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First-time homebuyer tax credit extended

The Homebuyer Assistance and Improvement Act of 2010 extends the closing date requirement for the first-time homebuyer tax credit from June 30, 2010, to September 30, 2010. This gives qualifying individuals who, prior to May 1, 2010, entered into a binding written contract to purchase a home, an additional three months to close on the purchase.   Click on the title above and watch the video for additional information.

The Credit Crunch and Student Loans

You’ve heard about the Credit Crunch and its tightening effect on lending guidelines in the mortgage industry, but what does it mean to millions of Americans who need student loans to help pay their college tuition?

The student loan market looked pretty bleak during the first quarter of 2008. Not only did the reduced benefits created by the College Cost Reduction and Access Act in 2007 kick in, but for the first time in 40 years, no bonds backed by student loans were purchased during this time. The new bill, which was good news for students, was funded by cutting subsidies to student lenders already feeling the effects of the credit crunch. According to Forbes, this loss of liquidity spooked a lot of investors of the student loan asset-backed securities market, destabilized Sallie Mae, the largest federal student loan provider and servicer, and sent student lenders into turmoil, as at least 50 federal student loan providers scaled back or ended participation in this type of lending.

Since then, Congress has passed legislation and taken other measures to ensure that student loan companies continue to issue federally subsidized student loans. Now, according to the National Association of Student Financial Aid Administrators (NASFAA), most “traditional” students should have no problem getting federal student loans from the remaining 2,000-plus lenders participating in this market.

For those students forced to seek private or alternate education loans, however, this is a much different story. NASFAA says many students could have trouble getting these types of student loans. Because of this, NASFAA added that private student loans should only be used as a last resort when it comes to paying for college.

Which students are affected?

• Students attending smaller schools and for-profit career or trade colleges, or other institutions that rely heavily on private lenders, will find it more difficult and expensive to gain access to private student loans than they have in the past – especially if they have credit issues.
• Older students, students with poor credit, or those students without a creditworthy co-signer (e.g., mom and dad), are likely to pay higher rates for whatever private student loans they are able to find.
• Students whose college tuition is more than their federal loans provide could also be affected if a) a private loan is necessary to make up the difference or b) the student does not qualify for Federal Perkins or PLUS loans or other types of financial aid programs.
• It’s important to note that financial aid, including Pell Grants, Federal Work Study, and education tax benefits are not affected by the Credit Crunch.

The biggest mistake students and parents can make in these situations is loading up credit cards and taking on expensive private loans to pay for college. Over the course of four or five years, this could really add up and put you or your children in debt for years to come. If you’re a homeowner, however, you may be able to avoid this credit trap by consolidating credit card balances and other debt through a home refinance.

Before you make any major credit decision regarding college tuition, give us a call. We’ll gladly review your finances and help you make the best decision for your specific goals and needs.

FHA seller concession rules

The Federal Housing Administration (FHA home loans in Virginia) is eliminating one of the mainstays to its program sometime this summer. Gone will be the 6 percent seller concession and in will be the 3 percent seller concession. The reason for eliminating the concession according to FHA is the 6 percent seller concession exposes them to too much risk. This has been one of the key selling points with FHA for decades. But if sellers and buyers move fast there is a possibility they can still take advantage of the higher seller concession.

The buyers must still save or be gifted the money for the down payment to purchase the home. The current minimum down payment is 3.50% of the sales price. The current guidelines on seller concession allow sellers to pay for all of or part of buyers closing costs when purchasing a property.  Items connected with the transaction such as — loan origination and discount points, state and county transfer stamps and fees, an appraisal, inspections, attorney and title closing costs.  

When it comes to lower priced homes, closing and loan expenses typically represent a higher percentage of the total loan closing costs than on higher prices homes. In Fairfax, Virginia and Northern Virginia, closing costs typically run between 2.50% and 3.50% of the sales price of the home. So on a $300,000 home purchase, that could be an extra $7,500 to $10,500 of out of pocket expenses for a home buyer. Current with FHA financing rules, the contract can be structured so the seller agrees to pay all closing costs up to 6% ($18,000) at settlement. This amount could even include some small required repairs.  Once the rule change takes effect, the max concessions will be a flat 3% of the sales price.

