Want $8,000 back on your taxes? First Time Home Buyer Tax Credit

2009 Tax Credit for First Time Home Buyers.
By: Keller Williams Realty, Inc.
Would you like $8000 back on your taxes this year?

We've been hearing a lot of questions about the new tax credit. Who qualifies? How does it work? How long will it last? Here, we’re taking an in-depth look at the $8,000 tax credit for first time home buyers.

According to the new legislation, a first time home buyer is defined as someone who has not owned a principle residence in the past three years. Those three years are counted up to the date you take possession of the house you buy in 2009. This means that even if you’ve owned a home in the past, you can still take advantage of the tax credit as long as you haven’t purchased a primary residence since 2006.

The same goes for married tax payers - they must both be first time home buyers. For non-married joint buyers, only one of them needs to be a first time home buyer, or someone who hasn’t owned a primary residence in the past three years.

Qualifying homes include:

    · New homes
    · Homes that are being re-sold
    · Condos
    · Townhomes

The main restriction is that the credit is only for those who buy a home as their primary residence. So investors looking to buy a rental property would not qualify for the credit. However owning a vacation home or a rental property already does not neccessarily disqualify you from taking advantage of the credit (as long as you haven’t owned a primary residence in the past three years).

A Look at the Numbers

The tax credit is equal to 10% of the purchase price of the home, up to $8,000. The amount of the credit you can qualify for is related to how much money you earn. Here’s how the credit is scaled:

    · Single home buyers earning 95K or less qualify. If you make 75K or less, you
      qualify for 100% of the $8000. If you make halfway, 85K, you qualify for 50%
      or $4000. The credit phases out gradually between 75K and 95K of income. For
      example, if you make halfway between the income limits, 85K, you qualify for
      up to half of the credit.

    · The same rate applies for married couples and joint buyers whose incomes
      limits are doubled to $150,000 to $170,000. Married couples or joint buyers
      whose incomes are less would receive the full $8000 credit.  At an income
      level of  $160,000, halfway between 150 and 170, the buyers would receive half
      the credit – or $4,000.  And the credit phases out altogether at $170,000.

This credit represent a significant amount of money. One of the biggest points of difference for the new credit from the one congress passed in July of 2008, is that the new credit does not have to be paid back.

In addition, it's refundable, which means that if you’ve paid all your taxes as you go with an automatic payroll deduction, you would receive an $8,000 check from the IRS.

If you're committed to buying a house in 2009 and want to use the $8000 tax credit for a downpayment, consult with your certified public accountant.

In Summary

Qualifying home buyers will need to make their home purchase between January 1, 2009 and December 1, 2009. And the home has to remain their principal residence for the following three years.

The new tax credit coupled with historically low mortgage rates and rising affordability, offers buyers a great opportunity if they act fast.

If you’re interested in learning more about the new tax credit or about homes in your area, speak with me soon.
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First-Time Buyers' Tax Credit

Summary of First-Time Homebuyer Tax Credit
By; Marcie Geffner: Thirdage.com
The government's first-time homebuyer tax credit is not really a credit, it's a loan that will need to be repaid. Make sure you read the fine print.

If you're planning to buy a home in the next 10 months, you may be eager to take advantage of the federal government's latest effort to jump-start the nation's moribund housing markets: A tax credit of up to $7,500 for certain homebuyers.

The credit may appear to be an attractive opportunity, but you should be sure you read the fine print before you elect to claim it on your federal tax return.

"The big story is that it is not a credit. It is a loan, and you are going to have to pay it back, so you'd better make sure that you have the money," says John W. Roth, senior tax analyst at CCH Group, a Riverwoods, Ill.-based company that provides tax software, services and information.

"If you claim the credit, you could end up with some tax issues a couple of years down the road because of the tax liability, and if you sell the house, there is a possibility that you could have a bigger tax bill."

With that warning in mind, here's a summary of the rules.

First-time homebuyer tax credit rules

1. The tax credit is not a deduction

2. The tax credit is repayable to the federal government

3. Selling your home before the 15 years are up?

4. The credit also will be written off if you die before it's repaid

5. The tax credit is restricted to 'first-time homebuyers

6. The tax credit may be taken only for the purchase of a principal residence

7. Modified adjusted gross income limits

8. Some may get a partial credit

9. Technically, the credit is equal to 10 percent of the purchase price of the home

10. The home must be purchased on or after April 9, 2008

11. Buying a home in 2009?

12. The credit cannot be used with mortgage-revenue bond financing

1. The tax credit is not a deduction, but rather a true credit in the sense that your federal income tax liability will be reduced dollar-for-dollar up to the amount of the credit you're entitled to take. For example, if you owed federal income tax of $8,000 and you took the maximum credit of $7,500, your tax bill would be cut to $500. The credit is also refundable: If you owed, for instance, $1,500 in income tax and, again, you took the maximum credit, your tax liability would be zeroed out and you'd get a check for $6,000 from the government.

2. The tax credit is repayable to the federal government. The total credit is divided into small bits of 6.67 percent, each of which is due annually for 15 years. That means if you claimed the maximum credit of $7,500, you'd have an additional tax liability of $502.50 each year for 15 years. No interest is charged.

3. If you sell your home before the 15 years are up, the remainder of the credit that you haven't yet repaid will become due. If you sell your home at a loss, the government will write off the balance of the credit that you still owe.

4. The credit also will be written off if you die before it's repaid. Special rules apply to transfers of property between spouses or incident to divorce; or if the home is subject to "involuntary conversion," such as being destroyed by a natural disaster; or is seized by a government authority though the exercise of eminent domain.

