Karl's Mortgage and Related Info Site

How Purchase Loans Are Made
A Step-By-Step Walkthrough

If you'd like to learn more, please give me a call. I'd be happy to speak with you!

Karl Peidl
Pleasant Valley Home Mortgage Corp.
305 Harper Drive, Suite 3
Moorestown, NJ 08057

856-252-1224

kpeidl@pvhmconline.net

www.karlpeidl.com

www.pleasantvalleyhomemortgage.com

How Much Money Should You Borrow?

While it might be tempting to borrow whatever amount of money your lender is willing to give you, it's important to think carefully about how much you'll actually need to borrow in order to purchase a new home. From the down payment to taxes to insurance and interest rates, there are many factors to consider when making this important, life-changing decision.

Contrary to popular sentiment, there is no standard formula for accurately calculating the specific dollar amount you should borrow when purchasing a new home. Many websites do offer special borrower calculators that claim to factor in important variables, and yet final results vary vastly from one site to the next. Other websites offer general rules of thumb, suggesting that you should never borrow more than 2 1/2 to 3 times your gross annual income, or that 28%, 32%, or even 40% is the maximum amount of debt you should ever take on.

And, while these insights may be helpful as you begin thinking about the overall borrowing process, meeting with a reputable loan professional and getting yourself pre-approved (not pre-qualified) is really the only way to know the exact amount of money you can and should borrow. By getting pre-approved, you not only increase the chance of finding the perfect house for your needs, you also become a "cash buyer", instantly increasing your bargaining power.

As a mortgage professional, I see my role differently than a traditional loan officer. While my job is to match you with the best mortgage available for your specific needs, I feel that it's also my duty to make sure it's the most responsible product as well. After all, what if something unforeseen or unexpected were to occur? What if you have an accident or you lose your job?

Whether you choose to work with me or not, be aware. A lender will often offer you the maximum amount of money that you qualify for, whether you actually need the full amount or not. Because of this, it's vital to sit down with a professional you can trust to figure out your complete financial picture.

If you or someone you know could benefit from this type of free consultation, give me a call. I would be happy to assist you!

Karl Peidl
Pleasant Valley Home Mortgage Corp.
305 Harper Drive, Suite 3
Moorestown, NJ 08057

856-252-1224

kpeidl@pvhmconline.com

www.karlpeidl.com

www.pleasantvalleyhomemortgage.com

First Time Homebuyer Tax Credit Extended Into 2010!
Plus...A New Tax Credit for Certain Existing Home Owners!

It's official. President Obama has signed a bill that extends the tax credit for first-time homebuyers (FTHBs) into the first half of 2010. This program had been scheduled to expire on November 30, 2009.

In addition to extending the tax credit of up to $8,000 through June 30, 2010, the extension measure also opens up opportunities for others who are not buying a home for the first time.

So Who Gets What?
The program that has existed for FTHBs remains intact with the one exception that more people are now eligible based on an increase in the amount of income someone may now earn.

Additionally, the program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Deadlines
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

Higher Income Caps in Effect
The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible.

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

Maximum Purchase Price
Qualifying buyers may purchase a property with a maximum sales price of $800,000.

First-Time Homebuyer Tax Credit - Frequently Asked Questions
Here are answers to some commonly asked questions about the tax credit.

What is a tax credit?
A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual's primary residence.

What is the tax credit for first-time homebuyers (FTHBs)?
An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.

Who is eligible for the FTHB tax credit?
Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible. This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.

As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.

How do I claim the credit?
For those taking advantage of the tax credit in 2009, you may choose to either apply for the credit with your 2009 tax return or you may apply for the credit sooner by filing an amended 2008 tax return with Form 5405 (http://www.irs.gov/pub/irs-pdf/f5405.pdf).

Can you claim the tax credit in advance of purchasing a property?
No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.

Can a taxpayer claim a credit if the property is purchased from a seller with seller financing and the seller retains title to the property?
Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Examples of this would include a land contract, contract for deed, etc. According to the IRS, factors that would demonstrate the ownership of the property would include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property.

Are there other restrictions to taking the credit?
Yes. According to the IRS, if any of the following describe your situation, a credit would not be due.

• You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild.
• You do not use the home as your principal residence.
• You sell your home before the end of the year.
• You are a nonresident alien.
• You are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)
• Your home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
• You owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2009, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2006, through July 1, 2009.

