When you look for a home loan, your loan provider will ask you to offer financial paperwork, consisting of 1-2 years’ worth of tax returns. You’re most likely questioning precisely how that income tax return impacts your home loan application. We’ll simplify for you.
Your tax returns, in addition to the other monetary documents in your home loan application, are utilized to identify precisely how much you can pay your mortgage on a monthly basis. Since a home loan commits you to years of payments, we want to make certain your loan is budget friendly both now and later on in life. While getting a photo of your existing financial resources is a great start, we likewise need to forecast your future ability to pay.
1-2 years of personal tax returns
1-2 years of company’s tax returns (if you own more than 25% of a business).
1-2 years of W-2s or 1099s.
Depending on your unique financial image, we may request additional documents. For instance, if you have any real estate financial investments, we might have to see your Schedule E., Or if you’re self-employed, you may have to offer a copy of your Profit and Loss (P&L) declaration. If you’re not needed to send income tax return, we might have the ability to utilize your tax transcripts instead. Here’s a guide to what files lending institutions may need for your specific scenario.
Your tax files give loan providers evidence of your sources of income and tell them what of that earnings is loan-eligible. Any earnings that you report on your mortgage application but isn’t in fact noted in your income tax return cannot be utilized. Keep in mind that particular tax deductions may also reduce your earnings for loan purposes. Tax reductions for things that don’t actually cost you anything (like devaluation expenses) won’t minimize your loaning capability. So, while taking numerous reductions may save you on your taxes (especially if you’re self-employed), it can substantially minimize how many lending institutions can authorize you for.
Debt-to-income (DTI) ratio: Your DTI ratio offers us an understanding of how big of a month-to-month home loan payment you can manage without a financial problem. It is computed by taking all your regular monthly debt payments, including your future home mortgage payment, and dividing it by your average month-to-month earnings. Better can deal with creditworthy debtors with DTIs of approximately 50%. The lower your DTI, the more funding alternatives will be offered to you.
Income stability: We’ll be aiming to see that your earnings have actually been steady and constant over a 2-year period and likely to continue into the future. That way we can make sure that you can comfortably afford your home mortgage in the long run. We may request for extra documents if we see reducing year-to-year earnings, modifications in your pay structure, recent job switches, etc.
If you want to buy or re-finance a house in the very first half of the year, it might be a good idea to file your tax returns previously instead of later on to prevent any delays in your home loan process. As you might understand, it can take the IRS 4-8 weeks to process your tax filing. If your home mortgage application depends on your earnings info for that year, we may have to wait on that income tax return to be processed by the IRS before we can consider that income for your loan. This is especially essential if you’re self-employed or if you need that year’s earnings to obtain 2-year earning history.
Have concerns about exactly how your tax returns will affect your mortgage application? Speak with among our licensed Loan Consultants and get some clarity.
Units Contiguous States, District of Columbia, and Puerto Rico Alaska, Guam, Hawaii, and the U.S. Virgin Islands
1 $453,100 $679,650
2 $580,150 $870,225
3 $701,250 $1,051,875
4 $871,450 $1,307,175
This morning, Fannie Mae announced that it will raise its loan limits in 2018. That’s welcome news for those who want to buy next year, because so-called “conforming loans,” backed by Fannie Mae and Freddie Mac, often come with lower interest rates than loans classified as “jumbo” or “non-conforming.”
The new loan limit for borrowers in most parts of the US will be $453,100, up from 2017’s $424,100. That’s a 6.8 percent increase over the 2017 limit.
Loan limits are based on median home prices in the county or MSA (metropolitan statistical area) in which the property is located. For next year, all but 71 counties or MSAs will get an increase.
The new limits are effective for loans closed on or after January 1, 2018
Higher conforming loan limits help make cheaper financing available to more borrowers. Fannie Mae and Freddie Mac are government-sponsored enterprises that buy loans that conform to their guidelines from lenders. Then, they sell them to investors.
Loans that meet these guidelines often cost lenders less to originate, and so these less-risky mortgages tend to come with better mortgage rates. And because so many lenders offer conforming loans, they are easier to find, shop for, and compare.
What are today’s mortgage rates?