5. The tax credit is restricted to "first-time homebuyers," but the definition includes anyone who didn't have an ownership interest in a principal residence during the prior three years. If you're married, you and your spouse must fit that definition. An ownership interest in an investment property or vacation home is not a disqualification. The rules aren't entirely clear as to how the tax credit will be allocated if two unmarried people buy a home together and only one of them meets the definition.

6. The tax credit may be taken only for the purchase of a principal residence, which means a home where you plan to live most of the time. The home may be a detached house, condominium, town house, manufactured (aka mobile) home or houseboat. It must be located in the United States. A home purchased from a "related party" (e.g., a parent or sibling) is not eligible.
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Mortgage Applications Increase as Rates Decline

Mortgage applications bounced back last week after nearly a month in the doldrums when the number of applications fell to a seven-month low.
By: Mortgage Bankers Association: REALTOR®Magazine
The market index compiled by the Mortgage Bankers Association rose 6.6 percent on a seasonally adjusted basis to 548.2 points from 514.4 points the previous week.

On an unadjusted basis, the index increased 6 percent compared with the previous week and rose 17.2 percent compared with the same week a year ago.

Both purchases and refinances were up with the purchase share increasing 7.3 percent and refinances rising 5.9 percent.

Average mortgage rates were as follows:

*30-year fixed-rate mortgages decreased to 5.44 percent from 5.50 percent.
*15-year fixed-rate mortgages decreased to 4.93 percent from 4.99 percent.
*1-year ARMs remained unchanged at 6.54 percent.
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Southern California home prices rise slightly in May

The median price was $249,000, which is up less than 1% from $247,000 in April. It was the first month-to-month gain since July 2007.
By: Peter Y. Hong: latimes.com
Southern California's median home price rose slightly in May for the first time in nearly two years. But the increase was more reflective of a change in the types of homes sold than an end to falling values, a real estate research firm reported Wednesday.

The $249,000 median price in May was up less than 1% from April's $247,000 figure, and marked the fifth-straight month the median has held at roughly $250,000, according to San Diego-based MDA DataQuick.

The modest rise reflects increasing purchases at the high end of the housing market, where sales have been virtually frozen. For much of the last year, most home sales have occurred in the low end of the housing market, with banks unloading foreclosed properties at deep discounts, dragging the median price down.

Now, more expensive properties are selling, which raises the median, through a market paradox: many of those homes sold after owners cut prices to lure buyers. Still, stirring sales activity at the high end is a sign that the market is crawling toward equilibrium.

"As more sellers get realistic, more buyers get off the fence and more lenders offer reasonable terms for high-end purchase financing, we'll see a more normal share of sales in the more established, higher-cost areas that have been nearly comatose," said John Walsh, president of San Diego-based MDA DataQuick.

A slowly growing number of buyers like Geoff Graham, 40, is changing the mix of homes sold. Graham and his husband, James Tee, 35, bought a new three-bedroom row house in San Diego's Hillcrest neighborhood last month for $750,000.

The couple had admired the place a year ago but couldn't believe the seller wanted $995,000. "I thought, 'What a cool place, but who in the world would ever pay so much money for it ?' " Graham said.

The answer was no one.

In January, Graham and Tee saw that another row house in the development had sold for $760,000 and decided that price was within their comfort zone. The $10,000 state tax credit for new-home purchases also "made us feel a little more comfortable paying that price," Graham said.

Homes priced at $500,000 and above accounted for 17% of Southland home sales in May, up from 15% in April, DataQuick reported.

The median price is the level at which half of the homes are sold at higher prices and half at lower prices. As higher-priced homes have trickled into the sales mix, foreclosures are less dominant. In May, foreclosed homes accounted for 50% of sales, down from 54% in April and a peak of 57% in February.

The April-to-May Southern California median price increase was the first month-to-month gain since July 2007, when it moved from $502,000 to $505,000, which was the market's peak.

May's price was a 51% drop from that peak, and it was down 33% from the May 2008 median price of $370,000.

Lower prices continued to drive purchases: the 20,775 Southern California homes sold in May was up 1% from April and 23% above the May 2008 sales total.

The housing market "is starting to reach the bottom; prices have reached levels where they make sense again," said Christopher Thornberg, a Los Angeles economist who was an early forecaster of the housing bubble.

"But hitting the bottom is different from coming off the bottom," he said, noting that prices will probably remain low as long as "we still have a massive wave of foreclosures to deal with."

About 150,000 homes in California were in some stage of foreclosure in May, according to ForeclosureRadar, an online seller of default data.

The median price climbed most in the region's more affluent counties. Orange County posted the largest monthly median price increase among the Southern California counties. Its $410,000 median price was up 8% over its April median of $380,000. Ventura County's median was up 4% in May, to $355,000 from $340,000 in April. San Diego also saw a modest 2% price increase in May, to $295,000 from $290,000 in April.

Those counties rank first, second and third, respectively, in household income among the six counties, according to the U.S. Census Bureau.

The median home price in May essentially matched April's figure in Los Angeles ($300,000), Riverside ($180,000) and San Bernardino ($137,000) counties.

San Diego County may be a bit ahead of the local housing market curve: Its median sale price peaked at $517,500 in November 2005. That peak occurred 1 1/2 years before Los Angeles County hit its high median price in May 2007, at $550,000, according to DataQuick.

Those 18 additional months of price declines may have worn down the resistance of some San Diego sellers who until recently had expected to sell properties for near-peak prices. Kris Berg, a San Diego broker who works in the Scripps Ranch community, said homes in her area listed for around $700,000 are now selling quickly.

Those same homes might have sold for more than $900,000 at the height of the market, and until recently sellers continued to demand such prices, with few if any takers.

