FHA MIP Release option “disappearing”

Recently, I posted an article illustrating how releasing the mortgage insurance premium (MIP) on an existing FHA loan — after at least 60 monthly payments, and reaching a loan-to-value (LTV) ratio of 78% or lower — could substantially lower the borrower’s monthly payment, making more cash available for principle reduction. In sweeping reforms designed to shore up the financially ailing Federal Housing Administration, on loans originated after April 1, 2013, this option will not be available — meaning that, regardless of the equity the borrower has in the property, he will pay a monthly mortgage insurance premium for the life of the loan. In the future, the only way to eliminate the MIP will be to refinance the loan using a conventional lender. Of course, if interest rates rise as we all expect they will over the next few years, refinancing will not be a cost-saving option.

To add “insult to injury,” on loans originated after April 1 this year, the rate charged for MIP will increase substantially. On a $400,000 loan with certain LTV ratios would pay an additional $33.00 per month in MIP premium.

What should you do?

If you planned to make a purchase this year using an FHA loan (as the majority of today’s homebuyers do), consider escalating your time-line. You will need to have an accepted offer to purchase (i.e., your new home under contract), and make application with your lender before April 1, 2013. Because these changes are significant, I look for there to be a “rush” on lenders near the end of March, overwhelming them with the number of applications — so for best service, don’t want until the last minute!

Call me with any questions! I have a list of recommended lenders who can handle almost any situation, and although our available inventory is shrinking, we still have a number of great homes available at fantastic prices.

Resolutions

After spending the holidays with family and friends, this is a natural time of the year to start thinking about changes to make in our lives, both personal and in business.  I wanted to share one of mine with you.

My goal is to become your REALTOR® for life.  I want you to think of me first when you need to buy or sell AND that you’ll recommend me to your friends too!  That kind of trust has to be earned and I promise you that I will never pressure your friend or family member to make a decision that is uncomfortable to them.  I will treat them like family, and I will keep you informed in the process.

I’m also committed to helping you be a better homeowner even when you’re not buying or selling.  The strategy is simple.  A well-informed homeowner will make better decisions.  I’ll periodically offer information through articles and social media on a wide variety of home-related topics like maintenance tips, tax law changes, financing suggestions, insurance, equity building strategies, and rental property investments.

Please contact me if you need a recommendation on a service provider.  My experience has built a list of reputable and reasonable contractors that you can rely upon.  When you have any kind of home-related questions, I hope you’ll have the confidence to call me.

Happy New Year!   I sincerely look forward to helping you and your friends!

Protect Yourself

Home is a place you should feel safe and secure. Sometimes, we take it for granted and unfortunately, we do need to remain vigilant about things we do that could compromise our well-being. Here are a few tips you might want to consider.

Everyone loves an inviting home including burglars. Make sure it looks occupied and is difficult to break in.

• Always lock outside doors and windows even if you’re gone only a short time.
• Leave lights on when you leave. Consider timers to automatically control the lights.
• Keep your garage door closed even when you’re home; don’t tempt thieves with what you have in your garage.
• Suspend your mail and newspaper delivery when you’re out of town or get a neighbor to pick it up for you.
• Posting that you’re out of town or away from home on social networks is like advertising your home is unprotected. Equally dangerous could be allowing certain social network sites to track your location.
• Don’t leave keys under doormats, in flowerpots or the plastic rocks; thieves know about those hiding places and even more than you can think.
• Trim the shrubs from around your home; don’t give criminals a place to hide.

Gift or Inherit

Transferring the title of a home from one person to another may seem simple but it could have a significant tax implication.

When a person inherits property, the basis is “stepped-up” to fair market value at the time of the decedent’s death. On the other hand, a gift has a carry-over basis which means that the recipient receives the unrealized gain also.

As an example, let’s say an elderly parent, in an attempt to get their affairs in order, gives their home to their adult child. The rationale might be that they are the sole beneficiary and will get the property eventually. In an effort to settle things early, unnecessary income tax may be incurred.

If the home was purchased for $20,000 and worth $100,000 at the time of transfer, there is a possible gain of $80,000. However, if the adult child inherited the property at the time of the parent’s death, their new basis would be $100,000 or the fair market value at the time of death and the possible gain would be zero.

This is meant to be an example and many other variables could be involved. There are multiple other ways to wisely accomplish your estate goals.  If you’re concerned about a situation, you should seek specific advice from a tax professional. As always, I’m here to help you I can as your real estate professional, and can also refer you to excellent estate planners and tax professionals in our community!