If you use Fannie Mae or Freddie Mac financing, seller concessions is generally limited to 3%  for down payments below 20% of the sales price. Although concessions can be much higher when larger down payments are being used.

Bottom line is this: the helping hand of an FHA home loan is getting smaller and smaller. First the down payment was increased from 2.25% (3% in the new home) to a flat 3.50% down payment. Then a minimum credit score, now a decrease of seller concessions from 6% to 3% of the sales price.

The First Two Steps in Buying a Home

Fairfax, VA – Statistics suggest that the Internet is the first destination and source of information for potential home buyers. In fact, nearly 80% of potential buyers reportedly begin their home buying process online. And why not? The Internet has a wealth of information and resources that can aid in the beginnings of the home buyer’s search and make them feel more comfortable and confident about the process. However, when a potential buyer is ready to move forward and really begin to focus on his or her home buying goals, there are two very important steps to consider first in order to initiate a successful home buying experience. Know the Score – Whether you like it or not, your credit score will play a major role in your ability to qualify for a mortgage and purchase a home. Your credit score will also help determine your mortgage rate and how much home you can really afford. That’s why if you’re looking to purchase a home in the next 6 to 18 months, you don’t want to wait to find out what surprises, pleasant or otherwise, might await you on your credit report. By reviewing your credit early on in the process, you have time to make adjustments and improve your score. Remember, a lot has changed in the credit industry in the last two years alone. A recent federal crackdown on credit card companies have led many creditors to take actions such as lowering credit limits. This one act can significantly upset your debt ratios, which is a major component in calculating your credit score. Get Preapproved – Once you know where your credit stands, the next step in your home buying process is to get yourself pre-approved – not just pre-qualified. Why? Well, by becoming pre-approved you’ll know exactly how much money you can borrow down to the dime. This knowledge will allow you to focus on only those houses you can actually afford, making your search for the perfect home much easier. By being pre-approved you also become a “cash buyer” which demonstrates to sellers that you’re serious about your search and will allow you to negotiate more effectively than potential buyers who are not pre-approved.

Home Buyer Tax Credit Extended for Military Personnel

Fairfax, VA – The popular Home Buyer’s Tax Credit has expired for all Americans, except for three very deserving groups: the brave men and women of the uniformed services of the U.S military, members of the Foreign Service of the U.S., or employees of the intelligence community who are actively serving outside of the U.S. on “official extended duty.” Official extended duty is defined as any period of extended duty outside of the United States for at least 90 days during the period beginning December 31, 2008 and ending before May 1, 2010. That’s right. Thanks to the Worker, Home Ownership, and Business Assistance Act of 2009, which was signed into law by the President on November 6, 2009, qualified military service members have one extra year to take advantage of The Homebuyer’s Tax Credit of up to $8,000 for first-time buyers and up to $6,500 for certain repeat buyers. This means qualified military members must be under contract on a purchase by April 30, 2011 and close on the deal by June 30, 2011. Qualified military buyers can also utilize this tax credit along with other available benefits from the Department of Veterans Affairs (VA), making this dollar-for-dollar tax credit extremely financially attractive with today’s lower home prices and lower interest rates. That’s because the VA allows qualified military borrowers to purchase certain homes in certain areas with no money down and no private mortgage insurance. To be a qualified first-time home buyer and receive a tax credit of up to $8,000, the buyer and his or her spouse cannot have owned a home in the last three years. Unlike the Home Buyer Tax Credit for civilians, however, the maximum purchase price of a home is $800,000 under this program – anything over that and the tax credit is invalid. The credit phases out for individual taxpayers with modified adjusted gross income (MAGI) between $125,000 and $145,000 or between $225,000 and $245,000 for joint filers. To be a qualified “repeat buyer” or non first-time buyer and receive a tax credit for up to $6,500, a buyer must have lived in his or her current residence for five out of the last eight years. The rest of the requirements are generally the same as the $8,000 tax credit. You served your country, let us serve you. If you or someone you know is looking to purchase a new home and may qualify for this incredible opportunity, please don’t hesitate to give us a call right away.

