Your credit score is the single most important factor with lenders in determining if a homeowner will pay their mortgage. For this reason the biggest lenders in the mortgage industry, Fannie Mae and Freddie Mac, have decided to add credit score based fees to their loans. This is in addition to the ¼% delivery fee on all loans effective March 2008. The home owners credit score will determine how much this fee will be.

The following is a breakdown of the percentage in fees, a homeowner may incur based on their credit score.

• Credit scores between 660-679: 0.750% of loan
  
• Credit scores between 640-659: 1.250% of loan
  
• Credit scores between 620-639: 1.750% of loan
  
• Credit scores below 620: 2.000% of loan

For example, a person looking to purchase or refinance with a $250,000 loan amount and a 675 credit score could be subject to a credit based fee of $1,875. As you can see from the breakdown the fee can dramatically increase as a homeowner’s credit score lowers.

There will be three different options a borrower can choose to pay this fee:

• Cover the fee with cash at the closing
  
• Add the fee to the loan amount (this may also effect the loan-to-value of the loan)
  
• Accept a higher interest rate that will cover “far and above” the cost of the fee over the life of the loan but, no initial out of pocket money from the borrower.

These adjustments do not take effect until March 1, 2008. That means if you are planning to purchase or refinance a home mortgage after that time, please take the time to get your credit in order now. Contacting a mortgage planner at Cascade Financial is a good start to knowing your credit standing. Then, if you find that your scores are below 680 or very close to the next tier, take a proactive stance and work to improve your score.

FLORIDA PROPERTY TAX REFORM:How Does It Affect You

On October 30, 2007 the Florida Legislature meeting in special session, approved a package of property tax reform proposals meant to provide relief to homestead-exempted homeowners, owners of second-homes, rental property owners and businesses.
Four major reforms are proposed:
1. EXPANDED HOMESTEAD EXEMPTION: Increase the cur-rent $25,000 Homestead Exemption by an additional$25,000 except on school board taxes.
2. PORTABILITY: Allow homeowners to transfer up to$500,000 of their Save Our Homes Assessment Limitation benefit to the new homestead.
3. CAP ON NON-HOMESTEAD PROPERTY: The assessed value for all other properties without a homestead exemption will be limited to a maximum 10% increase in a year.
4. TANGIBLE PERSONAL PROPERTY EXEMPTION: Businesses will be eligible for a $25,000 exemption on equipment such as computers, office furniture and fixtures. On January 29, 2008, Florida voters will have the opportunity to approve or reject this property tax reform package. The measure will pass if at least 60% of voters approve it.

Will voters have the ability to approve some provisions and reject others? No. Voters will have to decide if they want to pass the entire bill or not.
Will I have to apply for the increased homestead exemption? No. If voters approve the amendment and you already have a homestead exemption, you will not need to file a new application. The Property Appraisal Department will automatically increase your 2008 homestead exemption to $50,000. New homeowners must file a first time Homestead Exemption application in order to receive the $50,000 homestead exemption.
Will the qualifications for homestead exemption change under this bill? No. Minimum qualifications include ownership of the home and residence there as of January 1. You must file an application by March 1. For information on qualifications and how to apply for the Homestead Exemption, as well as for other property tax exemptions, please contact your local county property tax appraiser.
What is “portability”? Currently, property owners with a homestead exemption receive a benefit known as Amendment 10 or Save Our Homes cap. This Save Our Homes benefit works by limiting the increase of the assessed value of a home to a maximum of 3%regardless of any increase in market value. However, undercurrent law, if the homeowner moves or sells the property, this limitation is removed. If the proposed reform package is passed by voters, home owners will be allowed to transfer this benefit to the next homestead property. This is called portability or a portable cap.
If the proposal passes, when is the first year that I can transfer my Save Our Homes benefit? Qualified applicants will be able to transfer (or port) the Save Our Homes benefit beginning in 2008.
I plan to sell my existing home and buy a new one. How can I calculate the Save Our Homes benefit that I'll be able to transfer? There are two ways to calculate the amount of Save Our Homes benefit, depending on whether you buy a home that is less expensive or more expensive than your current homestead exempted property.
IF YOU'RE BUYING A MORE EXPENSIVE HOME: Calculate the difference between the market and assessed values of your existing home. You'll be able to port (or transfer) that amount, up to $500,000, to the next property.
IF YOU'RE BUYING A LESS EXPENSIVE HOME: In this situation you'll be able to transfer only a portion of this benefit. How much you can transfer will be proportional to the extent to which you're buying down.
My brother and I own an equal share in a home we bought a few years ago and we both have the homestead exemption. If he moves and purchases another home, does that affect my Save Our Homes limitation benefit? No. The Save Our Homes benefit remains with the original property. In order to transfer this benefit, the original Homestead Exemption would have to be abandoned by all parties.
Can I take my Save Our Homes benefit outside of the county I currently live in? Yes. The reforms have been packaged as an amendment to the Florida constitution and will therefore be applicable any where within the state.
What benefits are there for first time homebuyers? The reform package contains no specific proposals to benefit first time home buyers. However, first time home buyers who qualify will benefit from the increased $50,000 Homestead Exemption.

