Since 2014, Generation X’ers have been drastically underrepresented in the home buying population. After being locked into high rate mortgages after the real estate bubble burst, Gen. X’ers were trapped in homes worth less than they owed. Fortunately, this year has seen the first real… Read More

Since 2014, Generation X’ers have been drastically underrepresented in the home buying population. After being locked into high rate mortgages after the real estate bubble burst, Gen. X’ers were trapped in homes worth less than they owed. Fortunately, this year has seen the first real… Read More

The HARP refinancing program for homeowners was introduced under President Obama by the Federal Housing Finance Agency in March 2009. Unfortunately, this program was set to expire at the end of December 2016. Fortunately, however, a recent extension of the program means that it’s not… Read More

IRA accounts are confusing and unfortunately, not many colleges or workplaces offer the education needed to understand them fully. As valuable as these accounts can be to saving for retirement, though, it is crucial to familiarize yourself with them and how they can benefit you…. Read More

Perhaps one of the biggest expenses that most homeowners face is their mortgage. Fortunately, however, there are ways to save on your monthly mortgage payments! Whether you already have a mortgage or are considering applying for your first home loan, here are some tips and… Read More

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Homeowners Born Before 1981 Are in For a Nice Surprise

Since 2014, Generation X’ers have been drastically underrepresented in the home buying population. After being locked into high rate mortgages after the real estate bubble burst, Gen. X’ers were trapped in homes worth less than they owed. Fortunately, this year has seen the first real jump in Gen. X home purchases which bodes well for the once lost generation.

What Happened to the Gen X’er’s?

The Gen X’er’s were among the hardest hit homeowners when the real estate market crashed after peaking in 2006. As the prices of homes began to plummet and the housing market was flooded with homes, homeowners like the Gen X’er’s found themselves stuck. Too many homes on the market drove property prices down but despite this, homeowners were still left paying high mortgages. What happens when your home is worth less than your mortgage? It means that despite paying your mortgage on time, you are never gaining any equity in your home. With no equity, you’re stuck. You can’t sell your home because you’ll still need to pay your mortgage, but you can’t refinance because you owe so much more than your home is worth. This left Gen X’er’s short selling their homes, experiencing foreclosure, or simply paying into mortgages without receiving any equity in return.

Why Are Gen X’er’s in For a Nice Surprise?

A recent study released by the National Association of Realtors which details generational trends in home buying and selling showed a shift in the market. In the past year, Gen X’er’s made up 28% of home buyers. This increase indicates that the times are changing and those changes are good!

No longer are Gen X’er’s spinning their wheels, stuck with low-valued homes and high rate mortgages. Finally able to get out from under their debt or the repercussions of foreclosure, Gen X’er’s are finding their way back to home ownership on good footing. This is the light at the end of the tunnel that so many Gen Ex’er’s have been waiting for.

They’re Back and Better Than Ever!

Despite the setback, Gen X’er’s are not only the largest percentage of homebuyers than they have been in the past three years, but they are buying bigger homes as well. This means that Gen X’er’s are out from under their crushing mortgages and they have enough equity in their homes to upgrade! And fortunately, Gen X’er’s are now at a point where they are making the highest annual income of any generation before them, because the houses they are purchasing are costly!

Will Gen Ex’er’s Remain “On Top”?

While certainly not the largest portion of home buyers, Gen Ex’er’s are finally making their way back to the top. They will never outnumber the millennials in terms of home ownership, but market analysts remain hopeful that Gen Ex’er home buyers will continue to grow in number. Even with changes in homeowner benefits under President Trump, past experience gives this generation all they need to know to stay on good footing this time around!

Homeowners Still Have Time Before Deadline Ends

The HARP refinancing program for homeowners was introduced under President Obama by the Federal Housing Finance Agency in March 2009. Unfortunately, this program was set to expire at the end of December 2016. Fortunately, however, a recent extension of the program means that it’s not too late for some homeowners to cash in on the savings!

What is the HARP Program?