Rates Have Hit All-Time Low Levels Again

Interest rates have rallied and improved dramatically on the heels of the recent European debt concerns…and what is most important is that due to the highly unusual set of circumstances that exist in the market, those who are acting quickly are saving.

 In fact, Freddie Mac reported last week that rates have met either all-time lows or 2010 lows. Bottom line, they are “smokin’ hot” right now – but won’t be for long.

Regardless of whether people want to convert their loan to a 15-Year fixed to potentially save over $100,000 in payments over the term…or drop their payment several hundred dollars a month, people are acting now!

However – one thing you have to know…rates are incredibly volatile and are not likely to hold these levels. We might only have a couple of days to lock people in at the best rates they will ever see.

I would love to look into your situation and see just what we can do to put some money back in your pocket. I never thought I would see rates this low across the board – so don’t miss this chance.

Home sales and home prices continue to improve. Monday, the NAR released information that shows strength in housing. If you are in the market to buy a home, act now before monthly payments increase as both prices and rates move higher.

Or, if you are looking to refinance and could not last year because of home values…you just might be able to now. Call me!

Interest Rates on the Rise?

Fairfax, VA  - For the last couple of years, home buyers have benefitted from an affordable combination of lower home prices and lower interest rates. But if you’ve been on the fence about buying a home, or waiting for even better buying opportunities, now might be the time to give us a call to see if buying today makes sense for your individual goals and needs. Even though the government’s popular Home Buyer’s Tax Credit expired on April, 30, 2010, this is still a good time to act, as home affordability is likely to get worse before getting better. Ever since the Federal Reserve’s program to help lower home loan rates and stabilize the housing sector ended in March, 2010, after purchasing a reported $1.25 Trillion in Mortgage Backed Securities, the mortgage market has been very volatile. And despite fluctuations, rates remain good overall; but, as the Federal Reserve sells off some of its huge holdings, supply in the market will increase, and likely lead to higher rates. Don’t wait until higher rates force you out of the market. Give us a call today.

Age Old Debate: Payoff Your Mortgage or Invest?

Why Payoff Your Mortgage

Fairfax, Virginia: Homeowners have been arguing this point since the invention of mortgages many years ago. Should a homeowner payoff their mortgage faster in order to save interest? Or should the homeowner invest that money into 401-K and other retirement vehicles to accumulate more money for retirement? The true answer lies in what is the right choice for your financial situation. Below I have tried to present both sides of the equation equally. Please let me know what you think. Once you are finished with the article check out some great information on my other site:

Calculators
Borrow Smart Information
Borrow Smart Application

There are several advantages to paying off your mortgage early.

Freedom- Not much more needs to be said about this. The freedom from monthly mortgage payments can be huge both psychologically and emotionally. What would it feel like to not have a mortgage payment each month?  If you paid off the mortgage and eliminated your other consumer debt, you could live debt-free. Well maybe – no mortgage would allow for more consumer spending, which could mean more bad debt. But it could leave additional money for basic necessities such as: food, heat, electric, gas (car and home). Not having a mortgage would certainly cut your monthly expenses.

Safety: Once you’ve paid off your mortgage debt, you own your home. Taxes and insurance must still be maintained even after the mortgage is paid-off. Believe it or not, homeowners actually lose their home for not paying their property taxes on homes owned free and clear of any mortgage. Your home is always a liability as long as it costs you money each month. Never forget that. Here is a nice article from AARP writer Jonathan Pond.

Reduced Stress: No monthly mortgage obligation would certainly be nice! You wouldn’t have to worry as much about losing your job, for instance.

Liquidity: Less spent on paying down the mortgage allows more money for other investments. But no mortgage allows for more money to be allocated for other investments also. But the real question has to do with the opportunity cost of money. Where is the biggest bang or investment opportunity for your money and will it grow faster now or later.  You could invest your monthly payment in a financial product, or build up a large rainy day / emergency fund.  Cash is still king and it is very liquid.

Why Have A Mortgage

Taxes: Interest and taxes are deductible up to your income tax bracket. Not having a mortgage means that you can’t deduct your interest payments off your federal income taxes.  But that alone is not enough of a reason to keep a mortgage. Here is one recent NY Times article on why it might not be a great idea to pay off your mortgage.

