Buying Your First Home

 First-time homebuyers (FTHB) are taking advantage of one of the best real estate environments we have ever seen. Home affordability this year has been at an all time high with low interest rates and declining home prices. However, buyers on the fence should not be complacent.

Home prices in many markets have not only stabilized but are rising. Interest rates, while still incredibly attractive, could be poised to rise in coming months as stimulus from Washington is scheduled to end in December. Finally, the tax credit of $8,000 for qualifying FTHBs is currently scheduled to end November 30, 2009.

Why Buy a Home?
One of the first questions someone naturally asks themselves as a renter is, "Why should I become a homeowner?" There are many reasons, but probably the first one is the pride in knowing that you have established a foundation for building personal wealth as well as a basis for future memories.

Thinking back to your childhood, many of your fondest memories may be from events in your childhood home. Holidays, birthdays, and family events all typically took place in your home growing up. Anything you and your parents wanted to do to your home, within reason of course, were options of your choosing.

Knowing that you have taken a major step in financial independence also creates a sense of pride that few things can replicate. However, it's one thing to say owning a home makes sense, it's another to actually look at how owning a home can help you financially.

Financial Reasons to Buy
Aside from the emotional implications, any decision involving money has to make sense. There are few things anyone can do that have a greater impact on their finances than owning a home.

The reasons to buy your first home are numerous, not only today, but anytime. In a comparison of renters versus homeowners, the U.S. Federal Reserve Board of Consumer Finance found that the average net worth of renters was $4,000 compared to homeowners at $184,400.

Building personal wealth can be accomplished a number of ways but owning a home provides a path that takes advantage of several ways at once, compounding their net impact on your bottom line. Increasing equity leveraged from the reduction of mortgage debt and home price appreciation are one path. Income tax deductions both from the sale and ownership of the property are another.

Move in and Watch it Grow
What do a tree and the impact of owning a home on personal wealth have in common? Neither grow quickly but both grow larger and become stronger over time. A home purchased today at a price of $150,000 will grow in value to $364,000 over 30 years at an appreciation rate of just 3%.

While the impact of home values over the last three years can not be ignored, during the period from 1950-2002, U.S. home prices appreciated at an annual growth rate of 4.8%, or significantly greater than the example just given.

The Impact on Your Wallet – Today
Owning a home creates a number of items that can result in both an immediate and long lasting boost to your wallet. The first is time sensitive and needs to be acted on quickly to benefit.

Income Tax Credit. The income tax credit available from the IRS for up to $8,000 for qualifying FTHBs is scheduled to end November 30, 2009.

Points Pay Twice. Many buyers today are opting to pay points to lower their interest rate. In some cases, this can be a negotiated expense that the seller may pay to incentivize you to purchase their home. Points paid to lower an interest rate are considered pre-paid interest by the IRS and would result in an income tax deduction for the buyer, regardless of who pays it.

Mortgage Interest. One of the largest tax deductions most people report each year is the amount of interest they pay on their mortgage. While not exact, on a $150,000 mortgage with an interest rate of 5.50%, the amount of the first year's interest would be approximately $8,000. For a family earning $70,000 in a federal tax bracket of 25%, this amounts to a significant savings, effectively reducing the amount of a homeowner's monthly mortgage payment. For those that pay state income taxes, the impact is even greater.

Private Mortgage Insurance (PMI). PMI is insurance that is mandated by a lender when the amount of a down payment is less than 20% of the purchase price. The purpose of PMI is to protect the lender in the event a borrower later falls into default and the home falls into foreclosure. PMI under most circumstances is a tax deductible expense. Consult your tax advisor for more details.

Real Estate Taxes. Property taxes, which can be normally included in the monthly mortgage payment to your lender are a deductible expense. This deduction also effectively reduces the monthly mortgage payment for the borrower at tax time.

Possibly More Dough. These are not the only expenses that can be deducted from your income at tax time. Other items can include moving expenses associated with a job relocation and home improvements that are deemed energy efficient as determined by the Recovery Act. As always, consult with your tax advisor for specific details about how each type of deduction mentioned in this article could apply to your situation.

Act Now and Plan Accordingly
If you or someone you know plans on purchasing a home in time to take advantage of the tax credit, there are some things to keep in mind. The last day to close to take advantage of the tax credit is Monday, November 30, 2009. Keep in mind, this follows Thanksgiving week. With the holiday offering a shortened work week for many, this will make closing at the end of the month more challenging.

Another item to take into consideration is recent legislation impacting a lender. If the Annual Percentage Rate, or APR, changes by more than .125% from the time of initial application, the lender is required to re-disclose the Truth in Lending statement. When this document must be re-disclosed, time must be allowed for a home buyer to receive the document in the mail and review it for approval.

One way to minimize any need to re-disclose your loan documents is to either lock early in the application process at the interest rate on the loan application or submit an initial loan application with a higher-than-current-market interest rate. So, if current rates are 5.50%, your mortgage professional may suggest your application reflect an interest rate of 5.75% for underwriting and initial loan disclosures.

A prudent buyer may plan for closing to occur no later than November 24, 2009 to allow for any possible delay and still take advantage of the tax credit before it expires on November 30. Another prudent decision would be to allow a minimum of 45 days to get your loan approved and closed. Just be sure that when you lock your interest rate, you allow for a cushion in your lock expiration date in the event your closing is delayed.

This would mean that, for your protection, you should work to get your home under contract not later than the first weekend in October. While some lenders may still be able to accommodate a later purchase contract signing, submitting your application earlier is advisable due to the volume of applications lenders may receive during this time.

Best Path to Take Now
Buying a home today could be the best financial decision a renter can make. Not only does this decision help turn a residence into a home, it establishes a foundation for future personal wealth, both immediately and over time.

To decide what works best for you or someone you know, get pre-approved today so you know exactly what you may qualify for both in purchase price and monthly payment. This one action can remove a lot of stress and simplify the home search process since you will know what you can afford.

2:42 PM - Oct. 23, 2009 - comments {1} - post comment

Men really ARE from Mars

This article is by Diann Patton of Coldwell Banker.

It often seems as though men and women are from different planets, but every day millions of couples navigate through day-to-day and even life-altering decisions. Because a home is the biggest purchase most people will make in their lifetime, Coldwell Banker Real Estate LLC surveyed 1,000 individuals to discover how much men and women differ in the home-buying process.

The real estate company engaged a third-party research firm, International Communications Research (ICR), to delve into the innerpsyche of men and women, asking questions such as “How long did it take for you to know that the last home you purchased was right for you?” and “If you found the home of your dreams but had concerns about its security, would you still be interested?” Coldwell Banker Real Estate also surveyed couples on additional topics, such as “Who wears the pants in the relationship?” when it comes to making major financial decisions.