The purpose of HARP or Home Affordable Refinance Plan is to make homeownership more affordable. This was achieved by lowering the loan to value percentage requirements for the ability to refinance mortgages without mortgage insurance. HARP dropped refinance loan to value percentage eligibility requirements from 105% to anything above 80%. This made refinancing more available to homeowners which then made monthly home payments more affordable. This was possible by taking the high-interest loans and either reducing fixed interest rates or converting adjustable rate mortgages to fixed rate mortgages.

Why Did HARP Come About?

In 2008, the housing bubble burst. When this happened, the number of houses for sale rose dramatically which, in turn, sent property prices crashing. This set of circumstances meant that homeowners found themselves owing more on their mortgages than their property was worth.

Couldn’t these homeowners refinance once the housing market started to bounce back? Most banks at the time required homeowners to have a loan to value ratio of 80% or lower in order to qualify for refinancing and this eliminated the vast majority of homeowners affected by the real estate market crash. This also meant that in order to refinance, homeowners would have to purchase mortgage insurance to make their refinance less of a risk to financial institutions.

This is where HARP originates. In 2009, the Federal Housing Finance Agency introduced HARP as a way to assist those still in crisis with their mortgages. By reducing the loan to value eligibility requirements for refinancing mortgages without mortgage insurance, HARP hoped to rebuild stability in the housing market.

The 5 Qualifying Criteria for the HARP Program

In order to be eligible to get in on the benefits of the HARP program, you must meet the following 5 criteria as well as act before the HARP program is ended.

  1. Your home loan must be backed by or owned by Freddie Mac or Fannie Mae.
  2. The current ratio of your home loan to home value is more than 80%.
  3. You have no more than one late mortgage payment in the last year and no late payments of 30 days or more in the past 6 months.
  4. Your home must be your primary living place, second home, or investment property.
  5. Your home mortgage must have originated on May 31, 2009, or before.

HARP 2.0

In December 2011, the HARP program was revamped. This new version of HARP made refinancing for homeowners even easier by allowing homeowners to refinance with any lender. The prior version of HARP allowed homeowners with private mortgage insurance to refinance, however, it required the new mortgage to cover the same amount of mortgage insurance as the homeowner had with their previous mortgage. This requirement made many lenders reluctant to refinance mortgages which carried private mortgage insurance. By revamping HARP to allow homeowners to refinance with any lender, more avenues for refinancing were opened.

Harp 2.0 also established higher mortgage rates for refinanced properties that were not serving as places of owner occupancy. Additionally, homeowners were now permitted to forego home appraisals, but only if there is a reliable automated model of valuation available in the area in question.

HARP 3.0

Although reference was made to further expanding savings for homeowners under the HARP plan, HARP 3.0 never came to fruition. Referenced in 2012 by President Obama, the third reincarnation of the HARP plan was to assist responsible homeowners in saving around $3,000 per year on their mortgages. It was also rumored that the plan was going to expand eligibility for HARP refinancing to mortgages with lenders other than Fannie Mae and Freddie Mac.

While the third incarnation of the HARP program never came into being, there is still time to apply for refinancing under HARP 2.0.

Applying Under the Current HARP Program

Assuming that your current mortgage meets the criteria established by the federal government for the HARP program, how do you go about applying for HARP?

Firstly, it’s important to know that mortgage servicers may implement their own additional regulations over refinancing under HARP.

Secondly, if you have successfully applied for refinancing under the previous version of HARP, know that you are not eligible for HARP 2.0.

Lastly, if you are interested in applying for refinancing under HARP, begin the process by contacting a mortgage lender who offers to refinance under HARP. Complete the application process with that lender making sure that you are familiar with any additional requirements of the lender.

What to Do If You Are Refused Refinancing Under HARP 2.0

If you are refused refinancing under HARP 2.0 when applying with one lender, it is worth talking to a second lender about a HARP refinance. You may still be approved, but only if the refusal is based on non-qualifying criteria. For example, if you are refused HARP 2.0 refinancing because you have already refinanced under the original version of HARP, you will not be able to gain approval from any HARP 2.0 lender. If, however, you are refused HARP 2.0 refinancing due to lender requirements rather than federal requirements, try consulting a second lender.