Investing: This nice article by Ric Edelman on having a mortgage where he puts forth that it makes better financial sense to pay your mortgage payments regularly, and invest the extra money instead. Theoretically, you make more in the long-term with this method; after all, average returns on stocks over the past 60 years are in the 9-10% range. But the recent fall in the stock market make it hard to stomach investing sometimes.

Liquidity: Yes – this again.  It works both ways. Todd Ballenger at Kendall Todd also says that keeping your money in liquid form (ie: stocks, bonds, etc.) might be a better option until you are ready for retirement.  If you pour all your money into your house, then the question is can you access your money again? If yes, how easy is it to get to? How fast do you need the money? With the drop in home values across the country and in Fairfax, Virginia your equity (money) might not be their or you might not qualify for the mortgage program. Staying liquid means that you can access your money quickly when you need it.

Taxes Are Your Biggest Expense!

Fairfax, Virginia: Do you realize that your biggest expense every month is TAXES?  If you don’t believe me, just look at your paycheck and see how much you earned versus how much you are actually bringing home!  As you strive to save more money, eliminate debt, and build a successful financial future, minimizing your tax expenses each year can make a huge difference in your financial success. 

The Internal Revenue Code is more than 67,000 pages!  Once you determine the proper forms you must complete, it can take hours to complete them properly.  Mistakes can be costly, leading to you paying more taxes than you should, or underpaying which can lead to penalties and interest. 

Fairfax, Virginia taxpayers who do their own taxes often refrain from claiming deductions, exemptions and credits they are entitled to out of fear of making a mistake or not understanding. The result: They pay far more in taxes than they actually owe. And tax-preparation software is of debatable help. If you skip or misunderstand a question, the software will produce the wrong forms or complete them incorrectly.  (*According to the Treasury Department, 56% of all the returns prepared in 2007 by volunteer tax preparers contained mistakes!)

It’s much better to have a certified public accountant (CPA), enrolled agent (EA) or tax attorney prepare your return for you. With narrow exceptions, these are the only people who can represent you in matters pertaining to the IRS. 

As a tremendous insurance policy, if your CPA, EA or attorney makes a mistake that causes you to owe additional tax, you’ll pay only the tax. They will pay any interest or penalties owed. (It’s unreasonable to ask preparers to pay the tax itself; that’s always the taxpayer’s responsibility.)

Ric Edelman, author and top financial planner says, “If you are concerned about the costs of using a professional tax preparer, think of if from a different perspective. According to the latest statistics released by the IRS, the typical married couple in 2005 with an adjusted gross income between $75,000 and $100,000 per year paid $7,300 in federal income taxes. That’s an effective tax rate of approximately 8.4%.”  If the CPA, EA or tax attorney’s fee is $600, that’s just 0.7% of their income. Considering all the time and aggravation saved, plus interest and penalties resulting from errors you might make, this relatively small fee can be well worth it.

By the way, the fee you pay your tax preparer is tax-deductible. If you don’t already have one and need a referral, contact us at jeff@lendingsolutions.net or 571-482-8301.

USDA Zero Down Home Loan In Jeopardy!

Fairfax, Virginia: Although USDA loans are not a big deal in the northern Virginia area, but they are HUGH deal in the outlying counties of Fauquier, Prince William and Loudoun. It was recently been announced that the USDA 100% (zero down) loan program will be out of money by the end of April 2010.  Typically the USDA program has sufficient funds to cover the needs of potential borrowers. But as with many home financing programs, money is in short supply.  As lending guidelines have tightened over the past two years, the ability of a borrower finding a zero down home loan out side of the Veteran Department VA loan has disappeared almost completely.  This is has caused homebuyers that wouldn’t typically consider a USDA loan for financing to not only consider it, but actually apply for and be approved for the USDA zero down home loan. The program has no mortgage insurance, great rates and flexible credit guidelines. So over the last few years, USDA has stepped up to fill the void and provide affordable zero down loans for qualified first time homebuyers across the nation.