Today’s jumbo and conforming rates are still very affordable. In fact, they have not changed much since October. This is good for anyone planning to buy soon.
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Mortgage rates today changed very little today, following the release of Consumer Sentiment index. Analysts expected it to remain unchanged at 100.7. Mortgage borrowers, however, got good news — the index came in unexpectedly ly low at 97.8.
That’a big drop, and it means consumers surveyed felt less confident about their finances. That’s a big deal because the US economy is two-thirds driven by consumer purchasing. If we aren’t buying, stocks aren’t rising — and neither are mortgage rates.
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Today’s indicators are a mixed lot, with the most concerning being the yield on Treasuries. Treasury prices tend to rise when overseas investors lose confidence in their own economies. That pushes their prices higher and rates down. The flip side is that when foreign investors are confident, they pull out of Treasuries, prices fall and rates rise.
Mortgage rates today remain very favorable for anyone considering homeownership. Residential financing is still affordable.
There are no scheduled economic reports on Monday.
Mortgage rates have been relatively stable this week, and today’s reporting did little to change that. If you are closing in, say, 16 days, you might want to wait a day or two and get a 15-day rather than a more-expensive 30-day lock. If you’re closing in 32 days, it’s probably worth holding out for a 30-day timeline.
In general, 30-day is the standard price most lenders will (should) quote you. The 15-day option should get you a discount, and locks over 30 days usually cost more.
If you want to “set it and forget it,” though, current mortgage rates are attractive enough to make that an okay move.
Check your options with CONNECT MORTGAGE CORP for LOCK OR FLOAT recommendation
We are glad to provide to you our latest technology and easy to use mortgage calculator.
It will give you a visual understanding of what your monthly mortgage payment will look.
It is a good to know that our mortgage specialists are ready to give you a free advice and consultation over the phone. Right now. No obligations at all, seriously, just a pro advice for your specific situation and need. Just call us at 847-610-3195
Mortgage rates are poised to move in November.
Rates have been dropping since the first quarter of 2017. Analysts predicted 30-year fixed rates in the mid-4s, yet rates in the high-3s have prevailed.
Will it last? November — exactly 12 months since Trump was voted in and rates skyrocketed — could be another defining month.
One year ago, homebuyers and refinancing homeowners regretted postponing a mortgage rate lock as rates rose 0.60% in just a few weeks.
No one expects those increases this year, but a few government initiatives are threatening rates to some extent.
Looking to buy or refinance? November could be the month to do it.
Check your options with CONNECT MORTGAGE CORP
Freddie Mac: Mortgage rates still solidly below 4%
Mortgage agency Freddie Mac has been tracking rates for more than 45 years. In October, it reported some of the lowest rates in its survey’s history.
Since 1971, mortgage rates have been below 4% for just 200 weekly readings out of more than 2400 weeks on record.
That means the rates available now are in the 90th percentile of good rates since Freddie Mac has been tracking them.
A Marketwatch poll revealed that analysts thought rates would be near 4.5% through 2017. So far this year, the highest weekly average rate has been 4.3%, and we haven’t seen those levels since March.
What does that mean for the home buyer or refinancing household? A lot. Here is the difference in principal and interest payment on a $250,000 mortgage between expected and actual levels as of October 26, 2017.
That $82-per-month difference makes the home buying more affordable, or could make a refinance pencil out.
Is it time to take action? It surely could be, before November events take their toll on rates.
You can compare the rates for the previous month here.
Conventional loan rates
Conventional refinance rates are holding low, as a rate for home purchases.
The Freddie Mac report described above polls lenders only on conventional rates, not ones for FHA, USDA, or VA loan types.
Yet those programs are worth looking into if you have a small down payment or damaged credit.
Conventional loans, however, are more suited for those with decent credit and at least 1% or 3% down (but preferably 5% due to higher rates that come with lower down payments).
Twenty percent in equity is preferred when refinancing.
With adequate equity in the home, a conventional refinance can pay off any loan type. These loans can even cancel mortgage insurance.
FHA mortgage rates
FHA is currently the go-to program for home buyers who don’t qualify for conventional loans.
The good news is that you could get a lower rate on an FHA loan than you can for conventional.