"A year ago, two years ago, so many sellers were still insisting their house was special. Now, the ones who want to sell are getting it; they're pricing their homes more appropriately," Berg said.
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Vampire power costs

There's a lot of interest in the fact that many electronic devices in our homes are using energy even while they are turned off or not being used.
By: Lori Bongiorno: YAHOO! GREEN
But, how much money do these energy vampires really suck up?

For many people, the standby power used by one device will seem minuscule, but the costs can add up when you take into account just how many things we all have plugged in. What's more, many households, have multiple televisions, computers, cordless phones, and others.

All told, the money wasted by an average U.S. household on standby power each year could easily be used to purchase an iPod Shuffle or in some cases even a Nano.

Below is a list of the annual average costs for many household gadgets that are turned off and plugged in. Just add up the costs for everything you have plugged in at home to find out how much standby power costs you each year.

Keep in mind that these are just averages, and in some categories there are big differences between most and least efficient products. How much energy each of your devices consumes will depend on both the device itself and your local electricity costs.

We calculated the following averages based on energy use stats from the Lawrence Berkeley National Laboratory and American Council for an Energy-Efficient Economy using a price of 11 cents per kilowatt-hour.

Home Entertainment

* CRT TV: $1.00
* LCD TV: $2.97
* Plasma TV: $2.97
* DVD: $1.53
* VCR: $4.63
* Digital cable box: $17.65
* Satellite cable box: $15.50
* DVR: $36.63
* Digital cable box with DVR: $43.01
* Set-top satellite box with DVR: $27.52
* Video game console: $1.00
* Portable stereo: $1.64
* AM/FM tuner: $1.11
* CD player: $4.99

Home Office

* Desktop computer: $3.96
* Laptop computer: $8.81
* Laptop charger (unattached to laptop): $4.38
* LCD monitor: $1.12
* Printer: $1.98
* Multifunction printer, scanner, copier: $5.21
* Computer speakers: $1.98

Other

* Coffee maker: $1.12
* Microwave oven: $3.05
* Cordless phone: $1.98
* Answering machine: $1.99
* Power tool: $3.96
* Handheld vacuum: $2.97
* Electric toothbrush: $1.98
* Cell phone charger (unattached to phone): $0.26

Costs start adding up when you take into account electronics that may be left on when you're not using them.

Here's a small sampling:

* Desktop computer: $71.00
* Video game console: $23.10
* VCR: $7.69
* DVD player: $7.46
* CD player: $8.53

There's little consumers can do about set-top cable, satellite, and DVR/TiVo boxes. Television shows can't be taped if boxes are unplugged and it typically takes a long time to reboot boxes. Since it's not practical to unplug them, the best you can do is remember to turn off the box when you're not actively watching TV.

When you add up how much money every U.S. household spends on standy power it amounts to about $4 billion a year of wasted energy.

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Bernanke Easing Mortgage Rates for Consumer-Driven Rebound

U.S. Federal Reserve Chairman Ben Bernanke is delivering what he promised five months ago, record- low mortgage rates and a refinancing boom that’s putting cash in consumers’ pockets.
By: Kathleen M. Howley: Bloomberg.com
Fixed 30-year mortgage rates fell to a record low for the second consecutive week last week, hitting 4.78 percent, Freddie Mac said yesterday in a statement. The rates are the lowest in records dating to 1971, and come after Bernanke told Congress in November that helping the most creditworthy borrowers was essential to reviving the economy.

Mortgage applications in the U.S. rose for the fourth straight week last week as a decline in borrowing costs spurred homeowners to refinance, while purchases of new houses unexpectedly rose in February. The Fed’s effort to bring down fixed rates may give consumers as much as $25 billion, said Mark Zandi, chief economist of Moody’s Economy.com.

“It certainly gives further fuel to consumer spending,” said Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies in Cambridge, Massachusetts. “It puts more money into circulation.”

The extra cash may help boost first-quarter consumer spending by 1 percent to 1.5 percent, said Barton Biggs, managing partner at New York-based hedge fund Traxis Partners LLC. Consumer spending accounts for about two-thirds of the U.S. economy.

Creditworthy Borrowers

Bernanke signaled the Fed’s effort to bring down fixed mortgage rates in Nov. 18 testimony to the U.S. House of Representatives’ Committee on Financial Services.

“It is imperative that all banking organizations and their regulators work together to ensure that the needs of creditworthy borrowers are met,” he said.

One week later, the Fed said it would buy up to $500 billion in home-loan securities, causing the biggest one-day drop in mortgage rates in at least seven years, according to Bankrate.com. On March 18, the central bank almost tripled the size of the program to up to $1.25 trillion in purchases during 2009. The intent is to lower rates and make real estate financing easier to get, the Fed said.

The plan to buy mortgage bonds this year is succeeding where $11.6 trillion of government lending, spending, and guarantees so far have failed.

‘Successful Effort’

“This has been the most successful effort, at least so far in this crisis, to shore up the economy,” said Zandi.

Bernanke’s mortgage purchase program may help curb a recession that is in its second year and being driven by the highest jobless rate in a quarter century and shrinking household wealth.

“If you throw enough money at one credit market, you will bring down the price,” said Gerald O’Driscoll, a senior fellow at the Cato Institute and former vice president of the Dallas Federal Reserve. “They are targeting the mortgage market in an attempt to speed the process of establishing a floor in the price of housing.”

Homeowners who refinance with a half-point drop in fixed rates may save $150 a month on a $300,000 mortgage, said Stephen Stanley, chief economist at RBS Securities Inc. in Greenwich, Connecticut, and a former Fed economist.

