home.


Thanks to Pierre Alley, McArthur Homes' preferred lender for his help in putting together this information. Click here to find out more about Pierre and financing your new home.

Here's all the math for you detail oriented people:
Parameters: $250,000 purchase price, Loan Amount: $200,000 or 20% down
Conventional, 30 year fixed rate
Rate of 4.375%, APR = 4.526%, P&I payment = $998.57, Total over 30 years = $359,485
Approximate monthly income need to qualify = $4278 (based on a conservative 28% ratio) or $51,335 or borrower needs to make $24.68 per hour
Same loan parameters
Rate of 7.00%, APR = 7.177%, P&I payment = $1330.60, Total over 30 years = $479,016
Approximate income needed to qualify = $5464 or $65,568 or borrower needs to make $31.52 per hour.

Saving with the lower rate = $332.03 per month or $199,531 over the term
Additional monthly income needed to qualify at the higher rate = $1186
All number based OAC.  

VA Loans

We have recently had several McArthur Homes homeowners who have financed their home using a VA loan. This is a unique program available to veterans which allows for 100% financing and competitive interest rates. Below I have provided some basics of VA loans, which were provided by one of McArthur Homes' preferred lenders, Scott Smith.


Down Payment & Mortgage Insurance Not Required

The VA Loan allows Veterans 100% financing without private mortgage insurance or a needing to obtain a 20% second mortgage. The guarantee of a VA Guaranteed Home Loan means the lender is protected against loss if you fail to repay the loan. Because the guaranty replaces the protection that the lender normally receives by requiring a down payment or mortgage insurance, qualified borrowers are allowed to obtain favorable financing terms without a down payment.

Assumability

A VA loan can be assumable. For VA Loans committed on or after March 1, 1988, you may sell your home to someone who agrees to assume your loan if the creditworthiness of the new borrower is approved. This can be a significant selling point when it comes time to sell your home.

Interest Rate

VA loans rates offered to VA borrowers can sometimes be lower than interest rates offered to the same borrowers for conventional loans.

No Prepayment Penalty

You are able to repay your VA loan at any time with no penalty.  Often loans with prepayment penalties require an additional amount be paid to the lender if the loan is repaid within the first two or three years.  Your VA benefit provides this extra peace of mind.

Late Payment Guidelines

One of the requirements for the servicing company of a VA Home Loan is that there be no late charge unless payment is more than 15 days overdue. Any late charge may not exceed 4 percent of payment amount. In addition, financial counseling is available from the VA in case of temporary financial difficulties.

Streamline Program

The VA Streamline Refinance allows qualified VA mortgage holders to refinance at a lower interest rate and/or term without having to re-qualify and in some cases obtain another appraisal. This is provided to those who have remained current on their VA loans.

For more information contact Scott Smith of Prime Lending at 801-209-3850 or visit www.McArthurHomes.com.

Interest Rates as Low as 4.375%

Interest rates as low as 4.375% have been announced by several of McArthur Homes' preferred lenders, but will they stay this low for long? Here's what Pierre Alley had to say about current interest rates:

Okay, so everyone was holding their breath anticipating where LeBron James would end up playing basketball. This topic has been discussed for months. But, the more important question for all of us is have we seen the bottom for interest rates? My guess is YES. The week started out with the European Banks showing a stronger position. French Finance Minister Christine Lagarde stated that after “stress” tests, European Banks are “solid and healthy. You may recall after the U.S. Banks went through their tests, the positive results helped boost stocks nearly 40%. A jump in our stock prices will most likely cause bond prices to fall. Claims for unemployment benefits were lower this week as well. Bonds have been priced for perfection and so any misstep in economic news provides a good reason to take out profits, which we have seen the last couple of days. I believe bonds have been overbought and so there could be a dark cloud hovering in the near future. This morning an executive board member on the European Central Bank stated, “the worst of the sovereign debt crisis seems to be over.” The jury is still out as Italy might be the next country to reveal debt problems. But for now enjoy these historic low interest rates.




Pierre Alley

Utah Mortgage

Work: 801-561-4700 Fax: 801-561-8585 Cell: 706-9763

Pierre@utahmortgageloan.net / www.utahmortgageloan.net

Senate votes to extend US home tax credit deadline

WASHINGTON June 16 (Reuters) - The U.S. Senate voted on Wednesday to give homebuyers another three months to settle on their contracts and take advantage of a popular tax credit that sparked a rush of activity in the housing market.
The Senate, with a vote of 60-37, accepted an amendment by Democratic Leader Harry Reid that extends the closing deadline to Sept. 30 for buyers who met the April 30 deadline to have a signed contract.
The current deadline requires buyers to close by June 30 to get the $8,000 tax credit for first-time homebuyers. Existing homeowners buying a new primary residence are eligible for a $6,500 credit.
Reid offered the measure as an amendment to a bill that would extend some popular business tax breaks and extend unemployment insurance benefits for jobless workers.
The proposal would not have a significant impact on future home sales as the extension would be only for home buyers who already had a contract in hand by April 30.
The popularity of the tax credit has caused some anxiety because settlement offices are inundated with buyers trying to close on transactions by the end of this month to get the tax break. (Reporting by Donna Smith; Editing by John O'Callaghan)