Can you buy a home from a step-relative and be eligible for the credit?
Yes. Provided the person you are buying a home from is not a direct blood relative, the purchase would be allowed.

Can parent(s) who will not live in the property cosign for a mortgage for their child and the child that is a qualifying FTHB still be eligible for the credit?
Yes.

Can a separated spouse who has not owned a home for four years qualify for the FTHB tax credit if the spouse has owned a property anytime in the last three years?
No. However, the spouse may be eligible for the repeat buyer credit. The best path to take in any situation regarding income taxes is to speak with a professional tax preparer or CPA.

If you have any questions that fall outside the situations here, give me a call and if you do not have an accountant to speak with, I can refer you to one.

First-time homebuyers (FTHB) are taking advantage of one of the best real estate environments we have ever seen. Home affordability this year has been at an all time high with low interest rates and declining home prices. However, buyers on the fence should not be complacent.

Home prices in many markets have not only stabilized but are rising. Interest rates, while still incredibly attractive, could be poised to rise in coming months as stimulus from Washington is scheduled to end in December. Finally, the tax credit of $8,000 for qualifying FTHBs is currently scheduled to end November 30, 2009.

Why Buy a Home?
One of the first questions someone naturally asks themselves as a renter is, "Why should I become a homeowner?" There are many reasons, but probably the first one is the pride in knowing that you have established a foundation for building personal wealth as well as a basis for future memories.

Thinking back to your childhood, many of your fondest memories may be from events in your childhood home. Holidays, birthdays, and family events all typically took place in your home growing up. Anything you and your parents wanted to do to your home, within reason of course, were options of your choosing.

Knowing that you have taken a major step in financial independence also creates a sense of pride that few things can replicate. However, it's one thing to say owning a home makes sense, it's another to actually look at how owning a home can help you financially.

Financial Reasons to Buy
Aside from the emotional implications, any decision involving money has to make sense. There are few things anyone can do that have a greater impact on their finances than owning a home.

The reasons to buy your first home are numerous, not only today, but anytime. In a comparison of renters versus homeowners, the U.S. Federal Reserve Board of Consumer Finance found that the average net worth of renters was $4,000 compared to homeowners at $184,400.

Building personal wealth can be accomplished a number of ways but owning a home provides a path that takes advantage of several ways at once, compounding their net impact on your bottom line. Increasing equity leveraged from the reduction of mortgage debt and home price appreciation are one path. Income tax deductions both from the sale and ownership of the property are another.

Move in and Watch it Grow
What do a tree and the impact of owning a home on personal wealth have in common? Neither grow quickly but both grow larger and become stronger over time. A home purchased today at a price of $150,000 will grow in value to $364,000 over 30 years at an appreciation rate of just 3%.

While the impact of home values over the last three years can not be ignored, during the period from 1950-2002, U.S. home prices appreciated at an annual growth rate of 4.8%, or significantly greater than the example just given.

The Impact on Your Wallet - Today
Owning a home creates a number of items that can result in both an immediate and long lasting boost to your wallet. The first is time sensitive and needs to be acted on quickly to benefit.

Income Tax Credit. The income tax credit available from the IRS for up to $8,000 for qualifying FTHBs is scheduled to end November 30, 2009.

Points Pay Twice. Many buyers today are opting to pay points to lower their interest rate. In some cases, this can be a negotiated expense that the seller may pay to incentivize you to purchase their home. Points paid to lower an interest rate are considered pre-paid interest by the IRS and would result in an income tax deduction for the buyer, regardless of who pays it.

Mortgage Interest. One of the largest tax deductions most people report each year is the amount of interest they pay on their mortgage. While not exact, on a $150,000 mortgage with an interest rate of 5.50%, the amount of the first year's interest would be approximately $8,000. For a family earning $70,000 in a federal tax bracket of 25%, this amounts to a significant savings, effectively reducing the amount of a homeowner's monthly mortgage payment. For those that pay state income taxes, the impact is even greater.

Private Mortgage Insurance (PMI). PMI is insurance that is mandated by a lender when the amount of a down payment is less than 20% of the purchase price. The purpose of PMI is to protect the lender in the event a borrower later falls into default and the home falls into foreclosure. PMI under most circumstances is a tax deductible expense. Consult your tax advisor for more details.

