Obama’s new plan to prevent foreclosures

As I had written about previously, President Obama is trying to do whatever he can to keep homeowners in their homes.  He’s unveiled a new plan to prevent and lower the amount of foreclosures across the country.  The new plan requires lenders to reduce the mortgage payments for their unemployed borrowers for three to six months.  For those having trouble paying but aren’t unemployed, he’s trying to encourage the same lenders to reduce principal payments if you pay your loan on time each month and are current and stay current.

By beginning this plan, if it could prevent a whole bunch of foreclosures at once, it could delay the dramatic decrease in prices and help to stabilize the housing market a little bit.  This way the lower prices will hit over time.  Some in opposition to this plan use that to say this will just delay the inevitable, that these homes will still go into foreclosure, it’ll just take longer.

But it is a benefit to those who lose their job and don’t want to lose their home.  To qualify, you need to live in the home, have a mortgage of less than $729,750, and receive unemployment benefits.  They’ll have to spend no more than 31% of their monthly income on their mortgage.  This plan will be available over the coming months.

What if you owe more than what your house is worth?  For many, this is when they list the house as a short sale.  Meaning, the lender will agree to sell the house for less than is currently owed on the mortgage.  Obama is trying to help people in this situation keep their homes.  It’s possible they can refinance with FHA-backed loans.

In order to qualify for one of these, you need to have a mortgage payment of $729,750 or less, show that you’re in financial trouble, and spend at least 31% of your pretax income on your monthly mortgage payment.  Lenders then can reduce the mortgage payment by about 10%.  You can’t be in default at all.  You must be current on all of your payments to qualify.   However, this plan is a completely voluntary one.  The lenders do not have to agree to do this. 

Do you think that this is a good idea or that it will just delay the inevitable?  I’d love to hear your thoughts.  Please leave me a comment below or visit me online.  More information on the program can be found here.

Tips to ensure first time buyer tax credit

Just a reminder that the deadline to be under contract on a home to still obtain the first time buyer tax credit is April 30th.  This is up to $8,000 in tax credits for any buyer who hasn’t owned a home in the past 3 years.  Of course, move up buyers are also eligible for up to a $6,500 credit.  Since that’s not very far away, I know that many people have just signed contracts or are still looking for their perfect place.  The property must close on or before June 30th.  And that April 30th contract must be signed by both the buyer and the seller, or one of their representatives, to make it legal and binding.  I wanted to give you some other tips to make sure you got through this process without a hitch.

1. Use your contingencies wisely.  In Illinois, you’re allowed an attorney review contingency, mortgage contingency, and home inspection contingency.  You’ll most likely want to take advantage of all three.  But don’t use them as just a stall tactic to buy more time.  Make sure you meet your deadlines.  Get the contract to your attorney as soon as its signed – give them as much time as possible to review it.  Order a home inspection upon signing it, too.  You don’t want to have to ask for extensions because you want to be able to close in time.

2. Don’t wait for better weather to go out looking.  You’re already in a serious time crunch, so delaying something even further could mean the home that’s meant for you is already sold or off the market.  Schedule appointments if it’s snowing if you need to find something quick.

3. Make sure you’re pre-approved before you go out looking. You don’t want to find out after you’ve finished negotiating that there’s a problem with the purchase price because you won’t qualify for a loan.  Make sure your mortgage broker has all of the documentation they need from you (tax returns, pay stubs, bank statements, etc.) well ahead of time.

4. Be wary of short sales in this situation.  The process to hear back from the lender could be a very long one, and you don’t want to risk losing your credit because of it.  At this point, that may not be the best way to go.

More great tips can be found here.

Let me know if you’re still looking.  I’m happy to help you find your dream home.  Visit me online.

Extreme Makeover in need of extreme makeover

The premise behind Extreme Makeover: Home Edition is a good one.  ABC’s reality TV show has a construction crew rebuild a home for a family well in need of a massive makeover.  It’s a great charitable cause, right?  It seems that way.  Unfortunately, a lot of the families on that show have had trouble paying the property taxes that came with their new homes.  What happened is the IRS looks at any prize winnings (a completely new home) as income.  So they’re now charged higher tax on the winnings.  And their property taxes could cost more, too.