Home Prices

Cheaper financing may also help spark a turnaround in the housing market. Sales of previously owned homes rose 5.1 percent to 4.72 million at an annualized pace in February from the prior month as low mortgage rates spurred demand, the National Association of Realtors said. The NAR’s affordability index rose to a record in January, helped by lower home values and mortgage rates. The median U.S. home price in February was $165,400, the NAR said in a March 23 report, down 28 percent from its 2006 high.

Bernanke cited lower mortgage rates in testimony in February as evidence that Fed policies were working, noting that rates had fallen “nearly 1 percentage point” since the program was announced.

On April 1, Federal Reserve Bank of Cleveland President Sandra Pianalto said the Fed’s program was resulting in “encouraging signs” for the economy. Besides falling rates, “we are also beginning to see a resurgence in refinancing activity in the residential mortgage markets, spurred on by these lower rates,” she said.

The bankers’ group boosted its forecast for 2009 home-loan originations by $800 billion to $2.78 trillion last month as a wave of refinancing and low interest rates spur homeowners to seek out new loans. Refinancing will increase to $1.96 trillion in 2009 and purchase originations will total $821 billion, the group said.

The London interbank offered rate, or Libor, for three- month dollar loans dropped to 1.17 percent yesterday, down from 1.43 percent at the start of the year, showing banks have become more willing to lend.

TED Spread

The so-called TED spread, the gap between what banks and the Treasury pay to borrow money for three months, shrank to 96 basis points from 1.35 percentage points on Dec. 31. It touched a yearly low of 91 basis points on Feb. 2. The gauge reached a high of 4.64 percentage points in October, up from 1.35 percentage points on Sept. 12, the last trading day before Lehman Brothers Holdings Inc. filed for bankruptcy.

U.S. home prices fell 6.3 percent in January from a year ago, the smallest decline in five months, according to the Federal Housing Finance Agency in Washington.

“We have seen evidence that home sales are bottoming,” said Jim O’Sullivan, senior economist with UBS Securities LLC, in Stamford, Connecticut. “This should be positive.”
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Existing-home sales rise on deep discounting

Sales up 5.1% in February while prices drop 15.5% in past year, NAR says
By: Rex Nutting: MarketWatch.com
Sales of U.S. pre-owned homes rose 5.1% to a seasonally adjusted annual rate of 4.72 million in February, boosted by "deep" price discounts, the National Association of Realtors reported Monday.

It was the largest percentage gain since July 2003.

Sales are down 4.6% in the past year, the industry trade group reported. February's sales increased in all four regions as tracked by the NAR.

Sales of foreclosed properties or short sales accounted for about 45% of transactions last month the real estate trade group said. Distressed homes are selling for 20% below "normal market prices," the realtors said.

Economists surveyed by MarketWatch had been expecting sales to drop to a pace of 4.45million units from January's 4.49 million annual rate. See Economic Preview.

The median sales price dropped 15.5% in the past year to $165,400 - the second-largest year-over-year price decline on record, coming on the heels of January's 17.5% drop.

Inventories of unsold homes on the market rose by 5.2% to 3.80 million, equating to a 9.7-month supply at the February sales pace. Inventories, which are not seasonally adjusted, typically rise about 5% in February.

Inventories of existing homes can be fluid, as home owners or banks owning foreclosed homes wait for better market conditions before putting their houses up for sale. Any uptick in sales or prices could unleash a wave of homes on the market.

The realtors track only homes offered and sold through the multiple-listing services. Many foreclosures are handled through auctions or are being held off the market until prices improve.

The increase in sales is "obviously good news for the industry and the economy," even if sales remained "very soft," said Lawrence Yun, chief economist for the industry group.

He said he expects that provisions in the recently enacted economic-stimulus package would boost sales by about 1 million this year. The stimulus includes an $8,000 tax credit for first-time home buyers.

February details

Sales of single-family homes rose 4.4%. Condo sales also increased, up 11.4%.

Sales of single-family homes and condos increased by 15.6% in the Northeast, by 6.1% in the South, by 2.6% in the West and by 1% in the Midwest.

Sales in the West are up 30.3% compared with February 2008. In the past year, sales are down 10% in the South, 7.8% in the Midwest and 4.8% in the Northeast.
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Five warnings to heed if you're trying to buy a short-sale house

Short sales, slow sales
Check out short sale properties, but get ready to play the waiting game
By: Amy Hoak: MarketWatch.com
Those searching for the best housing bargains on the market might consider buying a short-sale property. But there’s an important qualification for buyers interested in going this route: They need plenty of patience...

In a short sale, a homeowner's lender agrees to accept less than is owed on the mortgage for the property. It's a useful alternative for borrowers underwater on their mortgage and on their way to foreclosure. As home prices continue to decline, short sales have become a viable option for those who need to sell.

"Over the past three to six months, the servicers have really become aware that short sales are the best way to reduce their losses... when a modification is not an option," said Travis Hamel Olsen, president of National Short Sale Center, a company that facilitates short sales nationwide on behalf of homeowners and real estate agents. The short-sale option also is less damaging to a seller's credit than a foreclosure, he said.

A short sale can also be attractive to a home buyer since the lender will often accept bids on the property that can be 10% or more below the market value, determined by the prices of comparable, nearby properties, Olsen said.

Although the mortgage balance is probably greater than the price a seller could expect in a traditional sale, the lender may be willing to take less than it's owed in a short sale if it can avoid the further expenses of foreclosing and taking over the property. The savings, however, often come at the expense of a home buyer's time.

"Short sales should be called long sales," said Leslie Tyler, vice president of marketing for ZipRealty. "In some cases, it could take months for a buyer to hear back from a lender."