Although Fairfax, Virginia doesn’t have many areas that work for the USDA program, the increased demand across the country for USDA loans has led to a shortfall of funds. Last year the stimulus money was used to bridge the funding gap and business went along as usual. The stimulus money helped fill the void the past couple of years, but without additional it is projected that funds for the program will dry up sometime in late April.  When this happens the USDA will stop issuing loan commitments until their normal refunding takes place sometime next fall.  Most economist suspect any slow down in the housing market could have drastic affects on the economy pulling out of the recession.  Many first-time homebuyers could miss the $8,000 tax credit.  The best idea would be to fund the USDA program now so as to try and prevent the economy from slipping back in to a recession.

Below is a list of the members of the committees that can help steer passage of the appropriation request:
United States Senate Committee on Appropriations
Subcommittee on Agriculture
Rural Development
Food and Drug Administration

Democratic Members

• Senator Herb Kohl (Chairman) (WI)
• Senator Mark Pryor (AR)
• Senator Dianne Feinstein (CA)
• Senator Tom Harkin (IA)
• Senator Richard Durbin (IL)
• Senator Byron Dorgan (ND)
• Senator Ben Nelson (NE)
• Senator Jack Reed (RI)
• Senator Arlen Specter (PA)
• Senator Tim Johnson (SD)

Republican Members

• Senator Sam Brownback (Ranking Member) (KS)
• Senator Mitch McConnell (KY)
• Senator Susan Collins (ME)
• Senator Christopher Bond (MO)
• Senator Thad Cochran (MS)
• Senator Robert Bennett (UT)

Life After Bankruptcy

Fairfax, Virginia – Bankruptcy is an uncomfortable subject for a variety of reasons. I have been talking with clients since the economy and housing crisis began over two years ago about bankruptcy. But because I am in the mortgage business and filing for bankruptcy affects one’s ability to get a mortgage I get tons of calls.  The most obvious is the potential havoc it can wreak on your finances. Running a close second is the negative stigma which is often attached to the process. This negativity is important to mention because strong emotions can sometimes lead to unsound financial decisions with devastating results.

Bankruptcy in Fairfax, Virginia becomes a viable option for someone who is “upside down” in terms of cash flow. In other words, when a person has more money going out each month than coming in, bankruptcy should be considered if no reversal of this negative cash flow is within sight. The longer someone waits to explore the various options available, the more serious his or her situation may become.

One of the worst things people can do in this situation is to borrow more money to try and pay off their debts. On paper, this is clearly an unwise financial decision. In the real world, however, it is very common for individuals to pursue this strategy in an attempt to buy time and hold off on filing for bankruptcy. On the surface, this is certainly a noble notion; however it can often compound the problem and serves only to delay the inevitable.

For many homeowners in the midst of this upside down cash flow, speaking to a qualified mortgage professional is a much better option. An experienced loan officer can objectively look at your finances and help you determine if restructuring your mortgage would not only help, but possibly even alleviate any need for bankruptcy.

If bankruptcy is the only option, seek out a reputable bankruptcy attorney and credit counselor. A qualified mortgage specialist can provide references for you as well, as he or she works with these professionals on a regular basis. Reliable references are essential in this case because experienced professionals greatly increase the odds of a successful bankruptcy experience. It’s that simple.

When filing for bankruptcy in Fairfax, Virginia, be completely honest and accurate regarding every aspect of your financial situation. This includes any changes to your income which may occur throughout the process. Bankruptcy is a federal procedure, adjudicated by real judges, and scrutinized by representatives who coordinate with the Department of Justice, the FBI, and the IRS.

Here are some additional steps you can take to make the bankruptcy process as painless as possible:

• Save all paperwork regarding your bankruptcy, and keep it organized. This will prove beneficial after your bankruptcy as you now have all of the pertinent information in one place. Also, be sure to write down your discharge date. It’s surprising how many people forget to do this.
• Establish a household budget. This can be accomplished in many ways, but there are several inexpensive computer programs available which do an excellent job.
• Throughout the bankruptcy, do your best to not only live below your means, but to save as much cash as possible. You never know what you may need it for once the process is completed.
• Be prepared for a barrage of junk mail. There will be sharks on the loose who are hoping to capitalize on your need for credit.