Real Estate Taxes. Property taxes, which can be normally included in the monthly mortgage payment to your lender are a deductible expense. This deduction also effectively reduces the monthly mortgage payment for the borrower at tax time.

Possibly More Dough. These are not the only expenses that can be deducted from your income at tax time. Other items can include moving expenses associated with a job relocation and home improvements that are deemed energy efficient as determined by the Recovery Act. As always, consult with your tax advisor for specific details about how each type of deduction mentioned in this article could apply to your situation.

Act Now and Plan Accordingly
If you or someone you know plans on purchasing a home in time to take advantage of the tax credit, there are some things to keep in mind. The last day to close to take advantage of the tax credit is Monday, November 30, 2009. Keep in mind, this follows Thanksgiving week. With the holiday offering a shortened work week for many, this will make closing at the end of the month more challenging.

Another item to take into consideration is recent legislation impacting a lender. If the Annual Percentage Rate, or APR, changes by more than .125% from the time of initial application, the lender is required to re-disclose the Truth in Lending statement. When this document must be re-disclosed, time must be allowed for a home buyer to receive the document in the mail and review it for approval.

One way to minimize any need to re-disclose your loan documents is to either lock early in the application process at the interest rate on the loan application or submit an initial loan application with a higher-than-current-market interest rate. So, if current rates are 5.50%, your mortgage professional may suggest your application reflect an interest rate of 5.75% for underwriting and initial loan disclosures.

A prudent buyer may plan for closing to occur no later than November 20, 2009 to allow for any possible delay and still take advantage of the tax credit before it expires on November 30. Another prudent decision would be to allow a minimum of 45 days to get your loan approved and closed. Just be sure that when you lock your interest rate, you allow for a cushion in your lock expiration date in the event your closing is delayed.

This would mean that, for your protection, you should work to get your home under contract not later than October 6, 2009. While we may still be able to accommodate a later purchase contract signing, submitting your application earlier is advisable due to the volume of applications lenders may receive during this time.

Best Path to Take Now
Buying a home today could be the best financial decision a renter can make. Not only does this decision help turn a residence into a home, it establishes a foundation for future personal wealth, both immediately and over time.

To decide what works best for you or someone you know, get pre-approved today so you know exactly what you may qualify for both in purchase price and monthly payment. This one action can remove a lot of stress and simplify the home search process since you will know what you can afford.

Karl Peidl
Lincoln Mortgage Company
251 Bellevue Avenue, Suite 102
Hammonton, NJ 08037

609-878-7013

kpeidl@linc-mort.com

www.karlpeidl.com

Pennsylvania: Licensed by the PA Department of Banking as a First Mortgage Banker and licensed pursuant to the PA Secondary Mortgage Loan Act. New Jersey: Licensed by the N. J. Department of Banking and Insurance Maryland: Authorized Mortgage Lender by the State of Maryland Commissioner of Financial Regulation. Florida: Licensed Mortgage Lender by the Florida Office of Financial Regulation. Delaware: Licensed Lender by the Delaware Office of the State Bank Commissioner.

Quick Tips for Getting Started on Your Home Purchase

Karl Peidl
Lincoln Mortgage Company
251 Bellevue Avenue, Suite 102
Hammonton, NJ 08037

Accredited Loan Consultant

609-878-7013

kpeidl@linc-mort.com

www.karlpeidl.com

Home Buyer checklist

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The Neighborhood

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Environment Concerns / Influences

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The House

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Living Room

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Pennsylvania: Licensed by the PA Department of Banking as a First Mortgage Banker and licensed pursuant to the PA Secondary Mortgage Loan Act. New Jersey: Licensed by the N. J. Department of Banking and Insurance Maryland: Authorized Mortgage Lender by the State of Maryland Commissioner of Financial Regulation. Florida: Licensed Mortgage Lender by the Florida Office of Financial Regulation. Delaware: Licensed Lender by the Delaware Office of the State Bank Commissioner.

Pennsylvania: Licensed by the PA Department of Banking as a First Mortgage Banker and licensed pursuant to the PA Secondary Mortgage Loan Act. New Jersey: Licensed by the N. J. Department of Banking and Insurance Maryland: Authorized Mortgage Lender by the State of Maryland Commissioner of Financial Regulation. Florida: Licensed Mortgage Lender by the Florida Office of Financial Regulation. Delaware: Licensed Lender by the Delaware Office of the State Bank Commissioner.

