Hereâs where homebuyers are the happiest
Buying a home? Then head to the Midwest. According to a new survey, that’s where the nation’s happiest recent homebuyers are located.
Buying a home? Then head to the Midwest. According to a new survey, that’s where the nation’s happiest recent homebuyers are located.
We interviewed Justin Fichelson from Avenue 8 in the second real estate tech entrepreneur interview of 2021. Let’s get to it! Who are you and what do you do? Iâm the CEO and co-founder of Avenue 8, the only mobile-first real estate brokerage built expressly…
The post Meet The Real Estate Tech Entrepreneur: Justin Fichelson from Avenue 8 appeared first on GeekEstate Blog.
Have you been keeping a close eye on todayâs housing market? If the answer is âyes,â then youâre well aware that interest rates are at historic lows. But if youâve been holding off for just the right moment until home prices and financing options meet miraculously in your favor, thereâs really no reason to wait any longer. Low Mortgage Rates Making History â For Now Driven by concerns brought on by the coronavirus pandemic, the Federal Reserve has been maintaining the benchmark interest rate at the historically low range of 0.00% to 0.25% â matching their lowest levels from over a decade ago, when the Fed cut them to nearly zero during the 2008 housing crisis.* According to Freddie Mac, mortgage rates remained at their lowest levels in history for the first week of January, 2021, with 30-year fixed-rate loans averaging 2.65% as of January 7, 2021. Today, the typical mortgage is still hovering around a percentage point cheaper than a year ago when the average rate was 3.73%.** While it remains uncertain as to when rates may begin to head back up, once that does occur, one of the housing marketâs first casualties will be a homebuyerâs opportunity to get the extreme value weâre seeing available today on a home loan with lower rates. And even if you donât have 20% saved up for a down payment, buying with less down can be easily accomplished in many cases. In fact, depending on your situation, you can buy with as little as 3% down. There are also programs that allow for tremendous flexibility in regards to your down payment source. A PennyMac loan specialist would be able to guide you through the options that most conveniently match your needs. As long as you have sound credit and a qualifying debt-to-income (DTI) ratio, buying in todayâs hot market can prove remarkably beneficial while rates are this low. Your Buying Power With Low Interest Rates There are several factors that determine homebuying affordability and your purchasing power, but mortgage interest rates are playing the largest part in todayâs market. In the simplest terms, a mortgage interest rate is the percentage of a principal home loan amount that a lender charges a borrower. With a higher rate, youâll pay more in interest over the life of your loan, while a lower interest rate will reduce the cost of borrowing and the total amount of interest that youâll pay for your home. A lower interest rate can mean the difference of potentially hundreds every month, thousands every year, and many thousands of dollars saved over the entire life of your loan. It can also bring forth the possibility of buying a new home for some, or perhaps bring a more expensive home within reach that a higher rate environment would not so generously allow. For instance, letâs say you have a monthly budget of $2,000 to spend toward principal and interest on your mortgage payment. With a lower rate, that $2,000 per month can go further toward the amount of house you can afford. To illustrate, consider youâre looking at a 30-year fixed mortgage at a 3% interest rate. You could buy a house priced up to $475,000 while still maintaining your monthly budget of $2,000 principal and interest. If your rate were just 1% higher, however, youâd be limited to a purchase price of no more than $420,000 to keep within your budget.*** The difference between 3% and 4% means a $55,000 reduction from your maximum purchase price and an 11.58% loss in purchasing power. Just a 1% rate reduction could make the difference between getting into a home or not, or settling for less than what you were hoping for in a house. Getting More for Your Money Is your current home too small to contain your growing family? Are you an empty nester, ready to downsize? Maybe you want to be closer to extended family or friends. Or, you want to move closer to better schools and live in a community with more services, restaurants, and other amenities that better suit your needs. Record-low mortgage rates can empower you to really get what you really need, and want, in your next house. Covid-19 has changed the way homebuyers view square footage, especially in terms of privacy and workspace. The pandemic has also demonstrated that the need to live near a brick-and-mortar employer may be less of a necessity, as working remotely makes commuting a thing of the past. For those considering buying property as an investment, todayâs mortgage rates could be your key to entering the short-term rental market. Rental property has the potential to provide consistent cash flow as well as possible significant tax benefits. Also, even when rental property appreciates, the IRS allows you to deduct depreciation (Consult your tax adviser for further information regarding potential tax advantages with rental properties). **** Whatever