Co-ops Now Eligible for FNMA High Loan Program

We’ve just received the phenomenal news that one of our major national lenders is now allowing coops as part of the temporary “FNMA” jumbo/conforming economic stimulus program. What this means is dramatically lowered fixed rates and 5 year ARMs on coop loans up to $729,750!!

Take a look at the incredible and the amazing difference in interest rates between the NEW coop program and the regular fixed rate pricing with most major lenders. Let’s use this as an example: $900,000 purchase price with 20% down and a loan amount of $720,000. On the new coop stimulus program the fixed rate 30 year would be an incredible 6.875%. This (“conforming temporary loan limits”) gives us a monthly payment of $4,709.89. Up until just a few days ago that interest rate would be a whopping 8.75 % for the very same loan giving a monthly payment of $5,644.24. Essentially then, the savings to our customers on this type of transaction is a phenomenal, $934.35 per month!

One of the nice things about this program for coops is that it allows for not only 30 and 15 year fixed rates loans but also 5/1 ARMs and interest only products as well. Cash out refinances or cash out refinances to pay off home equity lines of credit are also available. Generally speaking, a minimum credit score of 660-680 is required, and we must always verify that any previous mortgage or rent payments in the last one to two years have always been paid on time.

Here is a quick review of some of the guidelines for the program:

CO-OP Guidelines with Wells Fargo
· Fixed Rate and 5/1, and Libor ARMs are available
· Primary and Second Homes
· Must Have at Least 5 Units
· No Ground Leases Allowed
· No Helocs Allowed
· 51% Owner Occupancy
· No more than 10% owned by a single entity (except for a sponsor)

Currently only one lender is allowing coops under these programs. We are hoping that more and more lenders will see the value in offering coops and will jump onto the bandwagon on this great program. It is essential that we obtain preapprovals way before customers sign their contracts for anyone who wants to apply for this program. The reason for this is that although it is an incredibly wonderful program, the lender will be incredibly strict with all approvals and will adhere tenaciously to their underwriting guidelines.

For more information don’t hesitate to call me at 718-534-5600 ext 140.

Thanks,

Norman

Mortgages and Tax Deductions

Owning a home and having a mortgage will clearly give borrowers a substantial tax deduction every year. Most people, especially first time home buyers, don’t know that all of the interest and property taxes paid in a given year can be deducted from gross income to reduce taxable income. Even though it is a bit complex, I am going to try to break the numbers down step by step and show you how this great savings opportunity works. Let’s use a real example that happened in the office this week.

The scenario is a purchase of a condo for $870,000 and a loan amount of $729,000 at 6.25%. The yearly real estate taxes are $3,000 and the borrower has a yearly income of $168,000. (All numbers are rough estimates)
Step 1 : Calculate the amount the borrower pays the government in taxes. This is simply approximated by taking the yearly income and multiply it by the tax bracket percentage.

$168,000 Income
X 30% Tax Bracket Percentage
$ 50,400 Current Estimated Yearly Income Taxes -Without Having a Mortgage (meaning for people who are renting or who have no mortgage payments on their home)

Step 2 : Calculate the yearly interest paid by the borrower on his new loan.

$729,000 Loan Amount
X 6.25% Interest Rate on Loan
$ 45,562 Interest on loan for a year

Step 3 : Now we take the original income and subtract all the deductions, to get the net taxable income.

$168,000 Income
- $ 45,562 Interest that is tax deductible from loan
- $ 3,000 Yearly taxes on condo that are tax deductible
- $ 5,000 Deductions (Estimated “other” legitimate itemized deductions such as charitable contributions)
$ 114,438 Net Taxable Income

Step 4 : Take the new net taxable income and multiply it by your new tax bracket percentage to find out the taxes you are really going to pay the government.

$114,438 Net Taxable Income
X 25% New Tax Bracket Percentage
$ 28,609 Estimated New Yearly Taxes

Step 5 : Finally, subtract your estimated new yearly taxes from the taxes that you would have paid had you NOT have mortgage.

$50,400 Current Estimated Yearly Income Taxes -Without a Mortgage
- $28,609 Estimated New Yearly Taxes With a Mortgage
$21,791 Yearly Tax Savings. This Represents A Monthly Savings of $1,815!!! (That’s 21,791 divided by 12 = 1,815, sounds dumb, but there is a lot of stupid people out there)

Essentially, then, because your tax bill is so much lower, your net saving’s by having a mortgage is $1,815 monthly. This means that your NET mortgage payment looks more like this (assuming the same 6.250% interest only loan)

$729,000 loan at 6.250%

$3,796.00 Monthly interest payment
+$ 250.00 Real Estate Taxes (Estimated)
$ 250.00 Insurance (Estimated)
$4,246.00 Total Regular Payment

$ 4,246.00 Total Regular Payment
-$ 1,815.00 Minus Tax Savings Because of Having a Mortgage
$ 2,431.00 Net Mortgage Payment

This is incredible. The REAL net payment on a $729,000 mortgage is only $2,431!!!!! No wonder everyone argues that the mortgage interest deduction is a pleasant benefit to everyone with a mortgage.

HAVE A GREAT WEEKEND!