Rates for $417,000+ Homes Can Be Costly

An article written by NYTimes.com on August 12th tells us of how the subprime market is affecting higher priced homes.

When an investment banker set out to buy a $1.5 million home on Long Island last month, his mortgage broker quoted an interest rate of 8 percent. Three days later, when the buyer said he would take the loan, the mortgage banker had bad news: the new rate was 13 percent.

“I have been in the business 20 years and I have never seen” such a big swing in interest rates, said the broker, Bob Moulton, president of the Americana Mortgage Group in Manhasset, N.Y.

“There is a lot of fear in the markets,” he added. “When there is fear, people have a tendency to overreact.”

It seems that the market for jumbo mortgages has dried up.

Jumbo mortgages are most important in areas with high home prices, most notably on the East and West coasts. “In California, it has shut down the purchase market,” said Jeff Jaye, a mortgage broker in the Bay area. “It has shut down the refi market.”

To read the rest of this post click here.

New FICO Scoring System Changes

FICO, Fair Isaac Corp, will be changing the credit scoring system. You may be asking why am I posting this on a real estate blog? Well, this affects the mortgage rates and monthly payments for people who have not closed on their home by September. Fair Isaac Corp is saying that this change will not have much affect. I will have to agree with the article from NewsObserver.com.

“Because businesses interpret scores differently, a slight change could be the deciding factor in whether a landlord decides to rent to you or whether your bank decides to increase the interest rate on your mortgage or home-equity loan.

For example, according to Fair Isaac’s Web site (www.myfico.com), the difference between a score of 620 to 659 and one in the range of 660 to 699 can result in a $163 difference in the monthly payment on a 30-year mortgage.”

This change will also affect others because of a “Piggybacking.” Piggybacking is a term used when someone with little or not credit is added as an authorized user of a credit card from someone with good credit to help build up their credit score, ex. a child as an authorized user on a parents credit card. There are other scenarios like this and the change will hurt the good credit scoring individual.

So what can you do about this?

Remove the authorized user from your account or switch to a joint account. Their are drawbacks to the latter so I suggest you head on over to MyFico.com to download tips on how to improve and maintain your credit score.

Another good article about this is located at STLtoday.com

Tax Deduction for Mortgage Insurance

A new tax deduction allows qualified families to write-off premiums for private and government mortgage insurance on loans that close in 2007.

According to privatemi.com, “Families with a household income of $100,000 or less will be able to deduct the full premium cost of PrivateMI in 2007, while families earning up to $109,000 can qualify for a reduced deduction.”

For answers to the most frequent questions regarding the deduction click here.

You should also consult with your tax advisor to determine your eligibility for this deduction.

Home Components Life Expectancy

According to the National Association of Home Builders, here are the life expectancy of various home components:

Component / Life Expectancy (in years)

Flooring

Laminate / 15-20

Wood / Lifetime

Sinks

Enamel steel / 5-10

Modified acrylic / 50

Countertops

Cultured marble / 20

Natural Stone / Lifetime

Whirlpool Tub / 20-50

Built-in Audio / 20

Source: "Study of Life Expectancy of Home Components," February 2007.

National Association of Home Builders and Bank of America Home Equity