Paying “Points” is not always a Bad Thing

If the money is available, paying points is a great investment if you plan to own your home for 3-4 years or longer. Points are fees the borrower pays the lender at the time the loan is closed, expressed as a percent of the loan. (On a $100,000 loan, 1 point means a cash payment of $1,000). The more points you pay, the lower the interest rate. Paying points can be viewed as an investment that yields a return that rises the longer you stay in your house. The return consists of the savings in monthly payment from the lower interest rate, plus the ability to lower the loan balance monthly because of the amortization schedule benefit. For example given a generic scenario, a borrower could buy down the rate from 6.25% to 5.5% by paying 2 points. On a $100,000 loan. The investment in points is $2,000, monthly payment would drop by $47.93. The reduction in the payment plus the faster reduction in the loan balance, yield a return on investment of 6.4% over 3 years, 17.4%, over 4 years, and 28-29% over 8 years or longer. Now this example is true regardless of your original loan amount. So does paying 2% at the beginning look like a good investment if your plan is to live in the property for a significant amount of time? Make sure to weigh all your options when looking for a mortgage and don’t treat points like a bad thing. Paying no points may be even worse. Sometimes you do get what you pay for.

How are mortgage rates determined?

Mortgage rates follow the bond market. The interest rate on a 30-year fixed-rate mortgage tracks the yield on the 10-year Treasury note (Monday 4.15% as of this post.). Lenders typically set their base mortgage rate around two percentage points higher than the 10-year bond yield. Rates on adjustable-rate mortgages are tied to yields on two-, three- and five-year Treasurys. These short-term loans are more sensitive to Fed rate movements, and those with the shortest maturities see the greatest impact when short-term rates rise and fall. So if you want to know the direction of mortgage rates, you need to get a sense of where bond yields are heading. Investors tend to flock to the safety of U.S. Treasurys when they’re worried about the state of the economy. That "flight to quality" drives bond prices higher and their yields lower. Keep this in mind if you want a quick reference for where rates are without having to call your broker to ask " What are your rates?" Now there are a lot of variables to consider, Loan-to-Value, type of property, when determining your actual rate but this is a good starting point if you know your income and credit are well qualified.

No Better Time Than Now

For a first time home buyer in Florida I beleive the market could not be better. First there is plenty of inventory for a buyer to choose from in any area they are interested. This means they will not be rushed into buying a home that does not meet their needs only because a realtor is pushing them saying "if you don't put in an offer the house may be taken off the market." Secondly, the value of homes have dropped in some areas by as much as 10% or more making real estate more affordable. Now we all can agree that this will not continue given real estate has been the most proven consistent investment througout time. (Although wouldn't we all want a couple shares of Berkshire Hathaway when it first came out). Thirdly with stable income and reasonable credit mortgage rates are still considered to be very low. Right now it is the norm to be in the low to mid 6's for a 30yr fixed mortgage. Compare this to the late seventies and into the eighties when rates reached into the teens. The market is only bad for those investors that bought everything in site, or for a seller needing to sell quickly. So for you first time home buyers, get patnered up with a Cascade Financial mortgage planner to go through your options and take advantage of the professionals they have in place to help you such as realtors,CPAs, and financial advisors.

You get what you pay for

The question that I begin all of my meetings with is, "Which is more important, low interest rate or lowest cost over time?" If you don't have a solid answer to this, it may be an indicator that you need to spend some quality time with someone who understands finance and can take a look at your overall financial health.

Many times people will make a decision solely based on interest rate. Why? Because someone that they trust said that rate is the only indicator you need to be weary of in mortgage shopping. Several times in my career I have seen people who made decisions based on someone elses criteria. You need to evaluate what is best for you and your future. Everyone is different. Frequently, people desire the best rate on the wrong scenario, which can be very costly in the long run. This may lead to an unnesscessary refinance, late payments, loss of equity, prepayment penalties, and possibly a forecloseure.

Do yourself a favor. Never make a decision solely based on rate or lowest cost. Do some research. Ask a lot of questions. Wait for the answers that you are comfortable with. Ask for references. Quicker isn't always better. Do business with someone you trust. If it sounds to good to be true, it probably isn't.

Good loan officers will uncover all the concerns of the loan and have solid answers to your questions. They should be able to identify your needs and provide sound financial solutions.

If you do go with the lowest cost, you will likely have to absord several unexpected costs. Costs like; expired rate, changed in loan terms, extension fees, change is product, faulty approval, increased rate to close, loss of earnest money, etc. Think about what you paid for your vehicle. If someone was trying to sell you your same vehicle for a third of the price, what would be your response? That is right, What is wrong with it? It is the same with mortgages, if the costs and rate seems low, you might want to ask a few more questions. There is a cost of doing business, you just need to be able to justify what is worth paying for. The right loan at the right cost over time.