This is from Weichert Market Monitor

Focusing on Housing Tax Breaks by Tim McLaughlin

Your home is probably brimming with tax advantages. Do you know about all the breaks you are entitled to? Obviously, you should always consult a professional tax advisor for details, but here’s a list of the top 5 tax deductions for homeowners:

1. Mortgage Interest – Mortgage interest on a home is usually fully tax deductible. You can deduct interest on multiple mortgages, as long as they do not exceed $1 million. The purpose of the mortgage must specifically be to buy, build or improve a home.

2. Points Paid on a Purchased/Refinanced Loan – If you refinanced, you may be able to write off any points you paid to buy down the mortgage rate. To do this, you deduct the points proportionately over the life of the new loan. For example, if you took out a 30 year loan, you would deduct 1/30th of the points you paid each year. Remember, if you’ve refinanced before, and you have points from the previous refinance that you haven’t finished deducting, you can write off the rest of those points in the year you refinance. If you bought your home last year, the points you paid at closing are deductible on your income tax statement for that year. If the seller paid some (or all) of your points for you, you may be able to deduct those seller paid points too!

3. PMI – extended through 2010! Late in 2007, Congress extended the tax deduction for homeowners paying private mortgage insurance through 2010. This one has some restrictions: for example, the borrowers must have an adjusted gross income under $110,000.

4. Capital Gains with No Income Taxes – Thanks to the 1997 Tax Act, once every two years, single homeowners can realize a tax-exempt profit of up to $250,000, as long as the seller owned and occupied the home as a principal residence during any two of the last five years. Married homeowners who file jointly on their tax returns do not have to pay taxes on up to $500,000 of gains when they sell their primary residence.

5. Refinance – Well, sure, I guess this one isn’t really a true “tax break”, but when you reduce your payment and/or loan term at historically low interest rates, it will feel like one. Need help refinancing? Ask us how!

According to the Washington Post last week, because FHA loans have become more popular and they now account for approximately 30% of all loans up from 3% in 2006, the agency is making some changes to their lending standards to protect itself against risk.

Some of the changes include:

1) Upfront Insurance Premium is going up from 1.75% of the loan value to 2.75%: this fee charged to FHA borrowers for utilizing the program.  The fee can be financed into the loan or paid up front at closing.

2) No more Condo Spot Approval: condo buildings must be FHA approved for you to be able to get an FHA loan to purchase a unit in the building.  For a time they would “spot approve” a condo for purchase by allowing the condo’s management to answer a questionnaire proving that they meet the FHA’s conditions for approval.  Condo buyers must now only use an FHA loan for an already approved community.

3) Seller Concessions Reduced from 6% of the purchase price to 3% of the purchase price.  For example, if you are purchasing a $500,000 house, the seller can provide a subsidy (money provided to the buyer by the seller at closing, intended to defray the buyers closing costs) of no more than $15,000.

4) Credit Score: Minimum score of 500 required and buyers with less than a 580 may be required to put down 10% as opposed to the more common 3.5%

There are other changes, so make sure to keep your eyes out and talk to your lender about details.

As stated in Weichert Insights this morning,

Rates on 30-year mortgages continue to fall and are now at the lowest point in five decades, according to Freddie Mac. Coupled with attractive prices, these incredibly low rates make buying a home more affordable now than at almost any point in history.

This is fantastic news for homebuyers and sellers. Buyers can take advantage of high home affordability and save tens of thousands of dollars over the lifespan of a 30-year loan by locking in at these never-before-seen rates.

As a seller, you should make sure your real estate agent displays information about your home’s “affordability” to show potential buyers how low the monthly cost of ownership is at this point in time.  This helps buyers see what buying your home really means to their bank account every month.  I put up rate sheets with the price of the home in every open house and often get raised eyebrows from guests about how they never realized that they could afford a home that price…but that with rates so low, they can!  I also leave them up in the home why a listing is on the market so that when agents bring in their clients, the client can really envision what buying this home actually looks like in the form of a monthly payment.  Sellers…these rates increase your pool of buyers!

Sellers need to take advantage of the rates as low as they are…they will not stay this low for long…you can could never borrow money for as cheaply as you can  now….this market is good for both sellers and buyers and that is not something that typically happens at the same time.