“The results were surprising,” said Diann Patton, the Coldwell Banker consumer real estate expert. “Not only did we uncover some of the inherent differences between men and women, but we also pinpointed a number of ways that the two genders are actually the same. For example, both men and women are increasingly concerned with having a space to work in their homes- something we would not have seen 40 years ago.” Patton continued, “We also found that feeling insecure about a home’s safety is a deal-breaker for most people, regardless of gender.”

Patton noted this topic is particularly timely given that many first-time homebuyers are hoping to take advantage of the $8,000 tax credit before it expires on December 1, 2009.

Below are some key highlights from the Coldwell Banker Real Estate study:

Women may be inclined to make up their mind more quickly than men.
-When asked how long it took before they knew their home was “right” for them, almost 70% of women had made up their mind the day they walked into the house, vs. 62% of men. Conversely, significantly more men needed two or more visits: (32% of men vs. 23% of women).

Women would rather live closer to their extended family than to their job.
-55 percent of women find it more important to be closer to their extended family (those that do not live in their household) than to their job, compared to only 37% of men.

A home’s security is a deal-breaker for both men and women.
-64 percent of women said that if they found the home of their dreams but had concerns about its security, they would no longer be interested. More than half of men agreed (51%).

Couples say that no one “wears the pants in the relationship” in terms of major financial decisions.
-When asked who wears the pants in the relationship (when it comes to major financial decisions, such as purchasing a home), almost 70% of respondents living with their significant other said it’s actually mutual.
-However, 23% think that they, themselves, wear the pants in the relationship, not their partner. More men than women said this (26% vs. 20%, respectively).

Men and women agree on how they would use a spare room, for the most part.
When the respondents were asked how they would use an extra 12 x 12 room if it could be anything they wanted, men and women agreed on the top three most popular, and very practical, responses:

-Bedroom: 25%
-Office/Study: 15%
-Family Room / Den: 11%

However, men really do want a “Man Cave.”
-Interestingly, out of the 8% who indicated they would turn that spare room into an entertainment center, it was a preponderance of men leading the charge. In fact, four times as many men as women said they would use the extra space for recreation / entertainment.

1:29 PM - Oct. 3, 2009 - comments {0} - post comment

How the First Time Homebuyer Tax Credit Works

This article is by Kimbrough Gray. Ki has sold Austin real estate for almost 10 years.

There is a provision in the Housing and Economic Recovery Act of 2008 that allows first time home buyers the ability to receive a credit on their taxes of up to $7,500 for purchasing a home. There is also a provision in the American Recovery and Reinvestment Act of 2009 that expands this tax credit for qualified first time home owners. The provision is called the first-time homebuyer credit.

The 2008 first-time homebuyer credit was created to infuse the slumping housing market, and is treated like an interest-free loan. Qualified participants were required to repay the loan interest-free over a period of 15 years, making 15 equal annual payments. You can find more details about this tax credit on the IRS website.

The provision in the American Recovery and Reinvestment Act of 2009 increased the first-time homebuyer tax credit to $8,000 for purchases made January 1 - November 30, 2009. In contrast to the 2008 tax credit, new home owners do not have to repay the credit as long as they do not sell their home within three years of closing on the home.

You need to be armed with the facts before you go to purchase a home on the assumption that you'll receive the credit. The following FAQs will help you navigate through the quagmire of confusion that has surrounded this tax credit.

* Who is eligible? Taxpayers who have not owned a home within the U.S. three years prior to purchasing a new or resale home in the United States. The closing and transfer of title on the home must be completed between April 9 and December 31, 2008 for the 2008 credit, and between January 1, 2009 and November 30, 2009 for the 2009 credit.

* What is the amount of credit? The credit allows for 10 percent of the purchase price. The maximum credit is $7,500 for 2008 and $8,000 for 2009.

* Are there income limits? Income limits are $75,000 for a single filer and $150,000 for a couple filing jointly. The IRS bases the credit on your modified adjusted gross income (MAGI). Your MAGI equals your adjusted gross income (AGI) plus IRA contribution deductions, foreign housing deductions, student loan deductions, higher education expense deductions and foreign income. Partial credit is available to some with higher MAGI.

* Does my home qualify? The home qualifies if it is the taxpayer's principal residence, is located within the U.S. and purchased between April 9, 2008 through July 1, 2009 for the 2008 tax credit, and January 1, 2008 through November 30, 2009 for the 2009 tax credit. For new construction, the date you actually occupy the residence will be considered the purchase date.

* What if I don't owe taxes or I'm exempt from filing? It doesn't matter. The credit applies to qualified applicants regardless of filing requirements, even to those who do not owe taxes or are exempt from filing. You may file solely to claim the first-time home buyer credit.

* How do I claim the credit? Although you are not required to claim the credit, you may do so by filing a Form 5405. You'll need to file the form with the applicable 2008 or 2009 federal income tax return.

* Does the tax credit act as a tax deduction? No. A tax deduction only diminishes the amount of income taxed. For instance, if the taxpayer's AGI is $40,000, then a deduction would reduce the amount taxed by $8,000, depending on the amount of applicable credit. The taxpayer would be taxed on the remaining amount of $32,000. Instead, the credit is directly deducted from what the taxpayer owes the government. If the taxpayer owes $2,000 to the IRS, then $6,000 would be the amount refunded to the taxpayer. If the taxpayer owes nothing, then the entire $8,000 would be refunded, depending on the applicable credit.

12:39 PM - Sep. 29, 2009 - comments {0} - post comment

Fannie Mae affects corporate relocations

This article is by Peg Guinta, CRP, Projects Director for RISMedia’s RIS Consulting Group.

 

Because of changes announced in June by Fannie Mae (FNMA), the largest mortgage purchaser in the country, transferring families’ purchasing power could be significantly impacted.

FNMA’s June 8th Announcement cites it will now disallow inclusion of secondary wage earner’s projected income in loan qualifying income ratios. Fannie Mae has in the past allowed “trailing secondary wage earner income” when determining housing affordability prior to a spouse or partner securing a position in the new location, but has now eliminated this policy.

Dual income families comprise about 70% of all corporate transfers so FNMA’s policy change may impact affordability for many whether purchasing or selling in corporate neighborhoods. For dual income families who rely on both a primary and secondary income to maintain lifestyle, securing employment at the new location in this economy may prove especially challenging.

Previous to this ruling, real estate agents and corporate administrators alike have seen many effects of this market: declining transfer acceptances, sluggish home sales, tightened mortgage lending and lengthier stays in temporary housing. Fannie Mae’s new policy may only reinforce these scenarios for certain corporate transfer populations.

To maintain mobility goals corporations must align relocation policy support with transferring family needs while keeping company objectives in mind. Employers should reevaluate relocation policy assistance periodically - especially when significant market changes in housing and mortgage markets occur, but not all do.

How can real estate agents support transferees’ buying and selling strategies?

Real estate agents are in an influential position in both the early inbound or outbound relocation phases and can help prepare transferring families for smoother passage ahead.