According to loan software company Ellie Mae, which processes more than 3 million loans per year, FHA loans averaged 4.23% in September, while conventional loans averaged 4.26%.
(You might wonder why Ellie Mae reports higher average rates than does Freddie Mac. It’s because Ellie Mae considers loans at all credit and down payment levels, whereas Freddie Mac averages rates for the “perfect scenario.”)
So, even with damaged credit, you can get a great rate. Yes, these loans come with mortgage insurance, but overall cost per month is not that much more than for conventional loans.
A little-known program, called the FHA streamline refinance, lets you convert your current FHA loan into a new one at a lower rate if rates have fallen since you received your loan.
An FHA streamline requires no W2s, pay stubs, or tax returns. And you don’t need an appraisal, so current home value doesn’t matter.
Check your FHA loan eligibility with CONNECT MORTGAGE CORP
Mortgage rates today
While a monthly mortgage rate forecast is helpful, it’s important to know that rates change daily.
You might get 4.0% today, and 4.125% tomorrow. Many factors alter the direction of current mortgage rates.
Mortgage rate predictions for November 2017
There is no shortage of market-moving news in November. The top seat at the Federal Reserve is up for grabs, and Trump is pushing through wide-reaching tax reform.
In addition, a Federal Reserve meeting adjourns November 1. The group is not expected to raise rates, but its report released the same day could move markets.
Where will rates end up by December?
Will Trump replace Fed Chair Janet Yellen?
This is a question everyone is asking.
And for good cause.
Yellen has been the rock-steady leader of the Federal Reserve since 2014. She has soothed markets with a predictable, data-dependent path, according to CNBC.
Her term is up in February. Trump says Yellen might stay. But he’s looking at other candidates, including former investment banker Jerome Powell and Stanford economist John Taylor.
The more rate-unfriendly choice could be Taylor. Chief U.S. economist at Bank of America Merrill Lynch Michelle Meyer says, “Taylor would likely be less sympathetic to short-term misses in the data or weakness in financial conditions and would want to keep the hiking cycle on track,” as reports CNBC.
Powell, though, would be more likely to pause Fed rate increases if economic data appears weak.
What does this mean for rates? Trump could drop more hints about his choice in November. If a rate-unfriendly candidate appears to be the front-runner, rates could rise in anticipation.
Conversely, an interest rate “dove” slated to fill the seat could have no effect on rates at all, or cause them to drop.
Trump budget/tax reform could usher in a new era for rates
Trump got a budget through the Senate as October came to a close. Next up: passage by the House of Representatives.
If this happens, it could be the catalyst to ignite larger reform: overhauling the tax code.
The president calls the new tax plan “the biggest cuts ever in the history of this country,” according to CNN. It would cut corporate tax from 35% to 20% as well as doubling the standard deduction for some filers.
The new tax plan could be “the biggest cuts ever in the history of this country,” says Donald Trump
What does tax reform have to do with mortgage rates? As it turns out, a lot.
Lower taxes could increase economic activity and spur the economy. Corporations would become more profitable, and the average family would have more to spend.
All this increased economic activity would lead to inflation in two basic ways. First, the demand for goods and services would rise as people have more to spend. This could lead to higher prices.
Second, tax cuts mean there’s less money coming into the government. So, Uncle Sam would issue more debt to pay for regular government operations. This causes rates to rise because government securities and mortgage-backed securities are the same types of asset.
In other words, more of the same kind of stuff in the market causes the value of those assets to drop. As value drops, interest rates must rise to continue attracting buyers.
The president is calling for a tax plan signed into law by Thanksgiving. That means mortgage rates could be in for a bumpy ride in November. Watch for headlines about tax proposals introduced to Congress this month.
The Fed will raise rates in December
The Federal Reserve meeting adjourns November 1. There is just a 1.5% chance that the group will hike rates, however, according to CME Group’s FedWatch tool.
That doesn’t mean a hike isn’t coming.
The same poll pegs chances of a federal funds rate increase near 97% when the Federal Open Market Committee (FOMC) adjourns on December 13.
Mortgage rates won’t necessarily rise when that happens, though. The Fed doesn’t control mortgage rates — markets do that. Because this hike is so widely expected, it’s already priced into today’s mortgage rate levels.
