Mortgage Rate News

While a home mortgage may not exactly be an investment, it can have certain benefits. Indeed, most people cite the home mortgage for some of its tax benefits, many of them deriving from deductions related to interest. Here are some of the tax benefits that come with a home mortgage:

1. Interest paid. When you make mortgage payments, a large portion of that each month goes to interest, especially at the beginning of the home loan. You can deduct a portion of that mortgage interest on your tax form.
2. Mortgage points. Sometimes, you can pay points to get a reduction in the interest rate that you pay. In addition to mortgage interest being tax deductible, you can get some tax advantage for points.
3. Home improvement. When you take out a home equity loan, for home improvement or otherwise, you are getting a second mortgage. This can mean that the loans you take out to improve your home, as long as they are based on the equity in your home, may be tax deductible.
4. Mortgage tax credit. In addition to home mortgage tax deductions, there is a mortgage tax credit that you can use in some cases.

Before taking any of these tax benefits from your home mortgage, however, it might be a good idea to check the IRS Web site to ensure that you do things properly. You may also consult with a knowledgeable tax attorney or accountant.

Tags: home equity loan, home mortgage tax benefits, home mortgage loan, home loan,
second mortgage, mortgage interest, mortgage blog

One of the most venerable home mortgage loan programs is the FHA home loan program. This program, administered through the Federal Housing Administration is designed to help homebuyers get approved for better loan terms. Now, with the current housing downcycle making things more difficult in terms of lending, and would-be homebuyers wary, the Mortgage Relief Act just passed by the House is changing some of the FHA home loan rules.

The new rules have lifted the ceiling on loan amounts in the program to $417,000. This means that homes in higher-priced markets can be bought using the FHA home loan program. Additionally, things are made easier for homebuyers with the new rule that reduces the amount required for a down payment. Now, instead of a 3% down payment, one only needs 1.5% of the home purchase price as a down payment.

A Sedona real estate blog points out that, even with the new rules, there are still caveats to the FHA home loan program:

However, FHA home loan rules do require that you have reasonably good credit, and a down payment is still necessary.

Your debt-to-income ratio will also be examined before you are approved for the FHA home loan program. The nice thing about the restrictions of the FHA home loan is that buyers using the program are much more likely to see their loans through, since the requirements demand a certain level of financial solvency and creditworthiness. Additionally, it prevents many homebuyers from getting homes that they cannot afford, since the interest rate is a fixed rate, and the mortgage is usually a traditional mortgage. No artificially tinkering with the debt-to-income ratio by giving a loan with a teaser rate, or an interest only loan.

While the new FHA rules are unlikely to help those facing foreclosure, they should help those buying a new home, especially first time homebuyers in high priced real estate markets.

Tags: FHA home loan, new FHA rules, home mortgage loan, mortgage loan blog,
Mortgage Relief Act, FHA home loan program

Another Fed rate cut is in the works. Most analysts and Fed watchers expect another rate cut tomorrow at the Fed meeting. The only real point of contention at this point is whether it will be a 25 basis point cut or a cut of 50 basis points. Global credit markets, and notably the U.S. credit market, has been in a bit of a freeze since the subprime lending crash last summer. Newsday reports on the fears associated with credit market issues:

Although there is no solid evidence yet that consumer or business spending has been affected by a freeze in global credit markets, “financial conditions … are signaling a slowdown, and a potentially meaningful one,” Robert V. DiClemente, chief economist at Citigroup Global Markets, said in an interview. “If financial conditions are tight and unsettled, it’s something like someone messing with the plumbing in a house … people don’t transact and intermediate properly, and you bring a whole lot of activity into question.”

The Fed rate cut will mainly affect the rate at which banks lend money to each other. But this also has effects on mortgage rates, credit card rates and other financial transactions. The stock market is one of these other financial markets; a Fed rate cut is expected to inject confidence into the market. Indeed, as First Business reports, the Fed rate cut is likely to affect even the most ordinary among us.

Tags: Fed rate cut, global credit markets, home mortgage loan, mortgage blog,
subprime lending, mortgage rates, U.S. credit market