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Homeownership More Accessible and Affordable in Raleigh with New FHA Mortgage Insurance Premium

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Are you in the market for a new home but worried about the cost of mortgage insurance? Well, we’ve got some excellent news for you! The Federal Housing Administration (FHA) has announced a 30 basis point reduction in their mortgage insurance premiums, providing some much-needed relief to homebuyers across the country.

In this special article, Raleigh mortgage broker and Certified Mortgage Advisor Kevin Martini explores the implications of this change and offering valuable insights into what it could mean for both current and future homebuyers, as well as the housing market.

For those who are not familiar with mortgage insurance, it is an insurance policy that protects lenders in case a borrower defaults on their loan. If a borrower defaults, the lender can file a claim with the mortgage insurer to recoup their losses. Mortgage insurance is typically required for borrowers who put down less than 20% on their home purchase, as they are considered to be at a higher risk of default.

FHA loans are designed to help first-time and repeat homebuyers plus those with lower credit scores or smaller down payments qualify for a mortgage. These loans are backed by the Federal Housing Administration and offer several benefits to borrowers, including lower down payment requirements and more relaxed credit score standards. However, they also require borrowers to pay mortgage insurance premiums.

The recent FHA announcement on February 22, 2023 by the FHA to reduce their mortgage insurance premiums by 30 basis points, effective on March 20, 2023, could result in significant savings for FHA borrowers. For example, a borrower with a $200,000 FHA loan who puts down 3.5% could save over $50 per month on their mortgage insurance premiums. Over the life of the loan, this could add up to thousands of dollars in savings.

This reduction in mortgage insurance premiums could make homeownership more accessible and affordable for first-time homebuyers or those with lower incomes who may struggle to afford a larger down payment. Additionally, this change could have positive implications for the overall housing market. By reducing the cost of homeownership, more people may be encouraged to enter the market, leading to increased demand and higher home values.

The Martini Mortgage Group can help you find the right mortgage for your unique situation. Since a FHA loan is not the only option that offers a low down payment, it can be overwhelming to know where to start. Our Raleigh based mortgage strategists are here to guide you through the process, answer all your questions, and ensure that you feel confident and informed every step of the way.

If you’re ready to explore your options and find the perfect mortgage for you, give us a call today. With our expertise and experience, we’ll help you achieve your dream of owning your own home while also saving you money with the reduced mortgage insurance premiums offered by the FHA.

First-Time Homebuyers Tax Credit | Martini Mortgage Group

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Many first-time homebuyers in North Carolina may be eligible to save up to $2,000 a year with the Mortgage Credit Certificate (MCC) offered by the Martini Mortgage Group in partnership with North Carolina Housing and Finance Agency (NCHFA).  This tax credit is not just for the first year, it is up to $2,000 every year as long as the home remains your primary residence.  

A MCC allows eligible first-time homebuyers to receive a federal tax credit of 30% of the mortgage interest paid annually on existing homes (50% on new construction). If you are one of the many that will qualify, you could save up to $2,000 per year on your federal tax liability.

Martini Mortgage Podcast Special Episode 172: Tax Credit 

Difference between Tax Credits and Tax Deductions

Understanding the difference between tax credits and tax deductions can help reduce your tax burden. A tax credit directly reduces the amount you owe to the government, while a tax deduction reduces your taxable income. With the MCC you are able to get both, assuming you itemize your tax return.

Imagine that after all eligible deductions are taken out of an individual’s income, they come to be taxed on $50,000. For example, a tax credit of $2,000 in this case would help reduce the tax liability from $5,000 (at a rate of 10%) to $3,000 – for a tax savings of $2,000 overall.

A tax credit directly reduces the amount of tax you owe dollar-for-dollar.  So a $2,000 tax credit lowers your tax by $2,000. 

Kevin Martini | Certified Mortgage Advisor and Raleigh Mortgage Broker

On the other hand, if this person were able to have their taxable income reduced from $50,000 to $47,500 through a tax deduction of $2,500 – their tax bill would be significantly lower at just $4,750 (from previously calculated: 10% x 50000 = 5000). Clearly understanding the difference between tax credits and tax deductions could result in significant savings for individuals or companies who are filing returns with the government.

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To learn more about tax benefits of owning a home and having a mortgage, check out this informative article called: Tax Benefits to Owning a Home and Having a Mortgage

Are you eligible?

You may be eligible if:

  • you are a first-time homebuyer or military veteran or buying in a targeted census tract
  • you meet the income limits and sales price limits
  • you are purchasing a home in North Carolina
  • you will occupy the home as your primary residence within 60-days of closing
  • you are a legal resident of the U.S.

To determine your eligibility and property eligibility, contact either Kevin Martini or Logan Martini with the Martini Mortgage Group.

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How Does The Gift Tax Work When Using Gift Funds To Buy A Home By Raleigh Mortgage Broker Kevin Martini 

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Are you thinking of using gift funds to purchase a new home? It can be a great way to make the dream of homeownership a reality, but most people don’t realize that it comes with its own set of rules and regulations. The gift tax is one such rule – have you heard of it? The Martini Mortgage Group is passionate about helping their clients understand how the process works so they can confidently begin their journey towards homeownership. This special article, will walk through everything you need to know about the gift tax when using gift funds to buy your first home in Raleigh or any city for that matter.

$17,000 Annual Exclusion

Every year, the federal government give each of us allowance to gift anybody $17,000 per year without incurring any gift tax in 2023 – this is up $1,000 from 2022! It is important to note, it is $17,000 per person per year not $17,000 in total.