Ok…so I know what some of you are thinking, so I will address it:

I know that some sellers stand to lose money on their home regardless of the market being favorable due to when they purchased their home (in the peak of the market).  In this case, it may not be the right time to sell if you do not have to….but if you purchased prior to that wild inflated time period, you may also be looking at  selling and saying…”I have lost money because if I had sold in 2006 I would have made a lot more money”…FOLKS…while it is true that you would have “made more money” then, it is NOT necessarily true that you lost money.  You can’t lose money that you never had.  Those prices were not real…yes it would have been lucky to sell at that time, but chances are you would have purchased another higher priced home and then really would be in a position where you would lose money if you sold.

I could go on for days about why the market did what it did and why it needed to be corrected, but I think most people understand that now (plus I don’t want to bore you to tears).  The point is that it is still the American dream to own a home and now you can do that and borrow money very cheaply to make it happen.  For a buyer this means more house for less money.  For a seller this means more buyers.

Happy Monday everyone!

Hi!

Courtesy of our friends at Weichert Financial, here are some interest rate updates as of July 3, 2010:

Fannie Mae 30 Year Conforming Fixed Rate
4.375% with 1 point – 60 day lock

Fannie Mae 15 Year Conforming Fixed Rate
3.990% with 1 point – 60 day lock

Historic Lows!  Take advantage if you can.

On a side note: If you are eligable…VA Loans (not shown above) are very advantages now…in additon to being able to put down as low as 0%, if you put down as little as 10%, your funding fee decreases exponentially…this is a huge savings over paying PMI with a conventional or FHA loan and although the previous reputation of this type of loan is that it is “difficult”, it is now a fantastic option for veterans and is a very strong loan program when compared to a conventional loan putting down less than 20%.  It is much easier to obtain now and does not take as long to get approved as was once the case.  If you have any questions, feel free to reach out and I can set you up with a loan officer to discuss your options.

Of course people think that Real Estate Agents just want people to buy so they can make money, but I just want to share what is actually happening in real estate…and why right now really is a GREAT time to buy/or to “move up” if you are in a position to do so.  Additionally, if you are thinking of selling, it is a great time now as well in Northern Virginia (contrary to what the news is saying).  In Northern Virginia we actually have a shortage of inventory meaning buyers are competing over houses.  The buyers are out because of the great interest rates, so it is a great time to put your house on the market.  We currently only have about a 3 month supply of homes when a stable market calls for a 6 month supply.  Anything over 6 months is a buyers market.

Here is some great info from Weichert Insigts that I wanted to share.  It offers a great illustration of  what todays prices and interest rates actually mean to the cost of a home now vs. later.  This is great news for buyers AND sellers…that doesn’t happen often, so take advantage.  Enjoy!

Waiting Doesn’t Make Cents!

Historically low-interest rates and attractive home prices have combined to make the current housing market one of the most affordable in decades.  While patience can sometimes be a virtue, for those who think a home purchase is in their near future, waiting just doesn’t make “cents”.

For example, the monthly payment to purchase a $300,000 home with 10 percent down and a 30-year fixed mortgage at an interest rate of 5 percent would cost $1,449.  Yet, if rates rise to 6 percent and home prices increase 5 percent, that same purchase would end up costing an additional $3,000 a year.

Figures from the National Association of Realtors shows the favorable gains that recent first-time buyers have enjoyed in housing affordability.  The average sale price of a typical starter home dropped nearly 24 percent from 2007 to 2010. That equates to a savings of $40,000 on the purchase of a home.

The same report shows that interest rates dropped from approximately 6.5 percent to under 5 percent to make a home purchase even more affordable. As a result, a first-time buyer’s monthly payment dropped nearly $400 from $1,083 to $709 and the income needed to qualify to purchase a starter home dropped from $52,000 in 2007 to $34,000 today.

While holding off on buying might have been a good strategy a few years ago, today’s market conditions are just too favorable to wait for a better opportunity that isn’t likely to come. With home prices appearing to stabilize or increase in many markets (including many areas in Northern Virginia), and with signs pointing to interest rates on the rise, it seems likely that a home purchase will cost more in the future than it does today.

Happy Sunday!!!