For corporate buyers, awareness and preparation are key:
• determine if your client is affected by the ruling and create awareness of its potential impact during pre-decision or familiarization trips to the new location
• if not already required by employers, urge mortgage preapproval prior to actual house hunting activities
• if not already provided by employers refer spouses/partners to employment assistance counselors and recruitment offices early in the process.
• research alternate lending sources having the ability to portfolio loans or sell to other investors.

For corporate sellers support may mean enhancements for their dual income buyer prospects. Agents’ price opinions and market reports should indicate if potential prospects are likely to be inbound corporate transfers who could potentially benefit by seller-provided incentives.

Appropriate marketing strategies in support of these buyer profiles could include assistance or incentives such as a:
• temporary mortgage rate buy down
• portion of buyer’s closing costs
• credit for first three mortgage payments.

While these seller-assisted incentives won’t change FNMA guidelines, it may attract buyers’ attention while offering a bridge of support until ‘trailing’ income materializes.

Some corporate employers already provide this type of assistance within home sale assistance policies, but many are not yet tuned into supporting seller-offered financial incentives for home selling transferees. In a market of multi-tiered challenges employers may be more receptive to allowing certain exceptions to support sales opportunities and perhaps also avoid another inventory property.

12:19 PM - Sep. 27, 2009 - comments {0} - post comment

New closing time lines

7:03 PM - Sep. 7, 2009 - comments {0} - post comment

5 ways to raise your credit score

Purchasing a home can feel overwhelming for buyers no matter how many times they've been through the process. And today, your credit score is more important than ever when it comes to your ability to buy the home you really want. If you are looking to improve your credit score, now is the perfect time to get started. Here are some great strategies you can utilize right away to give your score a little boost. And check out the accompanying video with Linda Ferrari from Credit Resource Corporation for even more details.

Create Some Balance: While paying down installment debt (car, school, mortgage, etc.) will definitely boost your credit score, paying down or paying off revolving debt, such as credit cards, can cause a quick jump in your credit score. The trick is to get and keep your balances below 30% of your credit limit on each card. For faster results, attack those cards with balances closer to their respective credit limits first, as opposed to those cards with simply the highest debt. Remember, if you pay off any credit cards completely, do not close your accounts without discussing it with your mortgage professional first. Cancelling those cards may inadvertently undo all of your hard work.

Know Your Limits: Make sure that your credit card issuers are reporting the correct limits on your accounts to the three major credit bureaus. Without an available limit, your account will appear to be maxed out at its highest reported balance each month. This could cost you up to 80 points in certain instances. Some creditors, such as American Express® and certain cards issued by Capital One®, actually have a policy of not reporting available credit. However, most companies will report your credit limits if you ask them in writing.

Take Some Credit: If you have a credit card account in very good standing, make sure that all three credit bureaus know about it. Just like your credit limits, some creditors don't report your information to all three credit companies – this is why credit scores often vary between bureaus. If this is the case, give them a call to find out why. Correcting this oversight could provide a significant boost to your score. Also, if you're in very good standing, ask your creditor for a lower rate or higher credit limit. This will increase the gap in the debt you owe versus the credit you have available. Sometimes hinting about closing an account can suddenly bring out the generous spirit of certain card issuers. Give it a try. The worst they can say is no.

Protect Your Interests: Your credit is calculated based solely on the information available to your creditors. If you have a HELOC, make sure it's listed as a mortgage or an installment account on your credit reports and not a revolving debt. If you had a bankruptcy, be sure that all items associated with the bankruptcy are being reported correctly, that is with a zero balance. This action could increase your score by 50-100 points. Because simple mistakes like these can wreak havoc on your credit score, it's important to monitor your credit every four to six months.

Even the Score: If you find information on your credit report that you believe is inaccurate or incomplete, then you have the right to dispute it free of charge. For the fastest results, visit the appropriate credit bureau's website and file a complaint online. If supporting documents are necessary, you have to file your dispute by mail.

With just a little bit of effort, you could be well on your way to a higher credit score...and to owning the home of your dreams!

7:00 PM - Aug. 28, 2009 - comments {0} - post comment

Important dates for home buyers

There's no place like home," so the famous saying from The Wizard of Oz goes. And this year, that saying applies to many new home owners, as first-time home buyers (FTHBs) have accounted for 53% of total residential real estate purchases during parts of 2009. For those of you who have already bought a home, congratulations. For those of you still waiting, this is a call to action: It's time to get moving.

While it's true that the best environment home buyers have ever seen may have been from January to late May of this year, outstanding opportunities still exist for those who act soon. If you are planning to buy a home, there are important dates on the calendar that you need to take note of so you can act accordingly. These dates represent money-saving opportunities for consumers.

We May Never See Rates This Low Again
Beginning in late November last year, 30-year fixed rates plunged into the mid 4.0% range. So what prompted this precipitous decline? The Federal Reserve announced that they would start purchasing mortgage backed securities (MBS) issued by Fannie Mae, Freddie Mac and Ginnie Mae. The Fed made this decision because there was a lack of liquidity and buyers in the fixed income securities market. By becoming a buyer for the securities that determine interest rates, the Fed helped lower rates to stimulate the economy by absorbing supply not picked up by others in the markets.

Following the announcement by the Federal Reserve, home loan rates immediately responded, falling a full percentage point. When the buying started, home loan rates fell even more, sparking a frenzy in refinancing and buyers seeking financing.

However...and here's what you need to note...this program implemented by the Federal Reserve has a deadline! That deadline is December 31, 2009. And as the Federal Reserve has been the primary buyer for MBS, purchasing up to 85% of all MBS since March, the impact to rates when the program ends could be as dramatic as when the program was announced. This means that interest rates could conceivably rise to well above 6.00%.

In the month leading up to the announcement, interest rates had been exceptionally volatile, peaking on some days near 7.00% for a 30-year fixed rate loan with no points and fees. This kind of volatility often happens when investors are reluctant to purchase MBS and trading volumes in securities are light, causing rates to rise quickly if investors demand a higher return for their investment.

While the final impact to interest rates will have to play itself out, one thing is certain: without the Federal Reserve as a primary buyer of MBS, home loan rates could be primed for a spike if other investors do not pick up the slack that could result in 2010.

It is unlikely that interest rates will return to the sub-5.0% range again this year. Why? The purchase and refinance mortgages that have already occurred this year were packaged into Mortgage Backed Securities after they closed and were sold on the secondary markets. This added supply to the markets and the new Bonds simply outweighed what the Fed had allocated to buy. Still, the Fed's program is helping slow down the rate increases we are seeing...but remember; their program is due to end on December 31. That's why now could mark the lowest rates that will be seen for some time to come.

Would You Like $8,000? Buy a Home. Soon!
To stimulate the economy, Washington juiced up the stimulus plan passed last year in February. Two benefits for FTHBs were that the amount of the tax credit was increased from up to $7,500 to $8,000. And, more importantly, the amount of the credit does not have to be repaid!