Tips for Rebuilding Credit in Fairfax, Virginia:

• If you must buy a car, focus on transportation as opposed to style. Buy an inexpensive, used car, and try to get a loan for it. It’s a good idea to figure out what your budget allows in terms of a dollar amount first. This means obtaining financing prior to looking for a car.
• Get a secured credit card. Secured credit cards allow for the cardholder to deposit a said amount of money into an account, thus establishing the spending limit of the card. Missed payments result in deductions from the account. Some of these cards will reward responsible borrowers by upping the limit without an additional deposit. Some will even convert the account into a traditional credit card. (Be wary of offers of “easy credit” or any card which asks you to call a 900 number. You will be charged for the call.)
• Meet with a credit repair specialist. Not only can they help you clean up the damage to your credit report, they can advise you on specific ways to rebuild the credit you lost as well.

While it does take time, there is definitely life (and credit) after bankruptcy. Some mortgage lenders will even lend to you within a year or so after a bankruptcy. If you’re in serious financial trouble, the trick is to get the help and advice you need from professionals you trust.

Market Snap Shot for Fairfax, Virginia

Market Snap Shot for Fairfax, Virginia Mortgage Interest Rates and Local Real Estate By Sigma Research By Tuesday, March 02, 2010

Treasuries and mortgages started weaker this morning with the stock index futures pointing to a nice open in equities at 9:30. No real data this morning, the only thing on the schedule is Feb auto and truck sales that will be out this afternoon. At 9:00 the DJIA +44, 10 yr note -10/32 3.65% +3 BP and mortgage prices for 30 yr fixed -5/32 (.15 bp). At 9:30 the DJIA opened +38, 10 yr note -7/32 at 3.64% and mortgages -3/32 (.09 bp).Four days and counting to the Feb employment report for Fairfax, Virginia Interest Rates. Always the key report each month, and each time there is some event or circumstance that makes it even more important—if that is possible. This report has a lot of weather related elements with the continual snow that crippled the mid-Atlantic and East coast; but the main event that traders are thinking about is the huge decline in consumer confidence in Feb and the big fall in new and existing home sales. How, if at all, will all that impact the employment picture? There is the theory that consumer confidence plunged by 20% because of more job losses. Long ago we gave up trying to anticipated non-farm jobs data, throwing darts blind folded is more accurate. Current estimates continue to be a small decline of 20K jobs in the month with the unemployment rate at 9.8% up 0.1% from Jan.Greece’s financial problems are well documented; next up according to what we are seeing is Great Britain. Investment mangers in England are bracing for a run on the British pound as its economic outlook remains dire. Britain’s debt amounts to 12% of output, about the same as Greece’s debt to output.  Moody’s Investors Service and Standard & Poor’s said last week they may cut Greece’s credit rating; now fund managers in Britain are worried the same fate may befall England as its economy is struggling to get some traction. The take away from the continuing debt problems in Europe (Spain and Portugal) and now Britain is adding support to US treasuries as a safe place for parking money. Markets and traders continue to expect US interest rates will increase this year as the US economy solidifies and consumers and the housing sector slowly improve. The Fed, with the exception of one or two Fed officials, is dead set on keeping the Federal Funds rate at near zero for that “extended period” which is markets are beginning to quantify as no rate increases until the Nov FOMC meeting. We noted yesterday we were hearing four more FOMC meetings before the Fed moves. A recent survey by Bloomberg of bankers was 46% chance the increase would be at the Nov FOMC meeting. What must be kept in mind is that the bond and mortgage markets will be out front of the Fed on any increases; given the preemptive move interest rates will begin to discount the increase by August. We expect mortgage rates to increase in Fairfax, Virginia by year end will be 50 basis points higher than at present levels; the 10 yr note to move to 4.15%. Through the later half of Jan and the early part of Feb the 10 yr note tried 10 times to move below 3.60%/3.58% range; each time it failed. Yesterday the 10 yr hit 3.58% at mid-day but again failed to crack the wall. This morning at 9:00 the 10 yr was back to 3.65%; the FNMA 4.5 coupon is registering overbought readings on the relative strength oscillator. The bond market today will, as is the case recently, take its lead from how stock indexes trade. No data until this afternoon with auto and truck sales; but the remainder of the week has data everyday with of course the Feb employment on Friday. On Thursday Treasury will announce next week’s auctions of 3 yr, 10 yr and 30 yr borrowings

