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What are Americans Saying about Scrapping the Mortgage Deduction?

The mortgage tax deduction has been around for decades. But will it be around much longer?

One of the main advantages cited by Americans when discussing the benefits of owning a home in the US is the tax break that they receive for the interest on their mortgage. In fact, many American homeowners think that the mortgage deduction is such an advantage that they will often choose to pay on their mortgage for several years even if they can pay it off sooner so they can keep receiving that tax deduction. But there have been rumors in Congress and around the country that the mortgage deduction may be disappearing in the near future and this has many people upset.

Currently, homeowners in the United States can deduct the interest on their mortgage up to a mortgage value of $1.1 million. Economists, however, have criticized this deduction for several years saying that it is unfair to non-homeowners. But since it is such a huge part of the tax code and it would be unpopular for a legislator to try to change it, the mortgage deduction is still around. That could change, however, in the near future as the national deficit is at a record high and the housing bubble has changed the way Americans look at the mortgage industry.

Reuters recently conducted a survey to find out what the average American thought about doing away with the mortgage deduction or even just changing it. About half of those surveyed were in favor of keeping the mortgage deduction the way it is. The other half said that there needed to be some changes made to the guidelines, such as putting a lower cap on the maximum amount that can be deducted, making a few changes to the regulations or simply eliminating the mortgage deduction all together.

Monica Luck, a 46 year old homeowner in the Atlanta suburb of Chamblee, says that taking away the mortgage deduction would be “unfair” to the homeowners who have put money into their homes and fixed them up. In her view, it would be a “big, fat tax increase” and she would be “furious” if the mortgage deduction was ended. Randall Ringer, the co-founder of Verse Group in New York, feels the same way. He remembers when student loans were tax deductible so he used them to pay for his education. After graduation, though, the tax deduction was eliminated and it “felt like a bait-and-switch scheme” he said. He went on to say that this situation sounds like the same kind of thing.

On the other side of the spectrum, Scott Peterson, a 56 year old homeowner in Virginia, said he would support changing the mortgage deduction for the greater good. If it would benefit the nation and help it with its financial mess, he would like to see the changes made. He says that “we all have to chip in” to help the country get back on financial track and this would just be one step to help make that happen.

What do you think about ending or even just changing the mortgage tax deduction? Is it something that could benefit the nation financially? Or do you think it would be more of a hit to the economy?

Time to Refinance Your Mortgage? Conforming Loan Limits Are Likely to Revert to $625,500 Nationwide

The maximum amount for a conventional loan mortgage not to be considered a jumbo loan mortgage is set to change on October 1, 2011. What does this mean for you?

If you have been keeping up with the real estate news, you may know that the conventional mortgage loan limits set by Congress in 2008 are about to expire.

A conventional conforming mortgage is one that is eligible to be sold to Fannie Mae or Freddie Mac. One of the requirements for a mortgage loan to be a conventional conforming loan is that the home is valued beneath a limit currently is between $417,000 and $729,750. Homes valued over the limits are jumbo loans which involve tighter credit restrictions, higher equity down payments and possibly higher mortgage rates. Beginning October 1, 2011 the convenional mortgage loan limits for homes across the entire country may revert to $625,500.

Currently, the maximum amount for conventional mortgage loans is between $417,000 and $729,750, depending of several factors, including the region of the country in which you live. Major metropolitan areas, where home prices are higher, today have limits closer to $729,750.

According to Mathew Carson of First Capital Group Inc., there are many people who will be affected by the new limits. Any homeowner who owns a home valued between $625,500 and $729,750 and wants to refinance, as their loans will likely fall into the jumbo category. Carson said that his company is reaching out to its clients who will be affected to alert them of the new guidelines.

Most affected will be homeowners in cities like New York City, San Francisco, Miami and Los Angeles where homes are typically priced above the conforming mortgage loan limit range. The lower limit in these areas will cause more home mortgages to be treated as jumbo mortgages going forward. According to the National Association of Home Builders, nearly 1.4 million owner-occupied homes in more than 200 counties across the county will be valued above the $625,500 conforming loan limit. Conversely, many in rural areas who had been subject to lower conventional loan limits close to $417,000 will now be able to obtain conventional loans more easily on home priced up to $625,500.