To qualify for the credit the individuals buying a home cannot have owned a home in the last three years. So, while the credit is discussed as a credit for first-time buyers, anyone who has not owned a home in the last three years is eligible.

There are income limitations to fully qualify but they are quite liberal. Single tax filers earning up to $75,000 and joint filers earning up to $150,000 based on modified adjusted gross income can earn the full credit. A partial credit is available for those earning up to $95,000 and $170,000 respectively.

The amount of the tax credit is based on a percentage of the price of the home, specifically 10% of the purchase price, up to $8,000. This means if someone purchases a home for $70,000 their credit would be $7,000 and if the amount of the home purchased is $100,000, the credit would max out at $8,000.

Note! The deadline to take advantage of this opportunity is November 30, 2009. Close in December, and you just lost $8,000.

Homes Have Never Been More Affordable
FTHBs are leading the way, taking advantage of one of the best home buying opportunities ever, providing support for the real estate market. As indicated earlier, FTHBs have accounted for as much as 53% of purchases for any month this year.

Who can blame them? In short, no one. Home prices have fallen to levels not seen in years and interest rates hit their lowest point ever. This combination led to the highest home affordability ever recorded.

The National Association of Realtors® tracks what is known as the Home Affordability Index. The Home Affordability Index is arrived at as a function of both median home prices, available interest rates, and median family income.

The index represents the amount of monthly income that is required to pay a mortgage payment. In 2005, approximately 23.3% of a family's monthly income was required to carry a mortgage payment. With falling home prices and interest rates, the percentage of monthly income required to pay a mortgage payment is now approximately 15%.

This means that for a family at the median income level purchasing a home priced at the median income level, the monthly mortgage payment has declined nearly 36%! This is great news for anyone shopping for a home today.

Get Busy, Time is Short!
In order to take advantage of both the available tax credit and low interest rates, anyone going into contract should strive to have their purchase agreement not later than mid-October. This will allow some time cushion in the event anything pops up in the purchase process and still allow for closing in time to take advantage of the available tax credit.

Home prices have fallen to levels not seen since the start of the decade in many parts of the country, interest rates are still near all time lows, and the availability of free money from the IRS all mean that the time to act is now. It is always easy to look back and identify times people should have acted, and this could well be one of those times people will look back and say, "Wow, I should have bought a home in 2009!"

6:57 PM - Aug. 26, 2009 - comments {0} - post comment

Moving tips

When moving, many people are faced with weighing the options-should they hire movers or pack themselves? What are the benefits of doing either? What do most people forget when packing up and moving? How can you save money when moving? From FlatRate Movers, a nationwide leader in moving and storage, here are some tips to keep in mind:

• Order boxes and moving supplies early so you can start packing. Moving companies provide boxes that are purpose made and easily marked. If your moving company allows you to return unused boxes, order more than you think you’ll need, by 20%. Likewise, do not scrimp on tape. It is inexpensive and prevents boxes from splitting open. You need fresh felt tip pens for labeling. Use colored ready-stick labels to designate boxes to their respective rooms.

• Start a book about your upcoming move and keep it in one place. Create a “Move Book,” using a large noticeable notebook, to centralize all the important details of your move. It should contain any lists you make, including that of labeled boxes. Supplement this with a computer printout of box contents. E-mail this to yourself as a backup. You can also access it remotely.

• First, pack up what you don’t use. Items, such as books, you do not immediately need can be packed right away. Keep your list up to date. Do not make the boxes too heavy for a person to carry, and place heavier objects at the bottom.

• Document your media connections. Take photos of or make notes on how your media equipment is set up: television, sound equipment, modems and computer equipment. Keep track of your remote controls and wires so you can locate them quickly in your new home.

• Make arrangements for pets. Moving can be particularly stressful for animals. You may want to consider leaving them with a friend or retaining a professional pet boarding service.

• Plan to care for your valuables and vital documents yourself. Most homeowner’s insurance will not cover property in transit. It may be desirable to insure certain items separately. Remember to take photos in case you need documentation to support loss or damage claims. If the items are irreplaceable (family heirlooms) or complicated to replace (passports and birth certificates), carry them with you.

• Choose a good moving company. Good companies guide you through the process and minimize surprises on moving day. They have local knowledge and a proven track record, and they can also advise you on receiving building permissions. Moving companies have no incentive to create extra hours of work for themselves, if they work for a flat fee.

• Keep your moving receipts for income tax deductions. In many cases, moving expenses are deductible from federal income taxes. If you are moving because of a change in employment, you may be able to claim this deduction even if you do not itemize. Consult your tax preparer. Also note that there is an $8,000 tax credit for first-time home buyers in the economic stimulus plan, signed into law by President Obama. To learn more, visit www.federalhousingtaxcredit.com.

8:02 AM - Aug. 6, 2009 - comments {0} - post comment

Get prepared before thinking of buying a home

This article is from www.rismedia.com

Consumers need to get informed as they prepare to buy a home. Today, there are a growing number of obstacles for home buyers, including a higher credit score standard and more restrictions on credit. Despite current challenges in the secondary mortgage market, home loans are available to credit-worthy buyers and Oregon banks stand ready to assist prospective home buyers.

It's crucial that you have a thorough understanding of the changing market when shopping for a mortgage. Here are seven tips to help you do exactly that:

1. Learn about first-time home buyer programs. Consider taking a first-time home buyers course or visit with your local banker to find out about programs available to you, such as the new federal $8,000 first-time home buyer credit for 2009 home purchases.

2. Get pre-approved. Know the difference between “pre-qualified” and “pre-approved.” Getting pre-qualified is a casual process where the lender tells you how much you should be able to borrow based on how much money you make, how much debt you have and how much you have to put down on a house. Pre-approval occurs only after you actually apply for the loan and the lender gives you in writing the amount you can borrow. A buyer who is pre-approved is more attractive to sellers and their agents than one who is only pre-qualified. Once you find a mortgage that is best for you, get pre-approved before you start making offers on a home.

3. Be honest with the lender and yourself. You don’t want to borrow more than you can afford. Your bank can provide a calculator to determine if you can afford to borrow and if so, how much. The American Bankers Association has several home financing calculators available at www.aba.com/aba/static/calculators.htm.

4. Look at the basics of the loan. Don’t get distracted by all the bells and whistles. Choose the type of loan that makes the most sense for you.

5. Know your credit situation. Obtain a copy of your credit report and FICO score or VantageScore at least six months before you apply for a mortgage. This should give you enough time to challenge and remove any errors on your credit report and take care of anything that’s hurting your credit score. To obtain a free copy of your credit report, visit www.annualcreditreport.com.

6. Consider all the costs. A lender will review costs like fees, closing costs, points, homeowner insurance, and taxes. But consumers should also consider repairs and maintenance costs. As a homeowner, you are responsible for those additional costs - there won’t be a landlord to call.