Home Buyer’s Tax Credit About to End

Fairfax, Virginia

You’re probably up to your neck by now in forms and paperwork as the April 15th income tax deadline approaches. Maybe you’ve already completed your taxes, paid your bill, or are awaiting your refund check. Either way, now is the perfect time to revisit the extended and expanded Home Buyer’s Tax Credit.Why? Because now, as you calculate your tax bill or your refund, you can finally see in real terms just how beneficial a tax credit of up to $8,000 can be to your bottom line.Here’s the basics:Qualified 2009 and 2010 first-time home buyers can get up to 10% of the home’s purchase price or a maximum of $8,000. In November 2009, legislation extended a tax credit of up to $6,500 (or up 10% of the home’s purchase price) to long-time residents of the same primary residence if they purchase a new main home. To qualify, eligible taxpayers must show that they lived in their previous homes for a five-consecutive-year period during the eight-year period ending on the closing date of the new home.Important details to remember: 1) You don’t have to pay it back (as long as you stay in your qualified home for at least 36 months). 2) If you qualify for the credit, you can still apply it to this year’s taxes, even if you’ve already filed your returns, or save it for your 2010 returns. 3) This is a true tax credit, not a deduction. If you qualify for the full credit, there will be an actual dollar-for-dollar reduction of up to $8,000 (or up to $6,500 for qualified repeat buyers) on your tax bill now or in 2010. 4) New income qualification limits have been put in place that expanded the pool of qualified buyers. 5) If you purchased a qualified home or plan to after reading this article, you must have a contract in place by April 30, 2010 (with closing to take place by June 30, 2010), so don’t wait! There are, of course, other details and qualification requirements and restrictions that you’ll need to consider. But don’t hesitate to give us a call if you have any questions. Also, if you happen to have your completed 2009 tax return handy, we’ll help you calculate how much money you can get if you purchase a home and qualify for the full credit.

Write-offs to Remember

Deductions in the Loan Process For Homeowners in Fairfax, Virginia

Write-offs are the government’s way of rewarding taxpayers when they’ve done something the government likes. And to judge by the write-offs, the government likes it when people borrow money to buy a house. There are write-offs aplenty, many of which people often forget.

Fairfax, Virginia homeowners need to make sure they take advantage of every break the IRS will give. Here are a few they tend to forget:

Points:
According to the IRS, origination fees charged as points must be paid for the use of money, (for example, to obtain a lower interest rate) in order to be tax deductible. Origination fees that constitute a “service fee” are not tax deductible. The question must be asked, “Does the fee apply to the use of money, or is it a service charge?”

Pre-payment penalties:
Unforeseen circumstances often cause borrowers to pull out of their mortgages sooner than expected. Fortunately, pre-payment penalties are tax deductible, which helps ease the pain.

Fairfax, Virginia Pro-rated real estate  taxes:
Even if the seller sent the tax collector the check, chances are the buyer paid a pro-rated portion of the taxes for the year at closing. Be sure they know to deduct their fair share.

Pro-rated mortgage interest:
Depending on when in the month the home sale closes, buyers pay either a hefty or a tiny amount of pro-rated mortgage interest for that month. Big or small, they can write that off. The Final Closing/Settlement Statement will show just how much they’re due.

Home construction loan interest:
As long as the construction period doesn’t last more than two years before they make the new place their “principal residence,” they can write off the interest for that construction loan.

It pays to pay attention – all these write-offs can add up to some serious savings when tax time comes around.

Time is Running Out for Significant Savings!

The Clock is Ticking!
Time is Running Out for Significant Savings!

Attention home buyers! Waiting to buy a home could cost you nearly $20,000 or more over a seven-year period if you time your purchase incorrectly. While the actual impact will vary depending on purchase price, the impact will certainly be significant because of stimulus programs scheduled to end in the coming months.

Economic turmoil and the real estate bubble have created significant opportunity for all those seeking to capitalize on the situation at hand. YOU Magazine will address the real estate purchase market and what people interested in both buying and selling a home need to know this month to take advantage of the current market conditions.

We also consulted with Michael J. Maher of “The Maher Team,” one of the busiest agents in the country who sold 216 homes in 2009. With a degree in mathematics, he knows his numbers and the impact on both buyers and sellers.