The good news is that, if you are the one giving the gift, there is no time limit on when you can give it. You can give gifts any time during the year, up to a total of $17,000 for 2023. In other words, you could give $10,000 in February and another $7,000 in December and there would be no gift taxes due.

$12,920,000 Lifetime Exclusion 

What most people don’t realize, is that there’s a second allowance of $12,920,000 called the Lifetime Exclusion!

Let me illustrate by example: you want to help your child buy a home and you want to give them $117,000. Wait, that is $100,000 more than what you can give you out of $17,000 annual exclusion – no problem thanks to the Lifetime Exclusion.

With the Lifetime Exclusion and in 2023 the Lifetime Exclusion is $12,920,000 you can use any of it during your lifetime.  When you use it, it simply reduces your estate tax exclusion by that amount.

So in our illustration, if you gift you $117,000 to your child, you would take $17,000 out of your Annual Exclusion and $100,000 out of your Lifetime Exclusion. It is critical to highlight, your Annual Exclusion replenishes each year however your Lifetime Exclusion does NOT replenish).  With this illustration, assuming it is 2023 and you have never used your Lifetime Exclusion you will have maxed out your 2023 Annual Exclusion for your child and your Lifetime Exclusion would be reduced from $12,920,000 to $12,820,000.

Now, if your estate is less than $12,920,000, this would not be a problem at all, because your heirs would have no estate tax anyhow. However, if my estate is more than $12,920,000 then your  heirs would have to pay estate taxes on anything inherited above $12,920,000.

Yes, the Lifetime Exclusion is used for both gift and estate tax purposes. So every time it use it to not pay gift taxes, you’re reducing your estate tax exclusion. 

Need To Know By Certified Mortgage Advisor and Raleigh Mortgage Broker Kevin Martini

  • No Relationship Required: You don’t have to be related to use either the Annual or Lifetime Exclusion. You could  gift $17,000 a year to a complete stranger and you would have no gift tax. You can also gift money to a complete stranger using your Lifetime Exclusion, and you would have no gift tax.
  • No Tax to the Gift Recipient: Everything we just talked about applies to the person GIVING the gift. What about the person RECEIVING the gift? Well, here’s some more good news: there is no tax due by the gift recipient!
  • $25,840,000 Total Exclusion for Married Couples: One thing to keep in mind about the Lifetime Exclusion is that the amount changes each year. In 2023, the exclusion is $12,920,000, but it is scheduled to go up in the years ahead because it is indexed to inflation. Also, keep in mind that you can ‘port’ over your $12,920,000 to your spouse if I’m married. This would mean, a married couple could have a total joint exclusion of $25,840,000! Hence, if you are married and your net worth is less than $25,840,000, there is absolutely no reason whatsoever for you to concern yourself with the gift tax. That’s because even if you gift your entire net worth during your lifetime, you would pay $0 in gift taxes and your heirs would pay $0 in estate taxes. This is why the gift tax is really a non-issue for most people!
  • Additional Paperwork May be Required: If you’re using the $17,000 annual bucket, the gift doesn’t need to be reported to the Internal Revenue Service (IRS) if you follow the proper procedures. However, if you’re using the $12,920,000 Lifetime Exclusion, you would need to file a gift tax return with the IRS (even though no gift tax would be due). This is done to simply notify the IRS that you’re using part of your gift/estate tax exclusion.
  • Use Separate Checks: Make sure the checks are written by the specific individuals who are giving the gift. In other words, if mom is gifting you $17,000, and dad is also gifting you $17,000, you’ll need two separate checks: one from mom and one from dad. NOTE: during the mortgage process, you both may need to “source” these funds from a mortgage underwriting standpoint. Please consult with Martini Mortgage Group before you do anything so that we can discuss the specific details of your situation and make sure this is all done properly.
  • Eligible Gift Donors With Conventional Loans: “A gift can be provided by: a relative, defined as the borrower’s spouse, child or other dependent, or by any individual who is related to the borrower by blood, marriage, adoption or legal guardianship; or a non-relative that shares a familial relationship defined as a domestic partnership (or relative from a domestic partnership), individual engaged to marry the borrower, former relative or godparent.” Fannie Mae Seller Guide B3-4.3-04 Personal Gifts (12/14/2022)

Being informed and armed with knowledge is vital in making sure that you make the best decision for yourself and your family when it comes to homeownership. The Martini Mortgage Group stands ready to help navigate you through all aspects of this process giving you the confidence needed to purchase your dream home. We are here to carefully explain rules and regulations regarding using gift funds to secure secure the proper mortgage.

Don’t wait any longer – contact the Martini Mortgage Group today!

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Kevin Martini

NMLS 143962 | Certified Mortgage Adviso

Martini Mortgage Group at Gold Star Mortgage Financial Group, Corporation | NMLS # 3446 | 507 N Blount St, Raleigh, NC 27604 | (919) 238-4934 | www.MartiniMortgageGroup.com | Kevin@MartiniMortgageGroup.com | Equal Housing Lender

    PLEASE NOTE: THIS OVERVIEW IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL, TAX, OR FINANCIAL ADVICE. PLEASE CONSULT WITH A QUALIFIED TAX ADVISOR FOR SPECIFIC ADVICE PERTAINING TO YOUR SITUATION. FOR MORE INFORMATION ON ANY OF THESE ITEMS, PLEASE REFERENCE IRS PUBLICATION 559. ALSO, THIS ARTICLE REFERENCES THE FEDERAL GIFT TAX. YOUR STATE GIFT TAX LAWS MAY BE DIFFERENT.