7. Organize your finances before you go to the bank. While each bank may require different documentation, at a minimum you will need:

- Pay stubs.
- Tax returns.
- Financial statements (one that is less than 60 days old).
- Copies of additional monthly payments such as car loans, credit cards, student loans, etc.
- Any additional information (such as proof of additional income) that you think will help your banker to positively evaluate your credit request.

9:16 AM - Jul. 25, 2009 - comments {0} - post comment

Down payment questions and answers

With today's combination of lower home prices, some of the lowest interest rates the industry has ever offered, and the $8000 tax incentive for first-time buyers, buying a home has never been so attractive. The only real hurdle left for many Americans is coming up with a down payment. With this in mind, we've put together some of the most frequently asked questions we get about down payments in today's market.

Q. Are there any no-down payment programs left?

Yes. While it's true that most of the popular no-down payment programs disappeared in the wake of the subprime mortgage collapse, there are still two longstanding government-backed programs that offer mortgages with no down payment: the USDA Rural Development Program and the VA Loan Program.

A USDA Guaranteed Loan is a government-insured, 100% purchase loan. This means there is no down payment required if you – and the house you intend to buy – qualify for the program. Not all areas qualify, but you'd be surprised at how many neighborhoods in your area do. There are income and other limitations, but if coming up with a down payment is challenging, you might want to consider this program.

If you or your spouse is a military veteran, you may qualify for a 100% financed loan from the US Department of Veterans Affairs. More than 29 million veterans and service personnel qualify for this service benefit. Give us a call to find out if you're one of them.

Q. Are there any other government-insured programs that can help someone struggling with a down payment?

Yes. In 1965, the federal government created the FHA loan programs to encourage homeownership throughout the country. FHA-insured mortgages offer many benefits, including a minimum down payment of 3.5%. FHA-insured loans have grown in popularity recently due to the seller's ability to pay closing costs up to 6% and a temporary increase in loan limits up to $729,750 in certain high-cost areas, which allows more potential buyers to utilize this program.

Q. May I use a gift from family members as part of my down payment?

Yes. In many cases, immediate family can provide monetary gifts to be used as a down payment. There are restrictions of course, and strict documentation will be required, but we will gladly walk you through the finer details of this process. Be sure to mention this option when you're filling out an application with us.

Q. May I use funds from my IRA for my down payment?

Yes. First-time home buyers can use funds from an IRA under certain circumstances for a down payment. The rules regarding this option, however, can be complicated, especially with a Roth IRA, and it's important to understand any and all tax implications before tapping into these accounts. Please talk to your tax professional before making any decisions. If you don't have one, we'll gladly refer you to one we work with on a regular basis.

Q. May I use the $8,000 tax credit as my down payment?

No. At the time of the writing of this article, qualified first-time home buyers do not have direct access to the $8,000 credit to use as a down payment. In May, HUD officials made an announcement to the contrary, but statements backing the announcement were quickly withdrawn from the HUD website. This doesn't mean that HUD and lawmakers will not allow this in the future. We're following this issue closely and will let you know if anything changes. Just keep reading our newsletters and other materials we send to you or give us a call and we'll let you know if any progress has been made.

3:35 PM - Jul. 19, 2009 - comments {0} - post comment

Things NOT to do before purchasing a home

This list is put together by Todd Little, President of America's Housing Educators

No Major Purchase of Any Kind

Do not become involved or create debt of any kind.  This includes furniture, appliances, electronic equipment, jewelry, vacations, expensive weddings, and most importantly, automobiles…

Don’t Move Money Around   When a lender reviews your loan package for approval, one of the things they are concerned about is the source of funds for your down payment and closing costs. Most likely, you will be asked to provide statements for the last two or three months on any of your liquid assets. This includes checking accounts, savings accounts, money market funds, certificates of deposit, stock statements, mutual funds, and even your company 401K and retirement accounts.
If you have been moving money between accounts during that time, there may be large deposits and withdrawals in some of them.
The mortgage underwriter (the person who actually approves your loan) will probably require a complete paper trail of all the withdrawals and deposits. You may be required to produce cancelled checks, deposit receipts, and other seemingly inconsequential data, which could get quite tedious.

Perhaps you become exasperated at your lender, but they are only doing their job correctly. To ensure quality control and eliminate potential fraud, it is a requirement on most loans to completely document the source of all funds. Moving your money around, even if you are consolidating your funds to make it "easier," could make it more difficult for the lender to properly document.

So leave your money where it is until you talk to a loan officer.

2:41 PM - Jul. 11, 2009 - comments {0} - post comment

Credit score myths

With many Americans considering a home purchase or refinance, seeking a new job, purchasing a new car, or striving to pay off credit card debt, 2009 might be the year of the credit score, said Bills.com president Ethan Ewing.

“Many Americans hold mistaken beliefs about credit scores,” cautioned Ewing, who heads the free online consumer portal at Bills.com. “Misinformation on television and in hearsay from friends and neighbors only compounds the problem.”

Here are the top 10 commonly held myths surrounding credit scores:

Myth #1: A credit score is a credit report. The credit report is a detailed listing of all debts and payments, going back throughout an individual’s entire payment history, Ewing explained. For each entry, it shows the creditor’s name, amount owed, the highest balance owed, the available credit, whether the account is open or closed (and who closed it), the number of late payments and whether the account is in default. A credit score is a number between 300 and 850 that is based on complex formulas incorporating all the data in the credit report.

Myth #2: Those who are not in default do not need to check their credit report. Everyone should check his or her credit report at least once a year (quarterly is not a bad idea in today’s market) to be sure the report contains no erroneous information. Visit www.annualcreditreport.com for a free, no-obligation copy of the report.

Myth #3: Checking a credit report damages credit. Reviewing your own credit information has no effect on a credit score, Ewing said. Neither does a credit report review by a prospective landlord or employer.

Myth #4: Everyone has one credit score. Credit score calculations are compiled using data from three different credit scoring agencies (Equifax, Experian and TransUnion). The resulting scores might vary slightly among the three agencies if they have slightly different information, but they will be similar.

Myth #5: Married couples share a credit score. If all of a couple’s accounts are joint, their scores will likely be similar, but each individual maintains a unique credit record and credit score. On the flip side, after a divorce, ex-spouses need to follow protocol to have creditors remove either party from a joint account.

Myth #6: Shopping for a loan destroys credit. It is true that “hard inquiries” - examinations of a credit score in preparation for extending credit can have a small negative impact on credit. However, credit bureaus take into account that consumers might inquire about a loan from multiple mortgage companies or auto lenders. “If multiple inquiries are received from the same type of lender within a 14-day period, the credit scoring companies do not count each inquiry against the borrower,” Ewing explained. But credit card account inquiries to open new accounts are counted individually.

Myth #7: To improve a score, close unused accounts. An important component of a credit score is available credit, or the unused credit that has been offered (on a credit card, for instance) but not used. Closing unused cards removes those available balances from the equation and can actually lower a credit score. Today, some banks are automatically lowering limits or closing accounts to reduce their own credit exposure. Individuals whose debt load is manageable should not experience an extreme effect on their scores.