As little as a few years ago, it would have almost been incomprehensible to expect that actions from Washington would impact decisions involving the purchase and financing of real estate. Well, that was then and this is now and the decisions people make or don’t make stand to impact wallets across the country.

Before You Buy – Things to Consider
The pressure is on to buy in the first quarter of 2010, so what should buyers focus on before pulling the trigger? Maher recommends that buyers focus on three things that are either expensive to fix later or unable to change without buying another home. His three primary areas to focus on are what he calls the three Ls: “Location, Lot and Layout.”

When considering location, use technology like GoogleMaps™ before visiting a home to save both time and gas. Mapping allows you to view the property from different angles, see if the home is on a busy street, or if it offers the other requirements you need. For example, if you need a large yard where the kids or dogs can play, a tool like GoogleMaps™ will help you eliminate some homes immediately.

While it is relatively easy to get caught up in the aesthetics, don’t do it. Overlook items you can change later like paint, carpet and other cosmetic details. Narrow your focus down to two or three homes and “all things being equal, focus on location, lot and layout.”

Selling a Home?
If you are selling a home and want to make sure you can get it off the market for time crunched buyers, remember that today is what Maher calls a “price war beauty contest.” Sellers need to be focused on having their home priced competitively and making it most appealing upon inspection. Sellers also should consider paying for a home warranty to alleviate any concerns cash-strapped buyers may have about paying for repairs after closing.

More than anything else for both buyers and sellers this year, Maher suggests that people not let the money savings opportunities pass them by. “Anyone that qualifies is in a no-lose situation – they are buying at the bottom of the market, economically, historically, seasonally, market-wise and interest rate-wise. The perfect storm has arrived and the pearls and treasures have floated to the surface.”

Gifts from the Federal Reserve Are on the Clock

MBS Purchase Program
Mortgage rates have been artificially low the past fourteen months due to assistance from the Federal Reserve and their mortgage backed securities purchase program. Regardless of the expert, when asked what the impact has been to lowering rates, the range is from 0.50-1.00% or potentially more. The Federal Reserve reiterated in its January statement that they will be ending the program on March 31st.

While it is uncertain to what degree interest rates will immediately rise starting April 1st, the overwhelming trend will be higher. Many experts are predicting that rates will start to rise in advance of April 1st.

Tax Credit
Low mortgage rates are not the only stimulus program ending in less than three months. Credited for boosting a major share of home sales at entry level, first time home buyers have been taking advantage of a tax credit of up to $8,000 for over a year.

Repeat purchasers were also given incentive in November with the availability of up to $6,500 in post-closing cash. Tax credit qualifying buyers have until April 30th to get under contract and must close by June 30th. If home buyers miss either date, it will be a costly one.

HUD and the FHA Tighten Up
HUD announced in January that the upfront costs to obtain an FHA mortgage are going up for any applications received April 5th or later. The cost of the up-front mortgage insurance premium (MIP) will increase for all case numbers effective April 5th by 0.50%, from 1.75% to 2.25%.

What Waiting Will Cost You
The costs of missing out on the combined incentives add up quickly for those who fail to act by the deadlines. The first incentive scheduled to end will impact buyers on a monthly basis in the form of higher monthly payments. On a $200,000 mortgage, a 1.00% increase to interest rates could increase a monthly payment by $125 a month or $10,500 over a seven-year period. Obviously, the longer the loan remains in place, the greater the impact of the potential loss.

The second potential loss that will be incurred would be waiting to obtain a mortgage guaranteed by the FHA. In the same example of borrowing $200,000, the upfront cost would be an additional $1,000, or .50% of the amount borrowed. While this cost may be financed, the impact to a monthly payment would also be an increase of approximately $5 a month and have to be accounted for later upon the sale of the property.

Finally, the third potential cost in waiting will be the end of the tax credit for qualified buyers of a primary residence, up to $6,500 for repeat buyers and up to $8,000 for first time home buyers.

Add all this up and the cost of choosing to wait could run up to nearly $20,000 or more depending on the purchase price of a home and the type of mortgage applied for. So, even if someone believes that home prices may fall from where they are today, even with a modest decline in price, the cost of waiting could outstrip any benefit of finding a home for less.

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