Housing- A Great Investment

One of McArthur Homes' preferred lenders, Dan Davidson, recently shared this chart with me. It clearly shows that despite a slower housing market over the last few years, purchasing a home is still a great long term investment. In fact, home values are up 46% since 2000! Add to that lower interest rates and a Federal tax credit and you can see that now is an incredible time to take a look at purchasing a new home! For more information, visit www.mcarthurhomes.com.

The new Good Faith Estimate

Recently, there have been many changes in the financing world. One big change for those looking to purchase a home is the new Good Faith Estimate. The changes were set up to standardize the information you receive when applying for a loan and to make it easier for borrowers to compare lenders. What you should know is that there are 6 pieces of information that you will need to give a lender before receiving a Good Faith Estimate. The big change is that you now need a Property Address and Estimated Value of Property. This means that you need to have chosen a home BEFORE receiving a Good Faith Estimate from a lender. Check out the other requirements listed below:

Elements of an application:


o Borrower’s name

o Borrower’s monthly income

o Borrower’s social security number to obtain credit report

o Property address

o Estimated value of property

o Loan amount
*Must have ALL six pieces of information before issuing GFE

For more information on financing changes including those to the Good Faith Estimate, you can contact one of McArthur Homes' preferred lenders.

What do the new FHA changes mean to you?

Have you heard about the upcoming FHA changes involving mortgage insurance premiums and required FICO scores? These changes could make it more difficult to qualify for a mortgage in the future. They could also cost you $1000 or more if you don't act quickly!

Click here for up-to-date information on these changes and other news regarding new homes.

If you are considering purchasing a new home, talk to your mortgage provider right away about what these changes mean to you.

Proposed Changes for FHA Loan Program

FHA has proposed several changes to their current loan requirements, which may make it more difficult for some borrowers to receive an FHA loan in the future. The good news is that now is an excellent time to move on a new home, before changes take effect and while you can also take advantage of generous Federal Tax Credits.

Proposed changes include:
Reducing the maximum permissible seller concessions from 6% to 3%
Raising the minimum FICO score (credit score) for new FHA borrowers
Increasing the amount of up-front cash that a borrower has to bring to closing

Details and public guidance for these changes should be available by the end of January.

Additional Home Run Grants???

I have heard several reports that additional Home Run Grant funds will be announced by next Monday to correspond with the Salt Lake County Parade of Homes. Supposedly, there will be about 2,500 additional grants of $4,000 which will be available to Utahns purchasing new homes. Nothing has been confirmed, but you can check our news updates at www.mcarthurhomes.com for the latest information.

More grant money might become available for Utahns looking to purchase a new home!

In a recent Salt Lake Tribune article, Lt. Gov. Herbert indicated that additional funds may become available to further boost the Utah housing market. This is fantastic news for home builders and those looking to purchase a new home. The following is quoted from the Salt Lake Tribune Article by Robert Gehrke:

Lt. Gov. Gary Herbert said Tuesday he is considering a second round of state stimulus to the housing market, similar to the $6,000 Home Run Grant incentive to homebuyers that helped generate $376.7 million in home sales in the past three months.
"Housing led us into the recession and housing will lead us out," Herbert, a past president of the Utah Association of Realtors, said in a statement. He is expected to become governor should Gov. Jon Huntsman Jr. be confirmed as U.S. ambassador to China.

The specifics of the new stimulus program are still being worked out with a working group, led by Utah Housing Corporation CEO Grant Whitaker, that convened last week.

Jason Perry, Herbert's transition director, said the lieutenant governor wants to make sure any additional housing stimulus is specifically tailored to have the best possible impact.

Perry would not comment on specifics, but one possibility the group is considering would be a smaller grant that could be given to more people and could potentially include the purchase of existing homes. The Home Run grant was limited to purchase of a new, never-lived-in home.

Another option would use state funds to provide an advance on the $8,000 federal tax credit to first-time homebuyers, who would then have to repay the state when the federal money arrived.

Perry said that the governor would have the authority to implement the new program without further approval by the Legislature.

For more information, you can contact a knowledgeable McArthur Homes Community Sales Manager, or visit www.mcarthurhomes.com

How To: Improve Your Credit Score

Here here some excerpts from a handy article from Man vs. Debt with a few tips for improving your credit score.