The End of HARP

HARP was originally scheduled to be terminated on December 31, 2016. In August of 2016, however, the Federal Housing Agency agreed to extend the program to September of 2017. What does this mean? It means that in order to benefit from a reduced mortgage rate under the HARP program, you must act now!

Is it possible that HARP will be extended once again? While it is entirely possible that HARP 2.0 could be re-extended, it is doubtful. Under the current administration, there has been a general pattern of overhaul and desire to create new programs rather than adjust those already in place. So, with that said, it’s a good time to consider HARP 2.0!

The 4 IRA Accounts You Should Be Familiar With

IRA accounts are confusing and unfortunately, not many colleges or workplaces offer the education needed to understand them fully. As valuable as these accounts can be to saving for retirement, though, it is crucial to familiarize yourself with them and how they can benefit you.

1. The Traditional IRA

A traditional IRA allows you to make tax-deductible contributions to your account annually. The limit on the amount of these contributions is determined by your income level and taxes are paid on the money when it is withdrawn from your account.

Funds can be withdrawn from the traditional IRA account once you hit age 59 ½ but can be postponed until age 70 ½. Funds CAN be withdrawn from the traditional IRA prior to the age of 59 ½, however, with very few exceptions, these withdrawals will carry a 10% penalty.

Traditional IRA accounts can be transformed into Roth IRA accounts but only by paying taxes on the IRA account first.

2. The Roth IRA

Contributions to a Roth IRA account are not tax deductible and not everyone is eligible for a Roth IRA. Specific income levels determine the point at which you are eligible to have a Roth IRA account.

Funds can be withdrawn without penalty from the Roth IRA account at any point after they have been invested for five years and when the investor is 59 ½ years old. Withdrawals from a Roth IRA account are tax-free if these criteria are met or if withdrawals made before 59 ½ are up to the amount that has been contributed to the Roth IRA account. Funds withdrawn before age 59 ½ and above your contributions will be taxed UNLESS you are experiencing certain financial hardships, you are paying for higher education, or you are purchasing a home.

3. The SEP IRA

A SEP IRA is also known as a “simplified employment plan” or simply a SEP. SEP accounts must be set up by employers for their employees. Employers can make contributions to this fund that are tax deductible but these contributions are limited. Employer contributions to the SEP IRA can be up to 25% of an employee’s annual income but dollar limitations do apply. These employer contributions must be the same percentage each year but employers can decide each year whether to make contributions to SEP IRA funds.

SEP IRA accounts can be set up for employees by any business with 100 employees or less. Employees are eligible for IRA accounts if they are aged 21 years or older, have worked for the employer for a specified amount of time, and makes more than a specific amount (referred to as an “exclusion allowance”).

Withdrawals from a SEP IRA account are taxed as income at income tax rates when withdrawals are made after age 59 ½.

4. The SIMPLE IRA

The “Savings Incentive Match Plan for Employees” or “SIMPLE” IRA is an account set up by employers for their employees. Employers with 100 or fewer employees can set up these accounts. Contributions can be made to these accounts by employees and these contributions are matched by the employer.

There is a percentage of annual salary limit of employee contributions to the SIMPLE IRA account per year. Employers must match employee contributions to the SIMPLE IRA up to 3%. Employers also have the option to contribute 2% of compensation for each employee of the company instead of matching contributions.

Withdrawals from a SIMPLE IRA account must be considered “qualified withdrawals”. Unqualified withdrawals from these accounts come with a 10% penalty. If unqualified withdrawals are made within two years of setting up the SIMPLE IRA account, the penalty is 25%! Qualified withdrawals include withdrawals made over the age of 59 ½, withdrawals due to permanent disability, withdrawal by next of kin due to the individual’s death, withdrawal used to pay for higher-education fees, withdrawal taken in equal payments over your remaining lifespan, withdrawals of $10,000 or less made to purchase a first home, withdrawal to pay premiums for health insurance when unemployed, withdrawals to pay for medical expenses that have not been reimbursed, or withdrawals made by a reservist who has been called to serve on active duty.

Additionally, all withdrawals from the SIMPLE IRA account are taxed as income at income tax rates.