This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.
The first article is about Federal tax credits used by home buyers to acquire commodities. In order to acquire a commodity, one must undergo through some steps before the set deadline in that a form to buy an item must be signed by April 30 and then the purchase need to be completed by June 30. Married couples qualify for a home purchase of up to $800,000. If one owes less in taxes then the credit, what happens is that the Internal Revenue Service will send back a refund check. However, nowadays one has to investigate the financial status in order to get a mortgage. Before you think of getting a mortgage, it is important to note the following because they are a pre-requisite. First you must be employed and recent pay stubs and two years of W-2 forms serving as a proof that you possess other assets and your tax return. This means that the amount of income one earns determines the amount of loan one gets. Mortgage rates are as low 5% for a 30 year and 4% for a shorter period. There is an appraisal challenge encountered in this business. This is as a result of home prices falling in most of the markets and therefore an appraisal below the purchase price puts the deal at a risk of making loses. The reason behind this is that low appraisal means the buyer must dig deeper into the pocket or the seller should lower prices to maintain the deal.
Mortgage insurance costs depend on the insurer, credit scores and deposits. This cost ranges from $300 to $1000 a year for every $100,000 one borrows. If one moves back from home within three years, one has to pay back tax credit. Therefore it is a good practice for one to consider owning a home for more than five years to prevent incurring unnecessary costs like tax.
According to the second article, one expects prices in mortgage securities to lower because the central bank has stopped its historic $1.25 trillion mortgage-purchasing program which was aimed at stabilizing the housing market. This did not sound good to the investors because they were bound to lose a big deal. Normally, government sponsored mortgage bonds have some risks associated with them. They produce more than the treasury because the investors can be repaid early enough if borrowers refinance. What should be noted with the mortgage market is that it is highly sensitive to interest rates in that small changes can lead to big swings in refinancing activity. In other words, when interest rates happen to fall, it leads to rising of refinancing and also the prepayment risk. Therefore, when interest rates rise the opposite can also happen. People halt refinancing and hence investors keep the yield they have although they miss out the opportunity to utilize the rising yields elsewhere. Many managers feel that they find good deals in the mortgages that lack government intervention. Managers should be mindful of the gap when they attempt to take risks to earn yields to surpass the treasury.
Mortgage business is greatly affecting the economy of USA positively in many ways because of late it has become a lucrative business especially at this time when the country is rapidly recovering from global economic crunch. The industry is becoming huge and developed as time progresses because many investors are realizing the importance of this booming business which offers a wide range of products to the customers and repayment options. It is evident that the United States of America has the most active mortgage market in the whole world where the mortgage services are provided by different investors who includes individuals and organizational mortgage providers. Competition in this area of mortgage business provision has recently become stiff because many investors are realizing the economic benefits realized from this business and therefore this has facilitated the availability of a wide range of mortgage products in the market. The government needs not to get involved in the mortgage business industry because it frightens away the investors who normally feel that the government is out there to exploit them. Investors need to conduct a market research analysis concerning the mortgage business in order to fully understand the customers' demands to ensure they are satisfied. They have to consider the interest rates charged on the mortgage loans given in order to attract more customers to go for those loans and hence they make a kill this way. Mortgage mode of acquiring items has assisted many people who could not have afforded the most expensive luxurious homes. This has aided in reducing the creation of a society that is not stratified in terms of those who have and those who have not. To the government, the mortgage business is of great economic importance in that it collects revenue from those investors in terms of tax. On the other hand, investors earn their living through this booming business and also the mortgage companies offer some form of business opportunities in those companies. By doing so, United States of America has gone a milestone higher in reducing unemployment.
The disadvantages of the mortgage business cannot be overlooked. Some people when filling the loan forms do not read all the documents containing the instructions and terms and conditions of the loan. After taking the mortgage they later realize that it contains some more instructions which could be more binding than the customer expected. When the customer fails to repay the loan, the home may be reclaimed by the mortgage company leaving the customer frustrated. Therefore, although mortgage is a good way of acquiring a commodity, it should be used with care to prevent such instances.