Reader Question: Quick Ways To Raise Credit
by Baker on March 29, 2009

There are no extremely quick ways to raise your credit!
Even some of the “quick” methods that can raise your credit, usually take 30-90 days to actually appear. And of course, the best way to build up a great credit score is gradually, over time. That being all fine and dandy, we did discuss a view strategies over a quick phone call.

Pull your credit report and check for inaccuracies!
My friend had paid to pull his credit score (which he could have got as part of a free trial at MyFico.com), but had not pulled his actual credit reports. I told him the first step and one of the quickest ways to see a turn-around in your actual score is to make sure that the information in your credit report is actually YOUR information. He was surprised to hear that my wife was the victim of identity theft several years ago and that it is the fastest growing white collar crime in the world!

Fix inaccuracies and resolve any legitimate unknowns!
I wont be diving into the exact process for reporting fraud and fixing inaccuracies (that would be a post in its own), but I do want to point out that this is the quickest way to see a major difference in your scores. If you take 3-4 fraudulent, unpaid accounts off your record, you can imagine what that might do to your score.

Also, don’t be afraid to call creditors, especially those who might hold legitimate accounts that you did not honestly know of. A couple strategies that wouldn’t help my friend, but could help you!

My friend doesn’t have any open credit cards. He has no balances and canceled his credit cards a while ago. Although I strongly believe this is a great strategy to commit to being debt-free (see Declaring War: Canceling Credit Cards), I did tell him that his mix of credit ratio (10% of overall score) was down a little because of this. Opening a new credit card wouldn’t immediately help as the new credit would temporarily ding his credit. It also wouldn’t improve his account length until much later and would only marginally improve his mix of credit.

If you DO currently have credit card debt:
Try calling all of your credit cards and asking them to raise your credit limits. See if they can raise your limits without re-inquiring on your credit score, therefore avoiding any temporary ding from an inquiry. This will lower your overall debt utilization ratio, meaning you will be using a lower percent of your total available debt, thus raising your score. Be sure to site payment history, length you’ve been a customer, etc… If all else fails, threaten to cancel the card and ask for their retention department. Credit card companies will often do just about anything to keep a customer they are making money on!

Rearranging revolving debts. Your overall utilization rate is important (see above), however so does the amount of debt on each specific card. For example someone may have a $1,000 balance with $5,000 in limits over 3 cards. In this example, let’s say one card is maxed out ($1000 of $1000 limit) and the other two have balances of $0 with $2,000 limits. This arrangement of debt is actually hurting the individual. They would be better off having $200 on this first card and $400 a piece on the remaining two. Their individual cards go from being 100%/0%/0% to being 20%/20%/20% in percent of used debt. This actually improves the credit score. Bottom line, having individual cards close to being maxed-out hurts your credit score!

Home Run Bill Update

Here is a quick update on the "Home Run" Bill (details in article below):

The bill, which will provide up to $6,000 in down payment assistance to buyers of New Construction homes, has now passed the Senate and the House! It is expected that Governor Huntsman will sign the bill at the beginning of the week. Buyers will be able to apply for the $6,000 through their lender and the money will be distributed through Utah Housing.

For more information email kristi@mcarthurhomes.com or contact our preferred lender, Scott Smith. There is only enough money available for approximately 1,660 home buyers and it will be distributed on a first come first serve basis, so don't delay!

Potential $6,000 Down Payment Assistance for New Construction

Now really is the best time to buy a brand new home! Not only is the government offering an $8,000 tax credit, but now Utahns may be able to receive up to $6,000 in down payment assistance thanks to a new bill that has been passed by the Senate. The following article is from KSL.com:

Senate OKs bill to help buyers of new homes.
March 10th, 2009 @ 8:00am
By Mary Richards

SALT LAKE CITY -- The Utah Senate has approved a measure that would give Utahns financial help with the down payment when buying a brand new home.

Senate Bill 260, sponsored by Sen. Scott Jenkins, R-Plain City, would give people $6,000 for the down payment on a new home. The Standard Examiner reports the money would come from the $10 million Utah is set to receive for housing assistance from the federal stimulus package. The money would go to more than 1,600 buyers on a first-come, first-serve basis.

It's an effort to help homebuyers and home builders by reducing the number of new homes sitting on the market since a housing boom declined about two years ago.

The grants would apply only to a 30-year, fixed-rate mortgage for people who make no more than $75,000 a year. It's for first-time homebuyers and existing homeowners who qualify.

Realtors and economists say this program could really help the housing market. The University of Utah's Bureau of Economic and Business Research told the Standard Examiner the program could create 8,000 jobs in Utah's housing sector and add $27 million in income tax revenue for the state.

The bill now moves on to the House for consideration.

For more information on financing, contact Scott Smith, McArthur Homes' preferred lender.