The Federal Housing Administration, or FHA, changed the limits for a conventional loan in 2008. While the change was intended to be temporary, Congress has voted in each year to renew the current limits. It seems quite possible that Congress will not take action to renew the higher limits before September 30, 2011, causing the current limits to expire and the pre-2008 $625,500 conforming loan limit to return nationwide.

So what does this mean for you? If you are thinking of refinancing your mortgage loan or taking out a conventional mortgage loan to purchase a home valued between $625,500 and $729,750, now may be the best time to initiate the process. The opportunity may be quite different after October 1.

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New JD Power Study Shows Mortgage-Holder Frustration

A new study shows that many homeowners are not satisfied with their mortgage servicer. Would you be included on this list?

A recent study conducted by JDPower and Associates shows that many homeowners are frustrated with their mortgage situation and the inability to refinance their mortgages during these times when mortgage rates are at historic lows.

The survey asked more than 4,500 homeowners about various things like their opinion of the billing and payment process for their mortgages, their mortgage lender’s website and contact information and the handling of their escrow account. JDPower conducted the same survey last year and with this year’s answers, found that homeowner satisfaction had dropped.

According to the survey, many respondents were unsatisfied with the way their mortgage lenders handled their loan. Respondents reported that during the application process lenders asked for their information several times and they didn’t explain the details of the process very clearly. During the origination process, about 28 percent of those surveyed said they had to provide their information more than one time. The companies that service these mortgages, however, didn’t measure up nearly as well with 80 percent of those surveyed reporting that they had to provide their information “multiple” times when dealing with the mortgage servicer.

In addition, the survey also found that many mortgage servicers did well in the areas of improving customer service and decreasing the number of phone calls that they receive. However, mortgage borrowers who are not satisfied with the information they get from their loan servicer are 3.5 times more likely to continue calling until they get the information they need. Similarly, the study showed that call volumes decrease as customer satisfaction increases. And the fewer phone calls a mortgage servicer gets, the lower their operating expenses are.

David Lo, the director of financial services at JDPower and Associates, said that many of today’s homeowners who bought their homes between 2006 and 2008 are frustrated because the housing prices were at a peak and the credit standards were extremely flexible. Many of these homeowners want to refinance their homes at a lower mortgage rate. But due to the falling home values, most of those buyers do not have enough equity built up in their home in order to qualify for a refinance. And even if they could, the credit standards are so strict these days that they wouldn’t qualify for a refinance anyways because their credit is banged up.

Are you unsatisfied with the way your mortgage is handled through your mortgage servicer? Or have you had a good experience since buying your house?

Is Now the Best Time To Buy A New Home?

Mortgage rates are low. Home prices are falling. Should you buy a house right now?

If you are thinking about buying a house right now, there are two things working in your favor: the low mortgage rates and the falling prices of homes. These two things combined together make homes very affordable these days. But does that mean you should jump into the mortgage market right now? Or would you be doing yourself a favor by waiting? There is no easy answer to that question because there are several things you have to consider.

According to Jed Smith, a managing director with the National Association of Realtors, it is very affordable to get into the home buying market right now. In fact, the median home prices throughout the country fell nearly 5 percent during the first three months of 2011.

When talking about the median home price, though, we have to remember that the median is an average. This means that there is a high and a low figure that is used to calculate the median. In Miami-Fort Lauderdale, Florida, home values dropped by about 20 percent during the first three months of 2011 when compared to last year. That’s a huge depreciation compared to many of the other local markets in the country. But in the Buffalo-Niagara Falls area in New York, median home values jumped by nearly 11 percent.

Analysts with Fannie Mae predict that housing prices in most of the country will continue to fall for at least the next three months, but may stabilize at the end of the year. Many economists are more pessimistic about the situation and they say the housing market won’t recover until at least 2014.

