Posts Tagged tax credit
Here’s an idea to help the economy and homeowners at the same time, especially the underwater ones:
Streamline refinancing of any mortgage loan, regardless of type.
A streamline refinance generally refers to one that does not require credit or property qualifying, so in short, credit scores are not looked at, only payment history on the mortgage being refinanced, and an appraisal is not needed. Streamline refinances usually have to benefit the borrower by either a shorter term or at least a 5% reduction in payment.
Currently, only FHA and VA have streamline programs with FHA’s Streamline refinance and VA’s Interest Rate Reduction Refinance Loan or IRRRL.
But, what if we were to apply the same concept to all types of mortgage loans? Why would a bank balk at reducing a borrower’s payment by a couple hundred a month and thus strengthening their financial position and reducing the chance of default? Okay, well other than the investors who like the returns on that borrower’s higher interest rate. But in the grand scheme of things, isn’t it better to keep the home occupied and money flowing on that loan than to have it go into default and get 60 cents on the dollar in a foreclosure sale two years from now?
An added benefit would also be that freeing-up a couple of hundred dollars a month for a homeowner would give them some extra pocket cash which they may spend on going out to dinner, home improvement, a new TV, new furniture, etc.
In short, they’d spend it, and by spending it there would be an increased demand for products, production, employment, etc.
A good example of this is former President Bush’s tax credit. People got a mid-year refund check and it did create a momentary positive spike in sales and the economy. But unlike the one-time tax credit the benefits to a homeowner of a lower mortgage payment would create an on-going positive affect on the economy.
Just kind of thinking out loud here. Are you listening Washington?
Salt Lake City, UT
Most media outlets are reporting a drop in existing home sales in May due to the expiration of the first time home buyer tax credit. This story says they increased some. I think the truth is somewhere in between, home sales increased in some areas of the U.S. and decreased in others. The next few months will tell the whole story, but one thing is for certain, it’s a buyer’s market and interest rates are low. Really low. If you’re thinking about buying right now is the best time to do it. Home values have to increase and like the old adage: buy low, sell high. Buy now and in seven to ten years you’ll have quite a bit of equity in your home.
RISMEDIA, June 23, 2010—Existing-home sales remained at elevated levels in May on buyer response to the tax credit, characterized by stabilizing home prices and historically low mortgage interest rates, according to the National Association of Realtors. Gains in the West and South were offset by a decline in the Northeast; the Midwest was steady. Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, were at a seasonally adjusted annual rate of 5.66 million units in May, down 2.2% from an upwardly revised surge of 5.79 million units in April. May closings are 19.2% above the 4.75 million-unit level in May 2009; April sales were revised to show an 8.0% monthly gain.
Story continued here: May 2010 Shows a Continued Strong Pace for Existing-Home Sales | RISMedia.
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