Question about taking out a mortgage on a home?

Posted on Mar 19, 2013 in FHA Information

Keeping It Real: Underwater mortgage holders may be able to refinance
The Home Affordable Refinance Program was announced in March 2009. It was designed by the government to help 5 million underwater or equity-challenged borrowers nationally. In October 2011, visit this discount in an effort to help more borrowers, story the loan-to-value …
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Wall Street Breakfast: Must-Know News
… says mortgage-bond trader Patrick Ahn. The Federal Housing Finance Agency will show in a report today how more borrowers, particularly those who are in negative equity, are taking advantage of the government's Home Affordable Refinance Program, …
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US mortgage refinance program on the up
The US government effort to help struggling homeowners under the home affordability refinance program (HARP) nearly doubled in 2012 from 2011. Harp helps borrowers stuck in loans backed from Fannie and Freddie Mac and which are in negative equity.
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Question by boss: How do I calculate a apartment building investment cash flow after taxes or before taxes?
I am going to invest in a apartment building using a loan.
Is it the noi-annual debt service-annual mortgage payments-the annual loan paybacks-income taxes?
If this isn’t right, pharmacy then please provide the proper way of determining my actual annual profit after taxes or pre-tax.

Best answer:

Answer by fn0384
You need to calculate the after-tax rental income first, remedy then after tax cash flow second.

First after-tax income from the property.
Income
a) gross income from the rentals

Expenses
b) mortgage interest
c) depreciation (assume 80% of the purchase price is depreciable building, thus annual depreciation is purchase price * 80% / 27.5 years or about 2.9% of the purchase price)
d) real estate taxes
e) rent loss due to vacancy, tenant
f) management fee
g) maintenance fee
h) insurance

Income – expense would give you roughtly taxable rental income from the property.

Assuming the rental bldg generates a (paper) loss, you can apply it towards your personal ordinary income and use it to reduce your ordinary income.

If you show a rental profit, then you would have to pay at your marginal tax rate.

Cash Flow:

Annual Rental income – annual mortgage payment -/+ tax liability or tax benefit from owning this property.

Add your own answer in the comments!
Question by Anthony: Question about taking out a mortgage on a home?
We plan on buying a home in about six months and we will be first time home buyers.

We have enough saved up for a down payment and we were planning on paying off our cars loans which would takes us about 4-6 more months which is why we are waiting.

Although we found a home for sale that we fell in love with, troche and our question is, for example: if we bought this home lets say within a month or so, but don’t move in for a few more months, is there something you can work out with a lender so you don’t have to make any payments till you move in. Or once you sign and bought the house, next month payment is yours?

We haven’t talked to a mortgage lender yet because we weren’t planning on moving out no earlier than six months from now. Talking to a lender will be our next step, but I was just curious to know about this question.
We have no other outstanding credit card debt.

We don’t have to pay off our car loans we are just preferring to do so ourselves. I understand I will have another one down the road, we just figure as first time buyer lets make are life a little easier by paying them off before we jump into the biggest purchase of our life.

Best answer:

Answer by Pascal the Gambler
Your payments start when you close on the home. Period.

If you are looking to purchase in 6 months, you should be talking to lenders now.

Give your answer to this question below!

5avg.rating 30 votes.

9 Comments

  1. Car loans (installment loans) are not bad for your credit.
    It’s credit cards (revolving debt) that can cause serious damage.
    A car loan payment will simply reduce the monthly mortgage payment you would qualify for.
    This is not a bad thing.
    Banks will push for the max you can afford on a house.
    More you spend – more profit for them.
    Buying the max can be a recipe for disaster.
    Does not allow you to comfortably save for vacations, retirement, new cars, kids college.

    You could buy the house today if your income with the debt qualifies.
    Once you pay off the car(s), that extra money can go towards savings.

    Six months from now, you are going to hit the Summer Buying Season.
    Prices go up right before summer to get ready for this.
    The best time to buy is when it’s cold outside and school is in session.
    When no one else wants to buy…
    Think about it a bit.

  2. Im a little confused as to why you need to wait until the car payments are paid. Always assume you will have one regardless or not when you determine if you can afford a house or not or how much of one.

    you should not spend more than 30% of your gross income into a monthly mortgage payment So if you and wife make 200,000 a year..your mortgage should be no more than 5000 a month., All your debt combined including mortgage should not be more than 41% of your gross income.

    my point is even if you do pay off your car loan, wouldnt you have to assume that you will have another in a another couple years? your still going to have a mortgage payment in that time frame as well..

    Now if you have credit card debt.. I would pay all that off first. One it will raise your score (paying off a cal loan likely will not) and two that is spending that you dont need.

    and to answer your question, no you cant defer payments. Once you close on a house..your payments will start. It usually takes 45 days from the time you sign the loan documents to close.

  3. Once you sign the documents, the mortgage company pays the owner of the home and you have about 45 days until your first payment is due. You could move in the next day, next month, next year . . . they don’t care . . . as long as the mortgage is being paid.

  4. Make sure you have a cash cushion. Hot water heaters break. Roofs leak. Moving is more expensive than you think. Closing on the house is more expensive than you think.

    The day that the bank writes a very big check to the current owner of the house is called closing (that’s when the sale “closes”), and you start owing interest. Whether you move in or not does not change that. On the day of closing, you have to provide a check for the first month’s interest plus probably some fees. Talk to the lender and be prepared.

  5. No, the payments are due as soon as they give you the money to buy the house.

    Additionally, if you are not moving in right away you can’t use a FHA loan, which most first times want. You will have to go conventional, with 20% down.

  6. Nope, when you get a mortgage, you have to start making payments about a month later.

  7. Some mortgage companies would allow you to defer your monthly payments. The current system allows you to make your defer your first payment for about 30-45 days after closing. The reason you are able to do this is because you are required by your mortgage lender to prepay your interest to cover this period of time. This might be done for a longer length of time. Check with your mortgage lender to see the length of time you are allowed to prepay your interest thus extending the time your first payment would be due.

    Financial planning is always an excellent idea. It is not a good idea to over extend yourself financially. There are times in which you might over plan, thus never really getting what you really need or getting it at a later time. Make sure you are doing proper financial planning and not making excuses for not doing what is the right financial time to purchase an item.

    There are many things you should do, in the purchase of a home for you and your family, the first thing you should do is contact a mortgage broker that does VA, USDA, FHA and conventional mortgage loans to get pre-approved. This is the first step. Once you have your pre-approval then contact a real estate agent to look at house based on what you are qualified to buy.

    You will need proof of income for a minimum of 2 years so have available pay stubs, w-2, bank statements and other items your mortgage broker will require. He will inform you of additional documents that would be necessary for pre-approval once you contact him.

    Your mortgage loan officer will obtain a copy of your credit report which would have your credit score as well as any credit you would have.

    This pre-approval will tell you the amount of house you are qualified to purchase as well as the interest rate, monthly mortgage payments and other necessary things you need to know about your mortgage.

    Once you have your pre-approval you should contact a real estate agent to look for a house for you to purchase.

    I hope this has been of some benefit to you, good luck.

    “FIGHT ON”

  8. Your payments start when you settle. If you settle today, 12/7, you FIRST payment is due on Feb 1.

    There is no way to defer the payments after settlement. I would say this. If you are looking to buy, I would do it now. Prices are still low BUT HAVE BEEN INCREASING and RATES WILL GO NO LOWER\

  9. No, interest starts the day you close.