For Kristine and John Williams the savings seem to be worth the wait.

Kristine Williams says they've found "the perfect house" in Brentwood, Calif., although the process is taking longer than they originally thought. The couple waited four months for an answer from the bank, and then had to revise their bid lower as the market continued to sour.

Their current bid is $550,000, on a home that was appraised at about $1 million three years ago. They're hopeful the current bid will be successful, but realize it could be months before they find out if the offer is accepted.

"In general, it takes a minimum of two months to get a response from the bank whether they will accept or counter your offer," said Rob Jenson, CEO of The Jenson Group, a Las Vegas-based real-estate firm. "That process could take longer."

Are the savings worth it to you? Consider these five caveats before shopping for a short sale:

1. You'll wait in the dark

Perhaps just as frustrating as the wait time is the fact that you likely won't be privy to details as the deal is progressing. That could mean going months without an update.

Banks are "ramping up their capability for short sales," said Dennis Green, general manager of ForeclosurePoint.com. But it hasn't made the process much easier.

"Where our buyers have been the most frustrated is the lack of status or information," Tyler said. Saying "we want an answer by this Friday or we're going walk... doesn't make a difference," Jenson said.

There are reasons for the wait: A lender could be considering multiple offers. If the seller had both a first and second mortgage, that could also make the process more complicated. The Williamses ran into both scenarios, slowing their process down - and that's not unusual. The homeowner also has to prove their financial hardship to the lender.

2. Banks will make you a deal, but within reason

There are deals to be found in short sales - but don't expect outright steals. A buyer needs to make a fair offer, based on comparable homes that have been sold recently, Jenson said. The offer should be aggressive, but not ridiculous, he said.

"The misconception is that banks should be happy to get it off the books," he said. "They are, but to a certain point."

Homes that have already been foreclosed on may be even less expensive than a short sale, Tyler said. But bank-owned properties also might be in worse shape, especially if the foreclosure home has been sitting vacant for some time, she added. It's important to consider the cost of necessary repairs before buying any distressed property.

3. Sales are 'as is'

In a short sale, it isn't likely that you will get allowances from the seller for repairs that are needed, as you might in a traditional sale, Jenson said. Do a home inspection and know what you're getting into, but remember that your bid is for the property "as is."

"The seller will not give you a credit for repairs," he said. "The last thing they will do is make repairs."

4. Have a back-up plan

Even if you decide to bid on a short-sale property, it might be best to keep looking anyway.

"There is no guarantee with short sales, and if the buyer is smart they will put an offer on a short sale they like and continue to look at properties that interest them," Olsen said. It isn't uncommon for people to find a home they like better and kill the short-sale deal, Green said.

That said, when a offer is accepted and earnest money is put down, remember that you risk losing those funds if you decide to walk away and buy another home, he added. It may take months before the deal closes, even after the offer is accepted.

5. It's not only about price

"One thing to not lose sight of is you're buying a house to live in. Buy a house you like," Tyler said. She recommends that prospective buyers remain open to properties of all types - short sales, bank owned and traditional sales - and compare prices and features.

A short sale is only a bargain if it's a home that you truly want to live in - not something you're drawn to only because of its low price tag.
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Bernanke Mortgage Rates Get 4% Handle First Time: Chart of Day

The lowest fixed mortgage rates on record may fall further after the Federal Reserve tripled its commitment to buy securities backed by conventional home loans.
By: Kathleen M. Howley: Bloomberg.com
Lenders will be setting rates “with the knowledge that there is a large buyer in the market ready with a bid at prices deliberately aimed at bringing down spreads,” said Jay Brinkmann, the chief economist at the Mortgage Bankers Association in Washington.

The CHART OF THE DAY shows spreads on mortgages and consumer loans versus benchmark interest rates. The gap between 15- and 30-year fixed-rate mortgages and the 10-year Treasury note narrowed since the Fed started buying mortgage securities in January.

The average U.S. rate on a 30-year fixed mortgage fell to 4.96 percent during the week ended Jan. 15, the lowest according to Freddie Mac data that goes back to 1971. This week the rate is 4.98 percent, the McLean, Virginia-based mortgage buyer said in a report yesterday. The 15-year fixed rate is 4.61 percent, the lowest since 2003.

The Fed said March 18 it would increase its purchases of mortgage-backed securities this year by up to an additional $750 billion, adding to the $500 billion it pledged between January and June. The central bank also said it would buy as much as $300 billion in Treasuries during the next six months.

The moves are aimed at giving “greater support to mortgage lending and housing markets,” the Fed governors said in their March 18 statement.
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10 Timely Home-Related Tax Tips

It's tax time again. Here are 10 tax advantages of homeownership.
RISMEDIA
Tax season is upon us, and homeowners everywhere will reap the benefits of tax breaks and incentives. Homeowners and potential home buyers should know what expenses are deductible and the ins-and-outs of new tax laws, says FrontDoor.com.

1. Deduct the interest you pay on your home loan on your tax return. A mortgage interest deduction reduces your taxable income. And because your mortgage payments for the first few years are heavily comprised of interest, they are almost entirely deductible.

2. Deduct property taxes and points you paid to lower your loan’s interest rate. The IRS offsets the expense of your state and local property taxes by allowing you to deduct those fees from your itemized income tax return. You may also get a tax benefit if you paid “points” at closing to lower your mortgage interest rate.

3. Take advantage of new laws in a challenging market. Look into new tax laws that may allow new homebuyers to get an $8,000 tax credit, short sellers to escape penalty for forgiven mortgage debt, and homeowners to contest property taxes in a struggling market.

