New Blog and Website

So I haven't posted on this blog because well, I have decided to abandon it and/or trade it in for a new blog and website, which is about 10 times cooler. If you come across this blog I hope that you will visit it. It is www.loganutahmortgages.com

Will the ARM make a comeback?

An ARM ,or adjustable rate mortgage, is a mortgage product with an interest rate that is tied to a certain economic index and that is fixed for a certain period of time (e.g. 1,3,5,7, or 10 years). After the fixed period the interest rate will periodically adjust as the economic index changes. In the mortgage industry, "ARM" has almost become a swear word. We can thank the media for this. So many bad things have been associated with an ARM... foreclosures, pre-payment penalties, rising payments, option-ARMS, negative amoritization, etc. The stigma has gotten so bad that I'm afraid that if I mention an ARM to a client that they are going to sprint out the door and never look back. Yet, with some trepidation, I have to say that there are some circumstances in which an ARM makes sense (gasp!). Check it out...Today a 30 year fixed rate is around 4.875%, but a 7 year ARM is at 4% and a 5 year ARM is at 3.875%! For a first time homebuyer that is certain that they will move after 5 years, why wouldn't they consider saving almost a full point of interest over that time. On a 100,000 loan, it's a savings of almost $5,000. Of course nobody can know for certain how long they will stay in a home but for many people I believe it is worth taking that risk. It's also important to know that it's not certain their interest rate will adjust higher after the fixed term. In today's market, many adjustable rate mortages are adjusting lower because the rates of the economic indexes are so low. I think it's time the ARM makes a comeback. I hope I don't go out of business for saying that.

Tax day!

Being self-employed can be a great thing. I set my own hours, I work for myself, and I have the freedom to run my business how I see fit. It also has its negative side though. Taxes for one are twice as complicated, as if they weren't already confusing. Instead of filing a single annual individual return at H&R Block, I now have a professional accountant who helps me file quaterly and annual taxes for my S Corporation.
Being self-employed can also make obtaining a mortgage very challenging. Many self-employed people that come to me make a lot more money than their tax returns actually reflect. This is because they take advantgage of a lot of write-offs. In the past self employed borrowers could just do a "stated-income" loan where the lender didn't verify income with tax returns. Well, we all know what happened with stated-income loans. With those types of loans being a thing of the past, it may behoove self-employed borrowers who are contemplating a refinance or purchase of a home, to reflect a little bit more income than they use to on those tax returns. Because it doesn't look like "stated-income" is coming back anytime soon.

1,599 grants remaining

Besides the $8,000 dollar tax credit for first time homebuyers, there is now a $6,000 grant for anyone that purchases a new-construction home. The guidelines are pretty much the same as the federal tax credit except the home must be new construction and the buyer does not have to be a first time homebuyer. There is some excellent information about it on the utah housing website.