Blog – Fred Gruber - First Rate Financial Group

30

Dec

Financial Reports

What’s Ahead For Mortgage Rates This Week – December 30th, 2024

With Christmas concluding the prior week, there were few reports other than Consumer Confidence, which had come in slightly below expectations. This should prove to have little impact, especially in the following week. With the New Year on the horizon, there are no reports other than the Chicago Manufacturing output report for the entire week. Happy Holidays!

Consumer Confidence

A post-election pop in consumer confidence fizzled at the end of the year, owing to worries about the U.S. stock market and a potentially higher cost of living as a result of new tariffs. The index of consumer confidence dropped 8.1 points to a three-month low of 104.7 in December, the privately run Conference Board said Monday.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates saw an increase of 0.08% with the current rate at 6.00%
• 30-Yr FRM rates saw an increase of 0.13% with the current rate at 6.85%

MND Rate Index

• 30-Yr FHA rates saw an increase of 0.03% for this week. Current rates at 6.45%
• 30-Yr VA rates saw an increase of 0.03% for this week. Current rates at 6.46%

Jobless Claims

Initial Claims were reported to be 219,000 compared to the expected claims of 225,000. The prior week landed at 220,000.

What’s Ahead

Chicago PMI Report will be the only release for next week.

27

Dec

By Fred Gruber

Tax Debts

How to Buy a Home if You Owe Taxes

If you’re considering buying a home while dealing with unpaid taxes, you might be wondering how your tax debt affects your mortgage approval. The good news is, it is possible to buy a home even if you owe taxes. Here’s what you need to know about how owing taxes can impact your homebuying process.

How Owing the IRS Affects Buying a Home

You might not need to wait until your tax debt is completely paid off to apply for a mortgage. It’s important to speak with a loan officer who can guide you through your options based on your specific financial situation. If you’ve been paying off your tax debt through a payment plan, be sure to let your loan officer know and provide supporting documentation and proof of payment.

Getting a Mortgage While You Owe Taxes

While paying off your tax debt isn’t always required before getting a mortgage, there are specific qualifications for mortgages when you have unfiled taxes or a tax lien.

How to Qualify for a Mortgage with Unfiled Taxes

When applying for a mortgage, you’ll need to provide the last two years of your tax returns. If your taxes are unfiled, you’ll need to file an extension with the IRS or your state government to remain eligible.

How to Qualify for a Mortgage with a Tax Lien

A tax lien gives the government a legal claim to your property due to unpaid taxes. Federal and state liens typically need to be paid off before closing to qualify for a mortgage. The IRS releases the lien within 30 days after the tax debt is paid in full.

Exceptions to the Rule

In some cases, exceptions are made for tax liens if you have a payment plan in place. These exceptions depend on the type of loan program.

Conventional Home Loan Requirements

Fannie Mae (FNMA): Requires you to pay off all past-due taxes, including any tax liens, in full before closing. However, Fannie Mae allows installment plans unless there’s a Notice of Federal Tax Lien.
Freddie Mac (FHLMC): If you have a tax lien, Freddie Mac requires it to be paid off or be under a repayment plan for at least three months. Payment history must be documented and included in your debt-to-income ratio.

Government Home Loan Requirements

Government-backed loans (like VA, USDA, and FHA) have more flexibility but still require you to resolve your tax lien situation.

VA and USDA: You must pay off tax liens in full or have a repayment plan for at least three months.
FHA: If your tax liens are delinquent, they must be current or part of a written payment agreement that’s included in your debt-to-income ratio. You’ll need to make at least three months of timely payments.

Does Owing Taxes Affect Mortgage Approval?

Tax debt won’t automatically disqualify you from getting a mortgage, but paying off your debt will increase your chances of approval. If you can’t pay off your tax debt in full, request an installment agreement and ensure you’re making timely payments.

26

Dec

By Fred Gruber

Bankruptcy History

Steps to Secure a Mortgage After Bankruptcy

Experiencing bankruptcy can feel like a significant setback, but it doesn’t mean the end of your dream to own a home. With time, effort, and careful planning, you can rebuild your financial foundation and secure a mortgage. Here are some key steps to guide you through the process of buying a home after bankruptcy.

Step 1: Get a Professional Credit Assessment

After your bankruptcy is discharged, there is typically a waiting period before you can apply for a mortgage—usually two years for Chapter 7 bankruptcy and as little as one year for Chapter 13, depending on the loan type. Use this time to focus on improving your credit score.

Your credit report will be closely scrutinized by lenders, so taking proactive steps to improve it is essential. The better your credit profile, the more likely you’ll be approved for a mortgage—and with better terms.

Step 2: Create and Stick to a Monthly Budget

Rebuilding financial stability after bankruptcy starts with creating a budget. A clear budget helps you manage your income and expenses, ensuring you don’t overextend yourself and remain on track toward homeownership.

Start by listing all your sources of income and subtracting your necessary expenses, such as housing, utilities, and groceries. Use budgeting tools like apps or spreadsheets to make tracking your finances easier. The goal is to allocate a portion of your income toward savings for a down payment and other home-buying costs.

Step 3: Save for a Down Payment

Saving for a down payment is one of the most critical steps in securing a mortgage after bankruptcy. A larger down payment reduces the lender’s risk and shows your commitment to the home-buying process.

The amount required for a down payment depends on the loan type and home price. Conventional loans often require around 20%, but some government-backed loans, like FHA loans, may allow down payments as low as 3.5%. Start saving as early as possible to meet your target amount.

A substantial down payment not only increases your chances of approval but may also qualify you for better interest rates and loan terms.

Step 4: Maintain Financial Discipline

Once your bankruptcy is discharged, maintaining strict financial discipline is crucial. Avoid unnecessary purchases, pay off any remaining debts, and refrain from opening new lines of credit.

Staying disciplined also helps improve your credit score over time, which is vital for qualifying for favorable loan terms and interest rates.

Step 5: Stay Positive and Patient

Rebuilding after bankruptcy is not an overnight process. It takes time, patience, and dedication to improve your financial health. However, by following these steps and staying committed to your goals, homeownership can become a reality.

Remember, your financial past does not define your future. With the right plan and support, you can move forward, secure a mortgage, and build a brighter future in the home of your dreams.