4. Request a property tax reassessment if your home’s market value has declined. If your property value is significantly lower now than when you bought it, show proof of your home’s current market value and recent comparable sales in your neighborhood to your local tax assessor for a tax adjustment.

5. Research past and proposed assessments that may apply to your home. Understanding property taxes and assessments in your area will give you a more accurate homeownership cost, as well as help you predict and control your monthly expenses.

6. Get a reliable estimate of your property tax bill. Don’t rely on the old tax data passed down from your home’s previous owners. Depending on the circumstances of the sale, your tax bill can differ from their bill.

7. Wrap your property taxes into your monthly mortgage payment. If you’re daunted by that huge tax bill once or twice a year, consider setting up a convenient escrow account. (As this also protects the lender, they are more than happy to do the work.)

8. Understand how capital gains tax is calculated. When you sell your home, you’re taxed on any profit over $250,000 if you are single, $500,000 if married. But in calculating your gains, the IRS takes into account the money you put into improving the home. Remember to save receipts for any repairs and upgrades.

9. Know how your tax situation changes with every real estate move you make. Whether you’re buying or selling a home, refinancing, or renting your investment property, understand how these situations affect your taxes.

10. See if homeownership lowers your tax liability. Your tax situation varies depending on your stage in life. Upon examining your payroll withholdings, opt to reduce them to be in line with your net tax liability, which will put more money in your pocket each pay period.
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Washington Report: Property Valuation

Washington continues to wrestle with one of the thorniest issues of both the housing boom and the housing downturn: What's a piece of real estate really worth, and who says so?
By: Kenneth R. Harney: Realty Times
At a House financial services subcommittee hearing last week, appraisers complained that pervasive attempts to interfere with their work - by loan officers, Realtors, builders and others - distorted home valuations in some areas during the boom years.

They asked Congress to pass reform legislation that would create federal rules banning pressure on appraisers and increasing penalties on anyone who interferes in a property valuation.

But at the same hearing, the president of the National Association of Home Builders took appraisers to task for being a major part of current problems in pricing unsold inventories of houses.

Joe Robson said appraisers in 2008 and 2009 “have often used sales of homes in foreclosure or other distressed property sales as comparables for new homes without making the appropriate value adjustments.”

Failure to make those adjustments, he said, depresses the true value of newly constructed houses, worsens the downward spiral in new home sales, and unfairly devalues entire neighborhoods.

Meanwhile controversial new rules governing appraisals are scheduled to take effect May 1 for all loans originated for sale to Fannie Mae and Freddie Mac, unless a federal lawsuit filed in U.S. District Court in Washington blocks them.

The suit by the National Association of Mortgage Brokers challenges Fannie's and Freddie's “Home Valuation Code of Conduct” because it bans mortgage brokers from any involvement in the selection or hiring of appraisers.

The association, which represents 20,000 brokers around the country, wants the court to throw out the new code, charging that it would “directly reduce the ability of mortgage brokers to provide consumers with an efficient and cost-effective means of (shopping) for a mortgage.”

In a conversation with Realty Times, mortgage broker association president Marc Savitz said absent an injunction, after May 1 home buyers and refinancers may need to pay for appraisals from every mortgage company or bank they shop. Under current rules, by contrast, a broker can obtain one appraisal at the consumer's expense and use it to shop multiple wholesale lenders for quotes.

The suit also asks the court to declare the entire process followed by Fannie and Freddie in devising the code illegal. Both companies and their federal regulator have declined to comment on the suit, but note that they routinely issue guidelines to lenders on all underwriting and appraisal procedures, and the code is no different.
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Five Ways to Wow Buyers

These days, tax credits and high housing inventory make it a buyers’ market.
By: Phoebe Chongchua: Realty Times
If you’re a seller, don’t despair. There are a variety of renovations that can help make your home stand out. Many buyers look at numerous homes when shopping for a house; so enhancing your home to make it more memorable is vital and increases the chances of a successful sale.

Clearing clutter, taking down personal photos, applying a fresh coat of paint, making minor repairs, and keeping a pleasant aroma are all basic techniques to make your home more appealing. But there are a few other creative enhancements that you can do to wow buyers without emptying your wallet. The results not only attract more attention, but also paint a picture of a well-cared-for home.

While not everyone has the same taste in housing, typically buyers are attracted to larger kitchens, extra storage space, light and bright rooms, and open floor plans. Special finishing touches on a home can be the needed incentive to generate an offer.

Kathy Gerstenberg has owned her home for nearly 20 years. Over the decades she’s made many improvements but now she’s considering selling and wants to make sure she gets top dollar in a down market. So, she’s examining her home the way a buyer would.

“We live in a tract home and I know there are many homes for sale; we don’t want ours to be seen as the same ‘cookie-cutter’ model as the others,” says Gerstenberg.

With that in mind, Gerstenberg has carefully made enhancements that make her home more comfortable and aesthetically pleasing. “I wanted to do improvements that would catch a buyer’s eye and also make it enjoyable for our family,” says Gerstenberg.

As she scouts the market for her next home there are various aspects of a potential home that she notices right away. “I love crown molding and finished doors and windows,” says Gerstenberg. She adds, “So many times builders just don’t complete the look of a home but when you frame a door or window and add some crown molding to a room it gives it a finished look.”

Industry experts agree; Americans are expected to spend $217 billion on remodeling in 2009. Here are five areas where homeowners may spend some of their remodeling money to add the “wow” factor to your home.

1. Go green. Energy efficient products and household goods are attractive to buyers. Renovations or replacements that help make the house more energy efficient are popular. Things such as better insulation, replacing old windows, caulking, and adding skylights can increase value.