Six families that have appeared on the show have had trouble keeping their new homes.  Three of them are facing foreclosures.  More on the individual stories can be seen here.

So the producers are now trying to find a way to build more sensible homes for the winners.  These homes would be ones that they are more able to afford.  The problem is that aside from the tax increase, if your square footage on your home recently doubled or tripled, you now have utility bills that can cost you a lot more per month.  Think of all the extra space you have to heat and cool. 

So what are some other solutions??  Maybe they can offer a stipend of a few thousand a month for the first year to help cover some unforseen costs or even more beneficial, maybe they can have the family sit down with a financial planner to budget more effectively. 

Or is the idea of this show just not meant to work given the current housing market?  I’d love to hear your thoughts via comment or by visiting me online. You can also view more about the problem in this article.


Important real estate tax deductions

I’m sure most of you out there dread April 15th as much as I do.  Long lines at the Post Office, endless paperwork of filing taxes, and some people may even have money they still have to pay to the government.  I wanted to make sure that all of you out there do as much as you can to deduct all of your eligible real estate expenses.  A lot of people aren’t aware that owning real estate can significantly affect the taxes you owe.  So even though the housing market has seen better days, there are some benefits to being a homeowner.  Please remember to always double-check with a Certified Public Accountant prior to filing your taxes.

The first possible deduction is mortgage interest.  Any interest you pay, no matter what the rate, is eligible.  You can also deduct any late payments to the mortgage company and any prepayment penalties you’re charged for paying your mortgage down early (if you are charged).  You should receive a statement from your lender giving you the total mortgage interest paid over the past year. 

If you bought a home this past year and you had to pay points to the lender to obtain the mortgage, that is deductible.  If the word “points” wasn’t used but terms like “loan origination fees,” that also qualifies.  These points are only deductible in the year they were actually paid. 

Many Lake County and Cook County, IL residents will be happy to know that their real estate property tax is deductible.  If you escrow your property taxes with the lender, the amount you paid over the past year will be included in the statement you receive detailing the total insurance.  If you pay separately, you can most likely view cancelled checks, or check with the tax assessor’s office for your county.  This information is also available online in Illinois where you can just enter your PIN number for your home or property address.  While the actual taxes are a deduction, any private services to the utility companies you use like electricity or trash removal is not.

Another deduction to keep in mind is for home improvements.  You’ll want to discuss these with your CPA because a lot of improvements you make to save energy can offer you back a tax credit.  Some of these include new windows and energy efficient appliances.

Some common items that are not deductible include premiums you pay for homeowners insurance, homeowners association fees, utility payments, and the principal you pay on your mortgage.  Again, please verify everything with a CPA.  More information can be found on the TurboTax site here.

Please visit me online for any real estate matters I can assist you with.

Green is key at this year’s builders’ show

The 2010 International Builders Show took place at the end of January in Las Vegas.  Four energy-efficient homes were on display that focused on using less energy, less water, and having cleaner indoor air.  I love this quote by Kevin Morrow, The National Association of Home Builder’s senior program manager of green building standards:

If these trends continue, “Keeping up with the Joneses” could take on a different spin as neighbors compete for the lowest power bill on the block!”

So what’s going to be new and more green?  Here’s some featured items:

Panasonic’s ventilation fan, the WhisperGreen FV-13VKM2.  It features dual motors, an energy-efficient motor to improve air quality. 

Rainwater Collection Solutions Inc. has the Original Rainwater Pillow.  This is designed to collect rainwater and is stored horizontally, such as under a deck or porch.

Hoping to reduce energy costs, BaySystemsTM is combining an HVAC system with spray foam insulation installed by an energywise Preferred Contractor to keep your utility bills lower.

EcoStar® has a premium line of synthetic slate and shake roofing tiles manufactured with 80% post-industrial recycled materials.

Sommer USA happily showcases their garage door opener, the quietest in the world.  It’s stronger than a chain but quieter than a belt drive.

I’ve talked about low VOC paint before, great for people with allergies.  Sherwin-Williams was on hand to promote their zero-VOC, low-odor paint. 

Here is a list of even more products that were featured this year: CLICK HERE.

More information on the show can be found here and here.  I’d love to know what new energy-efficient products you’d like to see in the future.  Please visit me online or leave me a comment below.