Interest rates are like stock prices. A company says it developed a groundbreaking product that will debut next year. The stock goes up now, not a year from now. Likewise, a company announces its sales will be much lower next year. The stock price drops today.
Mortgage rates rise and fall in the future, not on the present. If you want to know where mortgage rates will go, watch out for economic news that points to inflation or major economic changes, even if those events will happen months or years from now.
This month’s economic calendar
The next thirty days hold no shortage of market-moving news. Notably, watch for the jobs report on November 3, and the FOMC meeting minutes release on November 22.
Now could be the time to lock in a rate in case any one of these events push up rates this month.
What are today’s mortgage rates?
Mortgage rates are holding below 4 percent, to the surprise of analysts. Home buyers have excellent purchasing power, and refinancing households can save more cash than they could just months ago.
Call CONNECT MORTGAGE CORP and get personalized mortgage rate today
Mortgage rates don’t seem to know what year it is.
While 2017 was supposed to be the year of skyrocketing rates, it’s been the year of falling rates instead.
The 30-year fixed rate hit 4.30% in March according to mortgage agency Freddie Mac. Yet the agency reported rates at just 3.83% at the end of September.
That represents nearly a $70-per-month savings on a $250,000 mortgage.
Looking to buy or refinance property? October could be the month to do it.
The average conventional 30-year fixed rate mortgage is now solidly in the 3s.
Freddie Mac’s Primary Mortgage Market Survey (PMMS) revealed that rates averaged just 3.80% in September—another low for the year. These are the best rates since just before the election in November 2016.
Why are rates so good? There are a number of factors working together to keep rates low, including an administration still unable to bring an economic boost, low oil prices, geopolitical stress, and ultra-low inflation.
And, though Freddie Mac reports only on conventional mortgage rates, all types of mortgages are experiencing similar improvements.
Mortgage software giant Ellie Mae tracks not only conventional rates but other types, too.
Following are mortgage rate reductions since April.
What type of loan and rate should you get? It depends.
Home buyers with high credit and at least 3% down might choose a conventional loan.The Conventional 97 and HomeReady loan are built for newer buyers who don’t have the big down payment most people assume is required for conventional.
For homeowners looking to refinance, conventional loans are best for those with at least 20% equity. And more homeowners are using this loan to cancel FHA mortgage insurance.Home values are rising, and FHA loan holders should consider getting rid of an expense that often amounts to hundreds of dollars per month.
FHA loans are ideal for those without a perfect credit score. But high-credit home buyers are using them, too.
This type of financing requires 3.5% down or around $7,000 on a $200,000 home purchase. That down payment level is within the realm of reason even for low-income home buyers.
Income requirements are more flexible than for conventional loans, so many new grads just starting out in their careers can benefit.
But FHA is not just for home buyers.
The FHA streamline refinance is a powerful tool for homeowners with an FHA loan currently.
No income documentation is required. That means you can still qualify even if you’ve experienced a reduction in family income, but still need to lower your home payment.
A traditional refinance requires pay stubs, W2s, and sometimes tax returns. Many homeowners wouldn’t qualify for the even though it puts them in a better position.
FHA streamline lenders simply don’t ask for income, and none should be disclosed by the applicant. It’s almost as if you’re trading in your old FHA loan for one with a lower rate, almost “no questions asked.”
The loan doesn’t even require an appraisal, and the current value of your home absolutely does not matter.
You still need to come up with closing costs, and most lenders require a minimum credit score. But this loan product removes most of the traditional barriers to refinancing.
Mortgage rates in October should remain low.
While the economy is strong, inflation is tame. And because mortgage rates are inflation-sensitive, there’s no obvious reason for rates to rise.
Economic indicators are important, as discussed below, but so are geopolitical risks.
Watch for developments in North Korea. Almost daily, the country seems to agitate the world community with a new missile launch or nuclear test.
These actions make investors nervous. A flight to safer assets—like mortgage bonds—occurs, and that causes rates to drop.
While no one wants war, mortgage rates are the unintended beneficiary of geopolitical uncertainty.
But even disregarding North Korea, there are plenty of reasons within the U.S. economy to believe rates will stay low for the balance of the year. Perhaps the most obvious among them is the Fed’s evolving stance on the economy.