2. Crown molding and wider baseboards. Some homeowners are shy to experiment with this, especially if they live in a small home, but it can be very attractive in any size home. Wider baseboard. The measly baseboard that builders often use in tract homes doesn’t draw attention. Adding a wider baseboard and a fresh coat of paint makes the room come to life. Also, framing windows and doors helps complete the look of a room.

3. Textured paint. Faux finishes, accented walls, or even just a little fresh paint on them makes a lasting impression. Choose colors and textures wisely. Don’t get carried away with a color you love (e.g. purple walls—I’ve seen it in a home for sale). Remember, that you want your home to appeal to the masses. You can always paint your new home purple—and then change it when it comes time to sell it!

4. Improved flooring. Wood, tile, and new carpet can be a showstopper. But if the flooring is chipped, torn, or dirty, you’ll get the opposite reaction from buyers. They’ll think your home hasn’t been cared for properly which could result in a lower offer - or no sale at all.

5. Add a deck. Adding a deck can add value to your home. It’s a nice feature in a yard and many buyers are happy to purchase a home that already has a deck so that they don’t have to take on that home improvement project.
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Housing Plan Creates Opening for Scammers

Borrowers Who Hire Firms to Renegotiate Mortgages Rarely Come Out Ahead
By: JAMES R. HAGERTY: WSJ.com
Obama's housing plan will give troubled borrowers a chance to lower their mortgage payments - but could also give firms an opportunity to fleece unsuspecting borrowers.

President Barack Obama's foreclosure-prevention plan, announced last week, is designed to give several million troubled borrowers another chance to lower their mortgage payments. But government officials and counseling agencies warn that it also presents a golden opportunity for firms to fleece unsuspecting borrowers.

Over the past few years, there has been a proliferation of firms that charge fees for what they promise will be quick results in negotiating with banks to get easier loan terms. In many cases, the firms take the homeowner's money but never deliver the services promised. Even when the firms do deliver what they promise, they charge fees - often more than $1,000 - for services borrowers can receive free. In July, Congress increased to $360 million the funds it has allocated for foreclosure-prevention counseling to organizations that provide the service without charging consumers.

"Borrowers don't need to pay anybody," says William Apgar, a senior adviser to Shaun Donovan, President Obama's new secretary of housing and urban development. But Mr. Apgar and others fear that the recent headlines about the Obama housing plan will prompt more consumers to seek help in the wrong places.

Under the Obama plan, the government will offer incentives and subsidies to persuade mortgage-servicing companies to offer lower monthly payments to borrowers in danger of losing their homes to foreclosure.

The publicity about the plan could be "the greatest advertisement of all for these scamsters," says John Ryan, an executive vice president of the Conference of State Bank Supervisors, which helps coordinate bank regulators. But he adds that his group is working with state and federal regulators to alert consumers and crack down on scams.

Home Truths
The Federal Reserve recently issued advice for people seeking to modify their mortgage:

· Work only with HUD-approved nonprofit counselors. (See www.hud.gov.)

· Don't agree to pay a fee before you are provided with the promised service.

· Beware of people offering "guaranteed" results.

· Don't sign blank forms or documents you haven't read.

In the meantime, fee-charging loan-modification firms "are popping up everywhere," says John Snyder, a manager at NeighborWorks, a nonprofit group formed by Congress to support community-revitalization organizations. In California alone, the state Department of Real Estate has reviewed fee-agreement forms submitted by nearly 300 firms touting loan-modification or similar services and has posted them on its Web site. (The department says it doesn't endorse the firms or their services.) Cable-television stations also have been running ads for services that charge fees, many designed to look as if they come from government agencies or other trusted entities.

Consider the case of Marilyn Elias, a retired medical-records manager in Tempe, Ariz. Last September, when she was exploring ways to reduce her mortgage payments, Ms. Elias's son told her about a company called GSA Mortgage in Phoenix that he thought might be able to help her. She says she paid upfront fees totaling $1,455. "All they did was take my money," says Ms. Elias, a widow. "They haven't done one thing."

In addition, she says, an employee of the firm advised her to skip payments on her mortgage while waiting for a loan modification. That, she says, caused her credit score to plunge, even though she has since caught up with the payments. GSA Mortgage didn't respond to repeated requests for comment.

Wendy Brooks, a mortgage broker for Scout Mortgage in Scottsdale, Ariz., is trying to help Ms. Elias get a loan modification from the company that sends out her monthly mortgage bill, Aurora Loan Services. Ms. Brooks says she won't charge Ms. Elias anything for that help. A spokeswoman for Aurora declined to comment on Ms. Elias's loan.

Jeff Pasquale, an aircraft technician who lives in Lancaster, Calif., says he first tried to deal directly with his mortgage lender, Wells Fargo & Co., to negotiate lower payments. "I tried to handle it myself, and they started jamming me around," he says. He says he didn't seek a free HUD-approved counselor because a colleague had tried that without success.

Instead, Mr. Pasquale says he paid $1,100 about a month ago to a firm called U.S. Loan Assistance Center in Orange, Calif., which he found on the Internet. He says he believes the firm will deliver on its promises and is awaiting the results.

Eric Dena, processing manager at U.S. Loan Assistance Center, says Mr. Pasquale's payment is being held in a trust account until the firm's work is completed. He said his firm works faster than nonprofit counselors.

A spokeswoman for Wells said she couldn't discuss the specifics of Mr. Pasquale's situation, but added: "Wells Fargo encourages borrowers to work with us directly or a nonprofit housing counselor. We see no advantage to hiring third-party companies."

Borrowers are tempted by these firms partly because banks often don't have enough trained staff to cope with all of the calls they get from desperate homeowners and because nonprofit counselors don't always provide good service, says Jack Guttentag, a professor of finance emeritus at the University of Pennsylvania's Wharton School. He operates a Web site that offers free mortgage information called mtgprofessor.com.