Be prepared…when you find the home you love and put in an offer, remember that what you are putting down for the house is not the only cost you will have at the closing table.  Additionally, as a seller you have costs as well…don’t be caught off guard and be sure to talk to your agent and lender prior to your home search to get an idea of what these costs could be so that you are prepared.  Here are costs to expect:

Buyers:

• Lender fees include charges for loan processing, underwriting, preparation and establishing an escrow account.
• Third-party fees include charges for insurance, title search, and other inspections such as termites.
• Government fees include deed recording and state & local mortgage taxes.
• Escrow and interest fees include homeowner’s insurance, loan interest, real estate taxes, and occasionally private mortgage insurance.
• ** An Earnest Money Deposit** this will have been collected at the time you make the offer and is held in escrow from the time the contract is ratified and held until closing.  This is an important part of your offer to purchase the home.  The EMD is typically 1.5-2% of the purchase price, so make sure to be prepared to write this check when you are putting together the offer.  This is your demonstration to the seller that you are serious and able to buy.  Additionally, the seller has something to hold on to if you default for a reason that is not outlined as a reason to void the contract in the terms of the contract.  It is also refundable if the contract is voided for reasons set forth in the contract.  If all goes well and no one voids, this money will be applied at closing towards the purchase of the home and will offset some of the costs you will be responsible for on the day of closing.

Sellers:

• Title insurance fees depend on the sales price of the home.
• Broker’s commission is a full-service fee and will cost anywhere between 6% to 8%.
• Local property transfer tax, county transfer tax, state transfer tax, and state capital gains tax are the charges that you’ll pay for the privilege of selling your home. Credit to the buyer of unpaid real estate taxes for the prior or current year are variable and depend on when you close and when your taxes are due.
• FHA fees and costs are all fees are now negotiable between a FHA buyer and seller.
• Home inspections fees, while in most instances are paid for by the purchaser, are in some circumstances paid for by the seller and include pest, radon and other inspections.
• Miscellaneous fees can accrue from correcting problems noticed during the home inspection.  These you will typically fix and pay for prior to closing, but some seller often offer a credit at closing intended to be used for correcting problems.

Purchasing and selling a home costs money, but the benefits of home ownership far out way the costs at the closing table…preparation is key…

Happy Wednesday!

With all of the new lending guidelines, we are seeing a lot more FHA and VA loans popping up these days.  These are great loan programs, but there are some differences and special guidlines that make these different than Conventional financing beyond just the lower downpayment requirements and PMI with FHA/funding fee with VA.

For some time FHA had restrictions on lending to borrowers purchasing a home that had not been owned for at least 90-days by the current owner…termed as seller or title seasoning requirements.  This was recently reduced to 30-days.  This is all fine and good and is relatively common knowledge among investors and agents alike.  The tricky part is…is this also a requirement for VA financing?  And if so, is it still 90-days???  This is a relatively new problem that has popped up because of all of the foreclosures and short sales that have been purchased and renovated for investment purposes.

I was up against this very question recently.  My client was getting VA financing and wanted to buy a property owned by an investor who had only owned the home for 45+/- days.  We were all good with the terms and the sellers were ready to sign on the dotted line when the listing agent called a loan officer friend to ask a question and she put the kabosh on the deal!  She  said the VA has a 90-day title seasoning requirement and my client could not buy the house!!!

After many calls and the deal almost falling through…we found out that the VA DOES NOT have a title seasoning requirement at all!  Actually, their requirement is 1-day.  Some individual lenders add what they call layers of risk “risk layering” and make title seasoning a requirement for VA loans; however, this is not a requirement of the VA.  (but P.S. there is nothing online that even discusses this topic or outlines the guidelines pertaining to this)

Whew…was I relieved.  Thank God this was not a competitive situation…we could have missed out because of this misinformation!   My buyer was so happy to learn that he was in fact able to purchase the home and we ratified the contract the next day…but what a stressful weekend we had to sweat out because no one seemed to know for sure!  I presented the offer on a Saturday and had to wait until Monday morning to get a definitive answer from a VA underwriter who could clarify the guidelines.  This was so unnecessary!

But I learned something new…and if you didn’t know this then you did too.  Before you begin your home search and are looking into lending institutions (for VA or FHA loans) find out if the lender layers risk and requires a greater than 30-day seasoning requirement for FHA or greater than 1-day seasoning requirement for VA.  This will be important to know if you are looking at properties that have been recently rehabbed by investors.  You may want to choose a different lender…it isn’t worth losing the house of your dreams.

I am not a financial expert or a lender…I am a REALTOR(R)…ask your lender to clarify all terms, conditions and restrictions pertaining to the loan you are getting.  This is simply to facilitate that conversation and raise your awareness about what is happening in the marketplace in Northern Virginia.

Have a great night all!