Waiting until 2014 before jumping into the home buying market could be a mistake if you are ready to buy a home right now. Home prices may stay low for a little while but mortgage rates aren’t expected to stay low for much longer. By the end of next year, many mortgage analysts predict that the mortgage rates will be up as high as 6 percent. If this happens, you could end up paying more over the term of your mortgage loan even if you bought a home that had dropped in value.

Here’s an example: If you buy a home today that costs $150,000 and you get a mortgage rate of 4.75 percent, you will have a house payment of about $780 if you get a 30-year fixed rate loan. But if you wait until the mortgage rates jump up to 6 percent, the home price may drop to $135,000 but your payments are going to go up to about $810 per month for the term of your loan.

Of course, the timing for buying a home always depends on your financial situation. If you don’t feel you are ready to buy right now, there is nothing wrong with putting it off until you are in a better financial situation. But consider the emotional benefits of owning your own home now. You can make changes to it without consulting a landlord and you have much more freedom. Besides that, you are making an investment in your future buy purchasing a home right now. If you are financially ready, now may be the best time to purchase your first home!

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Three Common Myths about Refinancing Your Mortgage

For millions of homeowners, refinancing has helped them save thousands of dollars and pay off their home sooner. But is it the best option for your situation?

If you have been considering refinancing your mortgage, there are many advantages to doing so. Perhaps you are in a better financial position now than you were when you bought your home. You can pay down some of your mortgage and refinance the new balance. Or maybe your credit score is better now than it was a few years ago. You may qualify for a lower rate which could reduce the amount you pay in the long run on your mortgage. There are many good reasons to refinance your home, but there are also some misconceptions that people have about refinancing. Here are three of those myths and the truth to go along with it.

Myth #1: You should always switch your adjustable rate mortgage to a fixed rate when you refinance.
Many home owners buy into this myth because they simply do not understand the ins and outs of an adjustable rate mortgage. If you have an ARM, it doesn’t always benefit you to switch over to a fixed rate when you decide to refinance your home.

Everybody knows the trouble that occurred in recent years with ARMs, but those troubles happened because those mortgage reset to higher rates. With the historically low rates that we have today, the mortgage rates are resetting to lower rates which means savings for thousands of homeowners who have adjustable rate mortgages. You should never make the decision to switch to a fixed rate because of an impulse. Always check with a trusted financial advisor before making this type of decision.

Myth #2: Refinancing a mortgage means lower costs and monthly payments.
In general, refinancing your mortgage will give you a better bargain on the remaining portion of your mortgage, especially when rates are at a historic low point. However, this isn’t always the case. You have to consider closing costs when you refinance which could nullify any savings you will experience with a refinance.

You may also choose a shorter term when you refinance. If you currently have a 30 year mortgage, you might decide to switch to a 15 year which would essentially mean higher payments each month. But, of course, this means paying less in interest by the time you have your mortgage loan paid off.

Myth #3: A refinance helps you get out of your first mortgage easily.
In many cases, it may be more difficult to qualify for a refinance than it is for a regular mortgage loan. Since the housing crisis, underwriting guidelines have stiffened and banks are trying to weed out borrowers who are not fully qualified more aggressively than ever before. For home owners who are in a worse financial situation than they were when they first bought their home, it will be more difficult to get a mortgage as well.

But one of the most important factors that could keep you from qualifying for a refinance is that your home’s value probably dropped since the time when you bought it. If you currently owe more on your home than what it is worth, you’re going to have a difficult time refinancing it these days.

Of course, you should always check with a trusted advisor before making your decision to refinance or to not refinance. Every situation is different so you may not even need to worry about these myths. A few minutes of research and asking questions could bring you a much better deal for refinancing your home than you have ever considered.

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Tips for Avoiding Predatory Mortgage Lenders

Have you ever been targeted by a predatory lender? If you are in a precarious financial situation, you may be on their target list. Use the following tips to recognize predatory lenders so you can avoid them.