In theory, Mr. Guttentag says, it might make sense for some people to pay a modest fee for help in negotiating with banks. But he has found no way to determine which of the fee-charging firms are legitimate. Mr. Guttentag suggests that borrowers first try calling their loan servicers for help. If that doesn't work, he says, borrowers can try to get a free, government-approved counselor. One way to find those is to call the mortgage industry's "Hope Hotline" at 888-995-4673 or click on www.hopenow.com.

Firms that charge big fees for helping with loan modifications are just the latest potential trap for people facing foreclosure. In recent years, many distressed borrowers have fallen for "foreclosure rescue" schemes in which firms or individuals promise to help them avoid foreclosure through arrangements that involve transferring the title of their home to the supposed rescuers.

Rather than solving the problem, the deals typically resulted in the rescuer stripping the remaining equity in the home. As many of today's troubled borrowers have little or no equity remaining in their homes, fee-based loan-modification schemes have eclipsed foreclosure-rescue ones, says Mark Kaufman, Maryland's deputy commissioner of financial regulation.

The Federal Reserve and the Federal Trade Commission have published warnings about what they call "foreclosure scams." State attorneys general also are issuing warnings and in some cases prosecuting firms alleged to have cheated borrowers. U.S. Sen. Herb Kohl, a Wisconsin Democrat, has introduced legislation that would bar "foreclosure consultants" from collecting fees before they complete promised services. Some states, including California, Maryland, Iowa and Florida, already have laws with restrictions on upfront fees for these services.
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First Step in Housing Refinance Plan Is Reaching Loan Servicer

Homeowners seeking help from the Obama administration’s foreclosure-prevention plan should start by contacting their bank, a process that’s likely to involve multiple phone calls and hours of effort.
By: Jeff Plungis: Bloomberg.com
“Servicers are inundated right now,” said Gibran Nicholas, chairman of the CMPS Institute in Ann Arbor, Michigan. “You have to be patient.”

Mortgage payments may be reduced to 31 percent of gross monthly income under the Obama plan. Applicants will have to produce pay stubs and tax returns to document income, the Treasury Department said today. They’ll also need to sign an affidavit confirming financial hardship.

Loans must have been made before Jan. 1, 2009 with a balance of less than $729,750, and the property must be a primary residence to qualify. The program doesn’t apply to second homes or vacation homes. Loans can be modified only once under the program.

The administration estimates between 7 million and 9 million homeowners may be eligible for help. The two main groups are people who can’t currently refinance to lower rates and those who may be on the verge of foreclosure because of economic distress.

About 4 million to 5 million homeowners are current on their loans but aren’t able to take advantage of current low mortgage rates because their homes have lost value, the administration said. Homeowners generally aren’t able to get a new mortgage greater than 80 percent of their home’s value. With this voluntary program, that requirement will be waived. Loans up to 105 percent of the value of the home will be eligible.

Saving $2,300

In one example of a borrower refinancing from a 6.5 percent loan to a 5.16 percent loan on a $200,000 mortgage, the new program would save more than $2,300 per year, according to the Treasury Department.

The refinancing program only applies to loans owned by Fannie Mae or Freddie Mac. Determining if that’s the case is another big challenge for borrowers, said Nicholas of the CMPS Institute. The information usually isn’t disclosed in monthly mortgage statements or the papers received at closing.

Getting through to a loan-servicing company by phone is one option. Loan companies must respond to written requests by law, but that can take up to 60 days, Nicholas said. Fannie Mae has a link on its Web site offering to check if a borrower fills out an online form.

Modified Mortgages

The administration estimates 3 million to 4 million homeowners in economic distress may avoid foreclosure with modified mortgages. The guidelines released today distribute the cost of the new loans among the borrower, the lender and the government.

Lenders will be responsible for bringing down the monthly payment to no more than 38 percent of a borrower’s gross monthly income, the administration said. Further reductions in interest payments, down to 31 percent, will be matched dollar-for-dollar by the government and paid directly to the loan servicer.

The loan company will be able to reduce the interest rate to as little as 2 percent to achieve the debt-to-income ratio and can also extend the loan term to as long as 40 years.

Homeowners would be credited an extra $1,000 in reduced principal each year for five years as an incentive to stay current on payments. Lenders would be given $1,000 for each loan successfully modified and up to $1,000 each year for three years if the new loans stay current, according to the Treasury Department.

One difference from previous housing rescue plans is borrowers who haven’t missed payments are now eligible for help.

Seek Help

Consumers may want to obtain advice from a credit counselor before beginning the process, said Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling, an umbrella group of 850 U.S. community-based agencies.

The high rate of repeat foreclosures among borrowers who modified their loans under earlier foreclosure-prevention plans shows people aren’t always getting good advice. The foundation’s credit counselors are trained and certified, Cunningham said.

“If I was about to lose my home, I’d reach out for professional help,” Cunningham said. “Plan A, in everybody’s heart and mind, is to stay in the home. If long-term sustainability isn’t an option, then we need to exercise some tough love.”

The credit counseling foundation’s toll-free number is 1- 800-388-2227. Callers will be automatically routed to the counseling office nearest their home. Counseling agencies can also be located online at http://www.debtadvice.org.

The Hope Now alliance of banks, mortgage companies, investors and community groups offers advice on its Web site, hopenow.org, and links to 20 counseling groups certified by the U.S. Department of Housing and Urban Development, including the Association of Community Organizations for Reform Now, or ACORN, the Catholic Charities USA and the National Urban League.
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