Myth #8: To boost credit quickly, just pay off bills. Credit scores reflect performance over time. Scores will not change overnight.

Myth #9: For a fee, vendors can fix a bad score. Again, credit scores show historic behavior. Be cautious about companies that claim to “fix” or “repair” credit. “You yourself can remove inaccurate information,” Ewing said. “Beyond that, be aware that some companies send credit scorers a deluge of letters asking that they verify - and in the process, remove all past negative information. If and when truthful information is verified, however, it will quickly return to the credit report.”

Myth #10: Never get help - it is too hard on credit. It is true that credit counseling, debt settlement and bankruptcy all can cause significant black marks on a credit report. “If you are in real trouble, however, you can and should seek help,” Ewing urged. “Which option you choose will depend on the severity of your situation. Credit counseling can help to manage bills, and lower interest rates and monthly payments to creditors. Debt settlement firms can negotiate to lower the principal amount of your debts, typically providing a faster path to debt freedom than credit counseling. Bankruptcy, an even more serious alternative, should be discussed with a bankruptcy attorney.”

“Credit is important, but knowing the truth about credit might be even more important,” Ewing concluded. “Before taking action that might hurt or help your score, check your facts to be sure your actions will help your financial picture.”

5:54 PM - Jun. 21, 2009 - comments {0} - post comment

Move up buyers have advantages in this market

Potential home buyers who aren’t eligible for the $8,000 first-time home buyer tax credit because they currently own a home actually have what could be an even bigger advantage - the opportunity to buy a new home that is bigger and better than they could have just a year or two before. “Now may be an ideal time for any family looking to upgrade from their starter home to one more suited to their current or future needs,” said Joe Robson, chairman of the National Association of Home Builders and a home builder from Tulsa, Okla. “Buyers are able to get more home for their money by taking advantage of current prices and interest rates, along with the bargaining power that comes from the large number of homes on the market.”

Here are the top five reasons current home owners should consider upgrading to their dream home:, which means you can buy more house than you could a year ago - for the same monthly mortgage payment.

1. Interest rates are at historic lows

2. Prices have come down. Even if your current home is worth less than during the last housing market peak, your dream home is likely more affordable too.

3. There are plenty of homes on the market right now, both new construction and existing, giving you lots of choice-and negotiating power.

4. You can move in to your new home faster, as many builders either have completed homes in inventory or they can start work right away due to the production slowdown.

5. You may have outgrown your home, but it’s probably someone else’s ideal starter home. With the $8,000 tax credit expiring Nov. 30, now is the time to market your home to first-time buyers.

The current housing market offers unprecedented opportunities for first-time and move-up buyers alike. For more information on the $8,000 first-time home buyer tax credit, go to www.federalhousingtaxcredit.com.

2:41 PM - Jun. 13, 2009 - comments {0} - post comment

You can get a mortgage

This article is by Barry Habib, an expert in the mortgage-backed securities market, chairman of Mortgage Success Source and founder of Mortgage Market Guide.

Yes, you can get a mortgage in today's market, but you have to understand that lenders have returned to a pre-2000 mindset – a kind of "common-sense lending" that seeks long-term success versus short-term profits. There's plenty of money available, says Habib, but your mortgage must make sense in today's terms, not the looser standards permitted by lenders in 2000 and 2001.

How Did We Get Here?
In 2000 and 2001, real estate was hot – make that white hot. According to the S&P/Case-Shiller Home Price Composite 10 Index, an index that follows home prices, values increased 21.5% from the years 1990-1999. During the first two years of this decade alone, home prices increased 23.6% for the same index. This resulted in a period of wildly loose lending guidelines that would ultimately fuel the subprime mortgage collapse in 2008.

In retrospect, it's easy to see, and even understand, the mistakes that were made during this unusual period of growth. Rapidly escalating home prices not only eased economic and personal financial woes, they invited opportunity and risk whose rewards, while hard to resist, couldn't possibly be sustained at such a high level. Nonetheless, increasing equity created flexibility that benefitted buyers and sellers alike – as long as property values continued to ascend.

During this time, borrowers with no jobs, no down payments, and poor credit histories could easily obtain financing. A host of exotic mortgage products flooded the market. And even if a borrower got into trouble, there was a multitude of options to help him or her climb out of the hole, including refinancing or even selling the property. A lot of people made a lot of money during this time.

But, as the real estate market began to turn and the economy began to suffer, home values slowed and then ground to a halt, and the true risk in the market was exposed. No longer supported by skyrocketing home values, borrowers had fewer options, lending guidelines tightened, adjustable rates adjusted, resulting in a crash in the market that is only now just beginning to turn.

What Does This Mean to Borrowers Today?
Simply put, home lending has returned to what insiders call a "full-doc world." This means lenders need proof, documented evidence that a borrower is creditworthy and likely to repay the loan. This creditworthiness is based on the four tenets of lending: the borrower's ability to pay, willingness to pay, equity in the transaction, and the property itself.

Ability to Pay
This is the documentation portion of the equation. In determining one's ability to repay a loan, it is now common for a lender to ask for recent paystubs, W-2s, and possibly tax returns in the case of a salaried employee. For self-employed borrowers and those earning commissions, tax returns for the two most recent years and a profit and loss statement for the current calendar year will likely be required. While certain exceptions may be granted, potential borrowers can further increase their chances of securing a mortgage by keeping their debt-to-income level below 45%.

Willingness to Pay
Repercussions of the credit crisis have made FICO scores more important than ever to lenders. In order to obtain the best interest rate and have a broader selection of loan programs from which to choose, potential borrowers should strive to keep their FICO score above 720.

Borrowers whose scores fall below 720 where the loan will be sold to Fannie Mae and Freddie Mac can expect risk-based pricing, which could result in either higher costs or higher rates. So, while it is possible to get a loan with scores as low as 620, programs other than Fannie Mae or Freddie Mac are probably the best path for a borrower with a lower score to take.

Equity in the Transaction
With the exception of mortgage programs guaranteed by the USDA and VA, no-down-payment loans have pretty much evaporated on a national level. Today it is expected that borrowers put a minimum of 3.5% down for an FHA loan and 5%-10% down for agency loans sold to Fannie Mae or Freddie Mac.

If someone is strapped for cash, however, it is still possible in the purchase contract to negotiate with the seller to pay a percentage of the closing costs, as long as it's within the program's limitations and the property appraises highly enough for this action to be permitted.

With the exception of the President's Home Stability Plan, it is no longer possible to refinance a loan without equity in the property. However, under this plan, millions of homeowners are expected to be able to take advantage of being able to refinance at a loan-to-value of up to 105% of the appraised value.

Cash-out refinancing has also been tightened, compared to just a few years ago. While pulling equity out of a home is still possible, the costs to do so have become more expensive for homes with a higher loan-to-value. Depending on the program, cash-out transactions have generally been limited to a maximum of 85% of the home's appraised value.

