Harleysville-Lansdale Real Estate and More

Yesterday, Congress extended the deadline for closings from June 30, 2010 to September 30, 2010 for the Home Buyer Tax Credit.  This is great news for the thousands of pending home sales that did not close in time for the June 30th deadline.  Those buyers will still be able to receive the tax credit (up to $8,000 for first time buyers and $6,500 for existing homeowners who buy a new primary residence) as long as they now settle by September 30th.

There are valid reasons why some pending homes sales were unable to close by June 30th.  Because many of these factors were out the consumer's control, Congress wanted to ensure the credit would still be available and buyers would not abandon the process.

1)  Many buyers chose new construction.  Some builders were swamped with new orders and had difficulty meeting the June 30th deadline.  Factors that affect new construction include the weather, availability of supplies, the permitting and approval process, and the coordination of sub-contractors.

2)  Many buyers of short sales are still awaiting 3rd party approval.  If buyers abandon those sales and the transactions fail to close, the alternative is foreclosure which is far worse for the recovery of the housing market.

3)  Mortgage companies have had an enormous volume of work with the end of June settlements brought on by the tax credit.  Many have been unable to meet those deadlines.  Stricter screening of applicants, higher scrutiny of appraisals, new lending guidelines and new RESPA requirements have all contributed to making the loan process lengthier and more complicated.

This extension only applies to home buyers who went under contract to purchase a home prior to April 30, 2010.  There is no talk of renewing the tax credit for future home buyers.

~Lisa

Contact Scott Loper, Associate Broker, Realtor®, RE/MAX Realty Group at 215-513-1333 for help buying or selling a home in Lansdale, Harleysville, Hatfield, Souderton, Skippack, Collegeville, North Wales and the surrounding areas of Montgomery County Pennsylvania. To Search for Homes For Sale in Montgomery County Click Here.

Tax Credit Extended for Pending Sales to September 30, 2010 Copyright © 2010, The Scott Loper Team, All rights reserved.

This is an ever-relevant question, but a little scarier these days.  Many factors in the current market make this a difficult question, especially for homeowners who are currently at risk for losing their home because they can't afford their current mortgage payments or those that have suffered a loss or reduction of an income stream or those who have an adjustable rate mortgage due to "adjust" in the next few years. 

Mortgage companies have stricter guidelines and even consumers who are current on their payments could have difficulty refinancing their mortgage.

With interest rates still near all time lows, it begs the question for many homeowners whether or not they should refinance their mortgage.  The "right" answer depends on many factors.  And there are now two questions you must ask yourself:

• SHOULD I refinance?
• CAN I refinance?

SHOULD I refinance?  First and foremost, you need to determine if it even makes economic sense to refinance.  One of the most important pieces to this puzzle is the "break even analysis".  For this simple calculation, you'll need to know:

1. The costs to refinance
2. The projected savings of refinancing

The costs of the refinance are any upfront fees that you will have to pay and typically include fees for mortgage application/processing, title search/insurance, and recording fees.  To calculate the refinancing savings, subtract your projected new monthly payment from your current payment. 

Divide the costs by the projected monthly savings to determine the break even period (this is the minimum number of months that you will need to hold your new mortgage in order to recoup the refinancing costs).  The lower the break even period, the more sense it makes to refinance your mortgage. 

If you plan to hold the new mortgage for the foreseeable future, a break even period of 5 years or even more may still make the refinance worthwhile.  If you plan to only be in your home for the next 3 years, however, a 5 year break even period no longer looks attractive.

CAN I refinance?  But now the scary part, CAN you refinance even if you want to?  Important questions to consider: 

• Will you qualify for the new mortgage?  Has your income changed?  Is it documented? 
• How is your credit?  Is your current credit score high enough to qualify for the lowest interest rate?
• What is your house currently worth?  Do you have enough equity in the current market to avoid PMI?
• Are there any foreclosures or short sales in your neighborhood that could further hurt the appraisal of your home?
• Will you need to bring cash to settlement if you refinance?
• Does your current mortgage have a pre-payment penalty or a looming balloon payment? 
• What type of mortgage (fixed or adjustable rate) do you currently have and what type are you able to refinance into? 
• Do you need to get some equity out of your home?  Will the mortgage company allow a cash-out refinance?
• How many years are left to pay on your current mortgage?
• Are there any factors that would cause you to move in the foreseeable future?
• Will you be able to afford the new mortgage if any income streams change?

Refinancing can save you thousands of dollars.  But without a careful analysis, you could actually lose money or worsen your current situation.  In some cases, current economic factors may force you to stay with your current mortgage even if you could benefit from a refinance.

Talk to a real estate agent or a mortgage broker if you are considering a move or a refinance.  They can help guide you on what makes the most sense for your situation.

~Lisa

Contact Scott Loper, Associate Broker, Realtor®, RE/MAX Realty Group at 215-513-1333 for help buying or selling a home in Lansdale, Harleysville, Hatfield, Souderton, Skippack, Collegeville, North Wales and the surrounding areas of Montgomery County Pennsylvania. To Search for Homes For Sale in Montgomery County Click Here.

Is It Time To Refinance Your Mortgage? A Scary Question These Days Copyright © 2010, The Scott Loper Team, All rights reserved.