Buying a Home in Hammonton, NJ
The Federal Reserve and Mortgage Rates
Understanding What Causes Interest Rate Movement

The Federal Reserve constantly evaluates the US economy and, when necessary, takes steps to address inflationary concerns and avoid economic recession or depression. The mass media, in turn, reacts by providing a wide range of opinions and interpretations of the Fed's monetary policy. This can make it very difficult for consumers to decipher how such actions will influence interest rates in general and mortgages in particular.

And although actions of the Federal Reserve can have a direct impact on the Prime rate, mortgage interest rates are dictated by the trading of mortgage-backed securities, which are similar to bonds and trade on a daily basis. This means that the real dynamic at the heart of interest rate movement is the competitive relationship between stocks and bonds.

Stocks, bonds, and mortgage-backed securities compete for the same investment dollars on a daily basis. There is literally only so much money to be invested. When the Federal Reserve feels that interest rates need to be decreased in an effort to stimulate the economy, this reduction in rates can often cause a stock market rally. When the market becomes bullish, the money to invest in stocks comes from the selling off of other investments, including mortgage-backed securities.

Unfortunately, when mortgage-backed securities are sold off to fuel stock market rallies, this causes interest rates to go up, not down.

Historically, there have been many instances where the Federal Reserve has increased interest rates, arousing fears that corporate profit margins would be affected. This resulted in stocks being sold off, leading money managers to search for a place to invest their newly liquidated assets until the next market rally. One such safe haven has been mortgage-backed securities, which cause mortgage rates to drop.

The daily ebb and flow of money is what matters most when it comes to the movement of mortgage interest rates. I make it a point to continuously monitor interest rates for my clients and advise them of opportunities to manage their mortgage debt at a better rate. This is the foundation of my business model as a trusted advisor.

If media reports have led you to second guess whether it's a good time to purchase a new home, give me a call. We'll analyze your financial situation together and create a plan that's right for you.

Quick Tips for Getting Started on Your Home Purchase

Karl Peidl

Accredited Loan Consultant

Lincoln Mortgage Company

251 Bellevue Avenue, Suite 102

Hammonton, NJ 08037

609-878-7013

kpeidl@linc-mort.com

www.karlpeidl.com

Buying a Home in Hammonton NJ

How Much Money Should You Borrow?

While it might be tempting to borrow whatever amount of money your lender is willing to give you, it's important to think carefully about how much you'll actually need to borrow in order to purchase a new home. From the down payment to taxes to insurance and interest rates, there are many factors to consider when making this important, life-changing decision.

Contrary to popular sentiment, there is no standard formula for accurately calculating the specific dollar amount you should borrow when purchasing a new home. Many websites do offer special borrower calculators that claim to factor in important variables, and yet final results vary vastly from one site to the next. Other websites offer general rules of thumb, suggesting that you should never borrow more than 2 1/2 to 3 times your gross annual income, or that 28%, 32%, or even 40% is the maximum amount of debt you should ever take on.

And, while these insights may be helpful as you begin thinking about the overall borrowing process, meeting with a reputable loan professional and getting yourself pre-approved (not pre-qualified) is really the only way to know the exact amount of money you can and should borrow. By getting pre-approved, you not only increase the chance of finding the perfect house for your needs, you also become a "cash buyer", instantly increasing your bargaining power.

As a mortgage professional, I see my role differently than a traditional loan officer. While my job is to match you with the best mortgage available for your specific needs, I feel that it's also my duty to make sure it's the most responsible product as well. After all, what if something unforeseen or unexpected were to occur? What if you have an accident or you lose your job?

Whether you choose to work with me or not, be aware. A lender will often offer you the maximum amount of money that you qualify for, whether you actually need the full amount or not. Because of this, it's vital to sit down with a professional you can trust to figure out your complete financial picture.

If you or someone you know could benefit from this type of free consultation, give me a call. I would be happy to assist you!

Quick Tips For Getting Started On Your Home Purchase

Karl Peidl of Lincoln Mortgage Earns Advocate Lender Status

Karl Peidl
Lincoln Mortgage Company
251 Bellevue Avenue, Suite 102
Hammonton, NJ 08037

609-878-7013

kpeidl@linc-mort.com

http://karltalksmortgages.com/