Hello and welcome to this week’s Moorings Column. The clock is counting down and there is now less than three months left to take advantage of the $8,000 first time home buyer tax credit. Just as a reminder, you have to close on your home by November 30th to qualify, barring any further action or extension from Congress. On that same note I would highly encourage any and all readers to write your Federal Legislators and encourage them to extend this all-important tax credit that is helping to bring our economy back to profitability. More and more people have bought property in the past few months. Year to date there have been 1,584 homes sold in
Now for a look at the mortgage market where rates are still hovering at around or slightly over 5% for a 30 year fixed loan. Another option that can be good for many people is an Adjustable Rate Mortgage or ARM. Rates on ARMs are incredibly low right now. A person buying a home and wanting to obtain a 5 year ARM can expect a rate of 3.75% fixed for the first 5 years with a 1% origination fee. Yes…3.75%! That translates to a principal and interest payment of only $926.23 on a $200,000 loan!. That is really quite a deal and for many can be a great way of getting into that first home, and then of course turn around and get a nice $8,000 check from the government.
In addition to the principal and interest paid each month, I thought it might be a good idea to explain some of the other monthly expenses you can expect to pay when buying a home. You will need to set up Tax Escrows with the Lender so that there is enough money in you Escrow account to pay your taxes when they are due and still have two months left over in the account for the next year. Tax rates are a combination of City and County taxes and are different for each City in our County, and also vary County to County. Second is hazard insurance or homeowners insurance Escrows. You will need to pay your first years insurance and closing and then set up an escrow account with the lender to pay it when it comes due the following year. This is simply an assurance to the mortgage investor that their investment is secure in the event of your home burning down or a disaster. The other main item that scares many people is mortgage insurance. Mortgage Insurance insures the Lender against your default and is required on conventional loans when your down payment is less than 20%. It’s a benefit to you because without it, no loans above an 80% loan to value would ever happen, so think of it as just a helping hand in buying your dream home. Well it’s Labor Day Weekend as I write this, and will be past when you read it, so hopefully you had a great three day weekend. Until next week , be blessed and Numbers 6:24-26 be on you.