The Property
Home appraisals are also being more scrutinized today to ensure the value of the home is both fair and realistic for lender and borrower alike. On May 1st, new legislation (Home Value Code of Conduct or HVCC) placed a barrier between loan originators and appraisers for loans sold to Fannie Mae and Freddie Mac (legislation does not affect mortgages guaranteed by the FHA, USDA or VA.)

For those loans impacted by HVCC, all parties involved should be prepared for potential delays. If value conflicts occur, sellers, buyers, homeowners, and real estate agents must be prepared to provide information where needed.

In locations of the country where property values have been in significant decline, additional documentation may be required by the appraiser to help the lender justify the appraised value.

In Summary
Yes, getting a mortgage may be more difficult than it was a few years ago, but don't assume that you can't get one.

9:48 AM - Jun. 8, 2009 - comments {0} - post comment

Navigating today's mortgage markets

”There are five distinct strategies that can help home owners, buyers, and sellers successfully navigate today’s turbulent mortgage and housing markets,” said Gibran Nicholas, chairman of the CMPS Institute, an organization that certifies mortgage bankers and brokers.

1. Understand and Utilize the New Tax Credits. Many home owners are not aware that the latest government stimulus package gives them a special tax credit of up to $1,500 for making certain home improvements. Also, if you are buying a primary home and you have not owned a primary residence in the last 3 years, you may qualify for the new $8,000 first-time-homebuyer tax credit. “Although you can’t use the credit to help with your down payment, the credit can be claimed on your 2008 tax returns if you buy the home in 2009,” Nicholas said. “This means that even if you buy the home after you file your taxes on April 15, you can simply file an amended 2008 tax return and the IRS will send you a refund check for $8,000.”

2. Consider Paying Points for Your Mortgage Transaction. Mortgage “points” are upfront fees that you pay in order to lower your mortgage interest rate. One point is equal to 1% of the loan amount. “In the past, it almost never made sense to pay points in most situations where you were refinancing your mortgage,” Nicholas said. “However, enormous changes have taken place in the mortgage securitization process. Wall Street investors are demanding higher upfront fees for borrowers with credit scores below 740, and mortgage lenders don’t have as much flexibility when pricing loans. This means that the interest rate savings can be very significant when you pay upfront points.”

“If you are buying a home, negotiate into your purchase contract for the seller to pay points on your behalf,” Nicholas said. “In addition to the significant interest and payment savings you will enjoy, you will also receive a tax deduction this year for points paid by the seller on your behalf. If you are selling a home, offer to pay points for potential buyers as part of your marketing efforts. This will make your home more affordable for potential buyers and help your listing stand out from the glut of available inventory in today’s market.”

3. Carefully Structure Your Real Estate Short Sale Transaction. A real estate short sale is when a home owner sells their property for less than what they owe on the mortgage, and the lender gives their permission to do this by forgiving the difference and/or releasing the mortgage lien on the property. “Short sales are very common in many markets because of negative home owner equity due to the steep decline in house values,” Nicholas said.

“If you are selling your home as part of a short sale transaction, make sure to negotiate for a release and full satisfaction of the mortgage from your lender. Depending on the laws of your state and your individual circumstances, lenders may be able to wait a year or two for you to improve your financial situation, and then file a deficiency judgment against you to try and recover the money that you still owe them. The only way for you to avoid this risk is to have the lender not only release the mortgage lien, but also agree in writing to a full satisfaction of the mortgage.”

If you are a buying a home as part of a short sale, Nicholas advises you to take steps to make sure the deal is closeable. “It is estimated that approximately 30% of short sale listings are not closeable deals because the lender simply won’t approve it. In most of these cases that aren’t closeable, the first or second mortgage lender is expecting home sellers that have money to contribute something to the deal. One way to avoid getting caught up in the middle of this is to have your Realtor verify the status of the seller’s hardship package with their lender.”

4. Utilize the Special Options Available for Seniors Age 62 or Older. “If you are 62 or older, you could use a reverse mortgage to buy a new home without making any monthly mortgage payments,” Nicholas said. “This is a fantastic opportunity if you are contemplating a move but are worried about trying to sell your current home into a down market. Additionally, reverse mortgages can be used to supplement your retirement income that may be declining due to unfavorable economic or financial market conditions.”

5. Carefully Interview Your Mortgage Professional. With all the noise, confusion, fear and misinformation in today’s market, it is more important than ever for you to work with a Certified Mortgage Planning Specialist who has the training and experience to guide you through the home buying or refinancing process. The largest financial transaction of your life is far too important to place into the hands of someone who is not capable of advising you properly and troubleshooting the issues that may arise along the way

2:53 PM - May. 6, 2009 - comments {0} - post comment

5 Tips to De-stress your move

People who are moving are faced with many challenges, and now more than ever they are looking for ways to cut costs, cut down necessities, and still have everything they want. Below are some tips to cut down the cost of the move and at the same time get the service you need:

De-Clutter - Now is the time to clean out your closet and get rid of anything that you don’t need. That old heavy desk in the corner that is not being used and the treadmill that doubles as a clothes hanger. Having a garage sale or giving things to charity will help reduce the weight and cost of a move.

Get a ‘Binding Not-to-exceed’ estimate - One of the costs contributing to a move is the weight of the shipment. With this estimate, if your actual weight is more than the written estimate, you still pay for only the amount of the estimate. But if your actual weight is less than the estimate, then your costs can go down.

Get full replacement ‘valuation’ coverage- When you move, things can get damaged. This coverage is what will protect your goods in the event of any damage.

Furniture assembly & reassembly - If you have a large desk, entertainment center, or table that has to be taken apart and put back together, do it yourself to cut down on costs. If that is not possible, make sure the company you use has these services so you can take advantage of them.

Get a reputable mover - It is important to use a mover that is going to provide the level of service promised to you. Check out the better business bureau website to make sure they are what they say they are.

5:09 PM - Apr. 24, 2009 - comments {0} - post comment

What in the world is a DTI ratio?

This article is by Ralph R. Roberts who is a consumer advocate, spokesperson for Federal Loan Modification Law Center host of keepmyhouse.com, and author of numerous books, including Foreclosure Self-Defense For Dummies and Loan Modification For Dummies

Ask homeowners about their DTI (debt-to-income) ratios, and they’re likely to respond with something like, “My what ratios?!” However, when distressed homeowners are sizing up their foreclosure options, they need to brush up on DTI ratios. Lenders will be scrutinizing these ratios to determine homeowner eligibility for loan modification and other debt relief.

Homeowners need to know that their DTI ratios are crucial to determining an affordable house payment. The current government plan defines an affordable house payment as one that is no higher than 31% of the homeowner’s front-end DTI. In other words, the house payment or PITIA (principal, interest, taxes, insurance, and any association fees) on the first mortgage cannot exceed 31% of the household’s gross monthly income.