As in, maybe it’s not as strong as the group thought it was.
Students of mortgage rates know that, generally, rates rise in a hot economy.
That’s why today’s interest rate atmosphere is something of a mystery.
The economy “feels” good. Home prices are rising, the stock market hits new highs on a regular basis, and the unemployment rate is at 10-year bests.
So why are rates still so low?
That’s what Federal Reserve Chair Janet Yellen would like to know.
She admits that the Fed may have misread the signals. At a conference in Cleveland in September, Yellen stated, “My colleagues and I may have misjudged the strength of the labor market.”
The major conundrum is that unemployment is currently at 4.4%—widely considered “full employment”—yet inflation is surprisingly low. In times past, an economy with so many people employed caused higher inflation.
When there are more jobs than people, employers must pay more to attract and retain workers. That leads to higher prices for goods and services that those companies produce. Workers’ wages must rise to compensate for higher prices.
“My colleagues and I may have misjudged the strength of the labor market.” —Fed Chair Janet Yellen
It’s an inflation-inducing cycle.
But inflation is at just 1.4%, falling short of the Fed’s 2% target.
So, why is the job market tight, but wages and inflation are tame? Yellen got an up-close view of a potential reason during her trip to Cleveland, according to LA Times. There, potential workers were without the necessary skills for higher paying jobs.
They were enrolled in training to get the necessary skills, but for many, a “real” job was still a long way off.
Just looking at the unemployment rate, you could get the wrong impression. The government tracks “employed” persons as anyone who did any work for pay or profit during the prior week, according to the Bureau of Labor Statistics website. That could include someone who works 5 hours at a fast food restaurant, unpaid workers at a family business, and seasonal employees.
Technically, these people are employed. But enough to drive an economy to higher inflation? Hardly.
nd so, mortgage rates stay low.
As a mortgage rate shopper, there have been few better times to lock in a rate. Rates are still low, but that may change as more workers gain the skills needed to fill the many job openings just waiting for them.
The most powerful and respected financial body in the world is unsure of the direction of the economy.
So you shouldn’t feel bad about wondering where interest rates will go. (Rates and the economy are inextricably intertwined.)
The Fed will meet again at the end of October to try to water-witch economic truths. Where is the economy headed, anyway?
What does the meeting hold? Likely, not much.
Most major changes occur during four meetings per year at which the Fed releases projection materials. Those happened in March, June, and September, with the last one of the year scheduled for December.
October’s meeting is almost an obligatory one in which little is likely to happen.
Still, you can’t completely disregard any Fed meeting.
Markets will be watching for clues nestled in the group’s post-meeting statement. Any hint that the job market, wages, or inflation are picking up, and rates could rise.
September’s meeting revealed that there would likely be one more rate hike this year. That has a 76% chance of happening in December, according to a CME Group poll. Additionally, the Fed is calling for 3 more rate hikes in 2018.
So far, Fed hikes haven’t translated to drastically higher mortgage rates. The Fed doesn’t control consumer mortgage rates; Investors in mortgage-backed securities do that. But those investors listen to Fed plans and invest accordingly.
Mortgage rate watchers should monitor the Fed, too. Just a slight change in rates could remove the benefit of a refinance, or put a home out of reach.
The next thirty days hold no shortage of market-moving news. Notably, watch for two Yellen speeches, plus a FOMC meeting that begins on the last day of October
Wednesday, October 4: Fed Chair Janet Yellen Speaks
Friday, October 6: Jobs Report, unemployment rate, wages
Wednesday, October 11: FOMC meeting minutes released
Friday, October 13: Consumer Price Index (closely-watched inflation measurement), and Retail Sales
Wednesday, October 18: Housing Starts
Friday, October 20: Fed Chair Janet Yellen Speaks
Friday, October 20: Existing Home Sales
Wednesday, October 25: New Home Sales
Monday, October 30: Personal Income and Outlays
Tuesday, October 31: FOMC meeting begins
Now could be the time to lock in a rate in case any one of these events makes rates tick up this month.
Mortgage rates are holding below 4 percent, to the surprise of analysts. Home buyers have excellent purchasing power, and refinancing households can save more cash than they could just months ago.
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