Mortgage Lowdown

–By Priya Jestin, Staff Writer

The Office of Federal Housing Enterprise Oversight recently announced that it would freeze the size of so-called conforming loans that carry lower interest rates. This announcement was made after U.S. home prices fell in October for the first time in 13 years.

The average price of a single-family home fell 0.2% to $306,258 in October. This is supposed to be the first decline in prices since 1993. Data from 14,729 loans made by 82 different lenders is used to tally the average home price. The agency is expected to freeze the conforming-loan limit at $417,000 and defer for one year the reduction mandated by law to reflect the October price decline. The decline in prices is attributed to the cautions attitude adopted by potential buyers who are waiting for prices to stop falling. This means the housing market is flooded with unsold properties.

A home mortgage can help you get many tax deductions because you can deduct a portion of the interest that you pay on the mortgage. For those who don’t know, home mortgage interest is any interest that you pay on a loan for which you use your home as collateral. It need not be the first mortgage that you took to buy your home. If you have managed to pay off that loan and have secured another one, you can still get tax deducted from the interest on that loan. Only, you have to fulfill certain conditions to avail of this tax benefit:

• You have to complete a Form 1040 and include an itemized list of deductions that you included on Schedule A
• You must be the person who is legally liable for the loan
• The home you use as collateral for the loan must be your main home or a second home

A good credit score is of great help when you apply for a mortgage. The better your credit score, the easier it will be for you to get a loan. So, if your score is not too good and you want to improve it before you purchase your dream home, try this tip to get your score back on track. Always TRY to pay your bills on time. Nobody likes people who ‘forget’ or delay repaying their bills. Did you know that if you delay payment on your bills by 30 days or more, it can lower your score by 50 points or even more?

So, you realize how imperative it is that you pay off your bills as soon as you receive them. But if you cannot pay your bills for some reason like being tied down with many things or if you have a habit of forgetting, you can easily go online and automate your bill payment procedure. This way, you don’t have to worry about getting late. If you have too much debt and begin to fall behind or cannot see a way out of your financial mess, it probably is time for you to get credit counseling.

One of the biggest problems with reverse mortgages is that this popular program does not go far enough in extending seniors the funds they need. A ruling by the U.S. House of Representatives last month has now changed the scenario by taking steps to eliminate the geographical barrier by passing the Expanding American Homeownership Act of 2006, which would create a single national loan limit for the HECM program equal to the conforming Freddie Mac loan limit of $417,000 for 2006. Mortgage101.com reports:

Raising the local loan ceilings for senior borrowers would be well received. Two privately funded national studies showed participants were frustrated with the inability to fully tap their large and growing equity. Respondents noted their increasing property values and living expenses, as well as their difficulty in making ends meet with the current HECM loan limits.

Read more:House passes national reverse-mortgage loan limit