Homeowners should examine both their front-end and back-end DTI ratios:

Front-end DTI ratio is based solely on the house payment. (Under the current government plan, the front-end DTI target of 31% accounts only for the first mortgage. If the home has other liens against it, such as a second mortgage or home equity line of credit, those are accounted for separately as part of the back-end DTI.)

Back-end DTI ratio is based on all monthly debt payments combined, including the house payment, credit card payments, payments on auto loans, and other loan payments.

Calculating the Front-End DTI Ratio

Although the formulas for calculating DTI ratios are simple, homeowners are unlikely to have encountered them in the past. To calculate their front-end DTI, homeowners must divide their house payment by their monthly household income (gross income):

House Payment / Gross Monthly Household Income = Front-End DTI Ratio

This is easy, assuming the monthly house payment includes an amount held in escrow to pay the property taxes, homeowner’s insurance, and any association fees. Such a payment is often referred to as PITIA (principal, interest, taxes, insurance, and association fees).

If they pay property taxes, insurance, and association fees separately, then they have to perform an extra step. Total these additional annual expenses, divide by 12 months, and add the result to their monthly house payment (principal and interest). They can then divide the resulting house payment by their monthly household income to determine their front-end DTI ratio.

Private mortgage insurance (PMI) payments fall outside this calculation under the current government plan. 

Calculating the Back-End DTI Ratio

To calculate the back-end DTI ratio, homeowners should total their monthly debt payments, including: House payment or PITIA, as discussed in the previous section; Any payments on second mortgages, home-equity loans, or home-equity lines of credit; credit card payments; auto loan or lease payments; alimony and other payments on credit accounts or loans.

Now, they should divide their total monthly debt payments by their total gross monthly household income:

Monthly Debt Payments / Gross Monthly Household Income = Back-End DTI Ratio

Exploring DTI Ratios under Obama’s Foreclosure Prevention Plan

The Home Affordable Modification Program accounts for both front-end and back-end DTI ratios. When attempting to reach the 31% target for the front-end DTI, the focus is only on the first mortgage:

For qualifying homeowners, the lender will have to first reduce payments on the first mortgage to no greater than a 38% front-end DTI ratio. Treasury will match further reductions in monthly payments dollar-for-dollar with the lender/investor, down to a 31% front-end DTI ratio.

Borrowers who qualify for a modification but would have a post-modification back-end DTI ratio greater than or equal to 55%, will be provided with a letter stating that they are required to work with a HUD-approved counselor. The modification will not take effect until they provide a signed statement indicating that they will obtain counseling.

Keep in mind that only lenders, investors, and servicers who choose to participate in this program are bound by its guidelines and that the guidelines may change over time. Different lenders may have their own DTI ratio targets and limitations.

1:10 PM - Apr. 20, 2009 - comments {0} - post comment

First time homebuyer tax credit revisions

FIRST-TIME HOMEBUYER TAX CREDIT 

As Modified in the American Recovery and Reinvestment Act

Major Modifications Italicized

February 2009

FEATURE	CREDIT AS CREATED JULY 2008 APPLIES TO ALL QUALIFIED PURCHASES ON OR AFTER APRIL 9, 2008	REVISED CREDIT – EFFECTIVE FOR PURCHASES ON OR AFTER JANUARY 1, 2009 AND BEFORE DECEMBER 1, 2009
Amount of Credit	Lesser of 10 percent of cost of home or $7500	Maximum credit amount increased to $8000
Eligible Property	Any single family residence (including condos, co-ops, townhouses) that will be used as a principal residence.	No change All principal residences eligible.
Refundable	Yes. Reduces (or can eliminate) income tax liability for the year of purchase. Any unused amount of tax credit refunded to purchaser.	No change Purchasers will continue to receive refund for unused amount when tax return is filed.
Income Limit	Yes. Full amount of credit available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return). Phases out above those caps ($95,000 and $170,000).	No change Same income limits continue to apply.
First-time Homebuyer Only	Yes. Purchaser (and purchaser’s spouse) may not have owned a principal residence in 3 years previous to purchase.	No change Still available for first-time purchasers only. Three-year rule continues to apply.
Revenue Bond Financing	No credit allowed if home financed with state/local bond funding.	Purchasers who utilize revenue bond financing can use credit.
Repayment	Yes. Portion (6.67% of credit or $500) to be repaid each year for 15 years, starting with 2010 tax filing.	No repayment for purchases on or after January 1, 2009 and before December 1, 2009
Recapture	If home sold before 15-year repayment period ends, then outstanding balance of repayment amount recaptured on sale.	If home is sold within three years of purchase, entire amount of credit is recaptured on sale. Applies only to homes purchased in 2009.
Termination	July 1, 2009 (But note program changes for 2009)	December 1, 2009
Effective Date	Purchases on or after April 9, 2008 and before January 1, 2009. Repayment to begin for 2010 tax year.	All revisions are effective as of January 1, 2009

5:55 PM - Apr. 16, 2009 - comments {0} - post comment

First time homebuyer tax credit FAQ's

How could this effect my mortgage payment?

Assuming you are eligible for the full $8,000 refund it would be like reducing your monthly payment by $667 dollars a month!

•

6:27 PM - Apr. 6, 2009 - comments {0} - post comment

Moving and taxes

This article is byThe Move Advocate:

Now that 2008 is over, it’s the right time for you and your clients to begin thinking about taxes. Many of us are getting our records in order in preparation for tax day, April 15, 2009. If you or your clients have made a move this year, deducting moving expenses may be on your mind. But are all expenses allowable tax deductions?

The IRS does allow tax deductions for some of the costs associated with a move to accommodate a job in a new location. There are, however, two tests which must be met in order to qualify for deductions.

Test 1 - Distance Test

To qualify for a deduction, your new principal workplace must meet a 50-mile test. The distance between the old home and old work minus the distance between the old home and the new work must be greater than 50 miles. In other words, if the commute to the old workplace was 3 miles, a commute from the previous home to the new workplace must be at least 53 miles. If the person did not have a job before moving, then the new job must be at least 50 miles from the previous home.

Test 2 - Time Test

A person must work full time in the general area of the new workplace for at least 39 weeks during the 12 months right after the move. There are exceptions to the time test and other rules apply for those that are self-employed.

If you are not sure if you or your clients meet the requirements to deduct your moving expenses it is best to check with a tax advisor or visit the IRS website, Publication 521, and Form 3903 for more details.

If both tests are passed then some expenses may be deductible:

- Costs for packing, crating and movement of your household goods
- Up to 30 days of storage and insurance for household goods
- Transportation and lodging expenses (not meals) while traveling to new location

If you have clients who have made a move in 2008, it is a good idea to advise them to check with a tax advisor before deducting their expenses to make sure that they take the right deductions. According to Forbes, one of the top reasons for IRS tax audits is claiming too much for itemized deductions, including the deduction of moving expenses.

5:51 PM - Mar. 31, 2009 - comments {0} - post comment

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