your reason, whether it be the desire to live in a âsmart homeâ or have a bigger kitchen to suit your new passion for sourdough breadmaking, this could very well be your best opportunity to jump in with both oven mitts. Timing is Everything — Make Your Move Today Although low mortgage rates have placed more buying power in the hands of aspiring homeowners, itâs also resulted in an increasingly competitive sellerâs market. So, for house hunters watching from the sidelines, time is of the essence. To take advantage of todayâs great rates — as well as a market thatâs still in your favor — be ready to act when your dream home hits the market. A smart first step to take in your preparation is to get pre-approved before you start shopping. Your Buyer Advantage Pre-Approval from PennyMac will allow you to know your exact borrowing budget, as well as give your offer credibility to a seller once your dream home does appear. Get started now online, or contact a PennyMac Loan Officer to learn more. *Source: https://www.federalreserve.gov/newsevents/pressreleases/monetary20201216a1.htm**Source: http://www.freddiemac.com/pmms/#***Source: https://www.mortgagecalculator.net****Source: https://investorjunkie.com/real-estate/rental-property-investment/ ;https://learn.roofstock.com/blog/rental-property-depreciation
Today’s mortgage and refinance rates Average mortgage rates rose appreciably yesterday. They haven’t fallen since Jan. 4 so they’re some way above the all-time low. But they’re still within the […]
Editor’s note: This article was originally published on June 10, 2020, and updated on July 28, 2020, with the latest Fed forecasts Don’t wait on the Fed for lower mortgage […]
It was easy to get lulled into complacency by the second half of 2020 when it came to mortgage rates. Even as other indicators said rates should be rising, they continued on a calm journey to multiple record lows. 2021 has been very different so far! Covid and its impacts on the economy remain the driving forces behind market trends. That’s generally been great for rates, but it also means that rates should gradually rise as we battle back against covid. If the onset of the pandemic pushed rates to all-time lows, it’s only fair that progress against the pandemic would result in rates moving up from all-time lows. If you ask 10yr Treasury yields, that’s been the case for quite a while. And while the stock market has been singing a similar tune, the mortgage market has been in its own glorious
Posted To: MND NewsWire
Freddie Mac’s first quarter 2021 economic forecast is unusually short, and, unlike recent forecasts from either of the GSEs, has relatively few revisions. The company’s economists say that nearly a year after the first cases of COVID-19 were diagnosed in the U.S., economic growth remains uncertain, with answers largely hinging on the roll-out of the new vaccines. The labor market remains weak with close to 20 million collecting unemployment insurance. December’s job losses, the first since last April, didn’t change the unemployment rate from 6.7 percent because labor participation also declined. Record low mortgage rates continued to carry the housing market during the turmoil of the pandemic. At the end of the first week of 2021, the 30-year rate hit 2.65 percent, a new low. Freddie Mac expects…(read more)
Mortgage applications decreased 1.9% for the week ending Jan. 15 from one week earlier, per data from the Mortgage Bankers Associationâs weekly survey. The drop comes after a robust 16.7% jump in applications the prior week.
The post Mortgage applications decrease as rates move higher appeared first on HousingWire.
President Biden plans to sign 17 executive orders his first day in office, including an extension of the eviction and foreclosure moratorium.
The post Biden’s executive order will extend foreclosure moratorium appeared first on HousingWire.
Jana S. asked this question recently about Roth IRAs:
I just listened to your podcast about what to do if you overcontribute to a tax-advantaged account, especially when you earn too much to qualify for a Roth IRA. I’m interested in how to do a backdoor Roth. What are the rules that apply for transferring funds from a traditional IRA to a Roth?
If you’re a regular Money Girl reader or podcast listener, you’ve heard me discuss the fantastic tax benefits of a Roth IRA. The problem is, as Jana mentioned, the door to a Roth IRA gets slammed in your face if you make too much money.
But sometimes when you can’t get in the front door, the backdoor is wide open! In this episode, I'll explain a strategy known as the backdoor Roth or Roth conversion. We’ll cover how high earners can have a Roth IRA without breaking the rules.
A Roth IRA is a retirement account for individuals that’s never taxed after you make contributions. Instead of getting an upfront tax deduction (like you do with deductible contributions to a traditional IRA), you can withdraw Roth IRA contributions and earnings entirely tax-free as long as you’ve had it for at least five years and reach age 59.5.
You can make IRA contributions as long as you have earned income and no matter your age, although you can’t contribute more to an IRA than you earn. To contribute the maximum for 2021, which is $6,000 or $7,000 for those over age 50, you must make at least that much.
For 2021, single taxpayers must have an adjusted gross income of $125,000 or less to make a full Roth IRA contribution.