Many desperate home buyers use the services of a predatory lender to help them own a home. Of course, you won’t see a sign that says “Predatory Lender” on a mortgage lender’s marquee. That is why it is so important to know the signs of a predatory lender so you do not get taken in by one. Here are some tips to help you avoid these types of lenders so your home buying experience isn’t a horrible one.

Their Target
Predatory lenders aren’t going to reach out to people who have good credit and several options when buying a home. Their targets are typically home buyers who have bad credit or buyers who are higher risks due to their credit history. These lenders also reach out to older home buyers, buyers with low income, women, minorities and people who are no informed about mortgages. If you fall into any of these groups, be extra careful about the lender that you choose when you start looking for a mortgage.

Too-Good-to-Be-True Terms
One way to be sure that you are dealing with a predatory lender is that they are offering you terms that really seem too good to be true. Are they offering extremely low payments that do not seem to calculate correctly? Is the lender trying to encourage you to take out a second mortgage to pay off other debts like medical bills or credit card bills? If so, there is a good chance you are dealing with a predatory lender.

Unnecessary Fees
One telltale sign of a predatory lender is that they offer very high interest rates or they will charge your unnecessary fees, such as broker fees, prepaid life insurance or repayment terms that you simply cannot afford.

Listen to Their Phrases
If you see a lender advertise on TV or in a print publication and they use phrases like “bargain mortgages,” “deal is good for only a short time,” or some other phrase that sounds shady, stay away from them. Most reputable lenders do not use clichéd phrases or offer deals for a “short time.”

When shopping for a mortgage lender, you do not always want to go with the least expensive company or with the one company that will offer you a mortgage when dozens of others will not. The best thing to do is to take a few months to improve your credit score and save up a down payment so you won’t be targeted by predatory lenders. And if you have your doubts about a particular lender, you can always find another one that you are comfortable with.

Five Ways to Recognize a Loan Modification Scam

Loan modifications are becoming more and more common these days as people fall deeper into mortgage trouble. Is there a possibility that you may need a loan modification soon? Use the following information to keep yourself from becoming a victim of a loan modification scam.

Loan modification scams are prevalent these days with so many people desperate to find financial help to pay their mortgage. Within the next year, about 8 million people are going to face foreclosure which means that loan modification scams will likely increase. If you are in financial trouble and you are not sure how you are going to pay your mortgage from month to month, here are some ways to protect yourself from one of these scams.

1. Do they want to collect fees upfront? It is actually illegal for a foreclosure consultant to collect any fees before they provide any services for you. If the company you are considering hiring to handle your mortgage loan modification asks for payment before they even do anything for you, move along to another company that is more reputable.

2. Are they asking you to pay them instead of your lender? A sure sign that a company is a scamming company is that they ask you to pay your mortgage payments to them instead of to your lender. In most cases, these companies are going to keep your mortgage payments rather than sending it to your lender. Even worse, you may not even know about it until you get a foreclosure notice in your mailbox due to lack of payments. Also, if they ask you to ignore letters and phone calls from your lender, that’s a bad sign as well.

3. Are they asking you to transfer the title to your house to them? Many loan modification scams require you to sign the title of your home over to their company. They promise you that they will let you buy it back in the near future or they will lease it to you. Unfortunately, this almost never happens and the homeowner eventually gets evicted as a result.

4. Are they trying to discourage you from consulting with an attorney? Any company that asks you to not consult with an attorney regarding their services is probably not legitimate. And with a mortgage loan modification, this is one of the signs that they are trying to scam you. Why don’t they want you to consult with an attorney? It’s because they have something to hide.

5. Are they guaranteeing you a loan modification before hearing about your situation? It’s impossible to guarantee someone that they can modify your loan without knowing your financial or mortgage situation first. If a company is doing this, stay away from them…far away from them.

These are just a few of the ways you can spot a loan modification scam so you don’t become a victim like thousands of other people. As a good rule of thumb, if it sounds too good to be true, it probably is. Do your research before choosing a loan modification company to find a reputable one that can help you.