But, as I mentioned, not everyone qualifies for a Roth IRA. For 2021, single taxpayers must have an adjusted gross income of $125,000 or less to make a full contribution. And married couples who file joint taxes must earn $198,000 or less. If your income exceeds these annual limits, you can keep an existing Roth IRA, but you can’t make new contributions.
Note that if you have a Roth at work, such as a Roth 401(k) or 403(b), there are no income limits to qualify. Unlike a Roth IRA, you can max out these accounts every year no matter how much you earn.
RELATED: Can Minors and Seniors Have a Roth IRA?
A backdoor Roth isn’t a type of retirement account, it’s a method for high earners to fund a Roth IRA even when they don’t qualify for regular contributions. If your income is below the annual Roth IRA threshold, you don’t need a backdoor Roth because you can make regular "front door" contributions.
In addition to tax-deductible contributions, you can also make nondeductible, taxable contributions to a traditional IRA. Interestingly, the IRS allows you to convert nondeductible IRA contributions to a Roth IRA, which is the “backdoor” concept. It's a clever and legitimate way to move money into a Roth IRA, even if you earn too much to qualify for one.
A backdoor Roth isn’t a type of retirement account—it’s a method for high earners to fund a Roth IRA even when they don’t qualify for regular contributions.
To create a backdoor Roth IRA, you must make a nondeductible (taxable) contribution to a traditional IRA and file IRS Form 8606, Nondeductible IRAs. Then you roll over those funds into a Roth IRA. You won't owe taxes, except on any investment growth in the account earned between the time of your traditional IRA contribution and the Roth conversion. If it was a short period, your earnings and resulting tax should be small. Once your funds are in a Roth IRA, the earnings can grow and be withdrawn tax-free in retirement.
As I mentioned, there’s no income limit for traditional IRA contributions. So, converting nondeductible contributions from a traditional IRA to a Roth IRA allows anyone, regardless of income, to fund a Roth IRA.
Though sneaking into a backdoor Roth IRA sounds great, it doesn’t always work as planned.
If you already have pre-tax money in a traditional IRA, tax must be prorated over all your IRAs.
The IRS requires you to lump all your IRAs together when you make a distribution and doesn’t allow you to cherry-pick one account to convert. So, if you already have pre-tax money in a traditional IRA, tax must be prorated over all your IRAs.
For example, let’s say you have $5,000 in a nondeductible IRA that you want to convert into a Roth IRA, and you also have $15,000 in a deductible IRA. Since you have a total of $20,000 in IRAs, the $5,000 nondeductible portion is 25% ($5,000 / $20,000 = 0.25 or 25%) and the taxable portion is 75% ($15,000 / $20,000 = 0.75 or 75%).
You must pay the same ratio of tax on the conversion. In other words, 75% of $5,000, or $3,750, would be subject to tax. It’s up to you to weigh the upfront tax liability against the future benefits of getting tax-free withdrawals from a Roth IRA.
However, if you don’t have any pre-tax IRA funds, you could convert the full $5,000 from a nondeductible IRA into a Roth IRA with no tax due. Yes, this gets complicated. Just remember that if you have a substantial amount of pre-tax funds in a traditional IRA, doing a backdoor Roth IRA doesn’t help you avoid additional tax. Unfortunately, you can’t convert just nondeductible funds and forget about your pre-tax amounts.
If you really want to do a backdoor Roth IRA, and you have a retirement plan at work, you can use it as a workaround solution. You could remove your pre-tax IRA money from the equation by rolling it over into your 401(k) or 403(b). That would leave you with just nondeductible, after-tax IRA money to convert to a Roth.
High earners who fund a backdoor Roth IRA still won't qualify to make new contributions to the account, but the converted funds grow tax-free, which could save a bundle.
This strategy only works if your workplace plan allows incoming IRA rollovers. Plus, make sure you're happy with the plan's investment choices and fees because you don't have as much control over a 401(k) as you do with an IRA. If you're self-employed, you could set up a solo 401(k) that allows roll-ins and move your pre-tax IRA money into it.
Remember that high earners who fund a backdoor Roth IRA still won't qualify to make new contributions to the account. However, the converted funds grow tax-free, which could save a bundle in taxes. Additionally, Roth IRAs don't have required minimum distributions (RMDs), which means you can keep them indefinitely.
Doing a backdoor Roth can be worthwhile if you can afford to pay a potentially significant tax bill on your converted balance.
Consider that your converted funds count as income for tax purposes, which could move you into a higher tax bracket for that year. Plus, it's a transaction that you can't undo if you change your mind later on. So be sure to speak to a tax or financial advisor about the pros and cons of a backdoor Roth before crossing the threshold.