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Common real estate myths dispelled

Buying and selling residential real estate can be complex and confusing, particularly amid a process rife with misconception. To dispel common real estate myths, Robert Jenson, CEO of The Jenson Group at RE/MAX CENTRAL, offers some “truths” to help real estate consumers better navigate the home buying and selling process:

MYTH: All Realtors are created equal
TRUTH: Real estate agents vary widely in terms of experience, skill, ingenuity, accessibility and ability to produce results quickly and smoothly, among other key factors. Interview at least 3 agents, and come prepared with a list of questions you plan to ask. What is their track record? How do they market listings? Do they have a team to help show your home or does the responsibility fall on one particular agent? Due diligence is key to finding a representative prepared to work hard and who will be available to answer your questions along the way.

MYTH: Home inspections should wait until an offer has been presented
TRUTH: Even before listing a home, sellers should hire professionals to inspect the property including the roof, pool, and other structural elements, as well as for termites and other important buyer considerations. Make all repairs before you list the house on the market. Today’s buyer is discriminating and has many choices - don’t give them a reason to have concerns. A complete list of the completed inspections and repairs should be made available to serious buyers, which will go a long way in expediting the process at large.

MYTH: All negotiations start with a buyer submitting an offer
TRUTH: Sellers do have ways to kick start a negotiation, such as a “Reverse Offer.” Consider that one buyer who has been back for a second or possible third look, but hasn’t pulled the trigger. Make them an offer! Yes you, as the seller, should put something in writing and submit it to the buyer’s agent. This will create an opportunity for the buyer’s agent to sit down with his or her client and potentially help close the deal.

MYTH: Only home sellers - not buyers - need a real estate agent
TRUTH: Purchasing a home could be the most important and complex financial transaction you engage in, and going it alone is risky. Indeed, a buyer’s agent can save you time, hassle and thousands of dollars. Take time and care when selecting a real estate buyer’s agent - find someone you can trust, and that you have a good rapport with.

MYTH: Buyers should wait to secure loan approval until they’ve found a home they want to buy
TRUTH: Many buyers want to find the “perfect” home before having their credit pulled, which can backfire when an offer is on the table and time is of the essence. It’s wise to get pre-approved for a loan even before you view your first home. Your credit report may contain inaccurate information that you were not aware of, which can be a time consuming process to rectify. Or, you might not like what loan program you qualify for, or you might qualify for a higher loan value than you thought. Ultimately, you will need a pre-approval letter with your offer, so do yourself a favor and do this in advance. It’s free, after all.

MYTH: There is no real benefit to “shopping” for a mortgage among multiple lenders
TRUTH: A difference of even half a percentage point can mean a considerable savings over the life of a loan. For example, the difference in the monthly payment on a $100,000 mortgage at 8% vs. 7.5% is about $35 per month. Over 30 years, that’s $12,600. Be a smart consumer and comparison shop for the most favorable mortgage rates and terms.

MYTH: All real estate agents charge the same commission percentage
TRUTH: Not all agents - and agent packages - are created equal. From full-service agents to discount agencies, make sure you know the type of professional you are hiring and what EXACTLY they are going to do to sell your home. An agent that can professionally market your home above and beyond the MLS listing will increase your exposure within the marketplace, which will lead to a higher selling price and less days on the market. Will your agent incur costs to give your home that visibility? Find out, so that you may take everything into consideration when establishing the commission percent. Despite what an agent might say otherwise, commissions are always 100% negotiable.

12:23 PM - Jan. 6, 2009 - comments {0} - post comment

New Year's Revolutions

this article is by Michael Guld who is an author, speaker, entrepreneur and radio commentator whose business development expertise lies in the “soft skills”; increasing sales performance, marketing exposure, employee productivity and creating a world-class service experience. He is the president of The Guld Resource Group and creator of “Talking Business with Michael Guld,” airing on Central Virginia’s Public Radio and heard at www.talkingbiz.net.

While the origin of New Year’s resolutions goes back as far as 153 B.C., in modern day times, they usually evoke feelings of guilt. Most verbs associated with resolutions are restrictive in nature, including “to quit, stop, loose, reduce or eliminate.” The implication is that you need to improve, fix or repair something that’s broke or not complete. By its very nature, people see New Year’s resolutions as a difficult exercise at best, requiring discipline, determination and willpower…which are not exactly energizing words. As a result, most people “make” the resolutions January 1, and usually begin to “break” them by February 1 as their commitment fades and enthusiasm for attainment wanes. Case in point: The extreme increase in traffic at a health club the beginning of the year, which quickly subsides as the weeks and months progress.

Well here’s an idea: This year, consider creating New Year’s “reVolutions,” transformational actions that will lead to breakthrough results. New Year’s reVolutions can energize and invigorate by the thought of “what’s possible.” By definition, which one of the below would inspire you to get out of bed January 1?

- A resolution - a solution, accommodation or settling of a problem
- A reVolution - a drastic and far reaching change in ways of thinking and behaving

New Year’s revolutions are personal and broader in scope than the traditional resolutions. The framing of your revolutions requires stepping back and deciding what do you want to be as opposed to what you need to do. If someone were to introduce you to a large crowd recognizing you for your accomplishments, what would you want your bio to say? Are you on track to be that person? If not, what actionable steps can you take today that will help you get there tomorrow?

To help increase the chances of keeping inspired (vs. disciplined) with your New Year’s revolutions, follow these 10 tips:

Goals are dreams with a deadline - Dreams are all about “wants and desires” with no commitment, where goals are “concrete and defined” with commitment. Where do you ultimately want to be and what do you want to do? Imagine limitless opportunities and be willing to take a chance to lay yourself on the line to achieve them. Write down three actionable goals that you can visualize and that you WILL achieve by the end of 2009. Keep them in front of you at all times so your daily actions will lead you to the attainment of these goals.

Positive attitude plus positive actions equal positive results - While having a positive mental attitude is a good start, it is the positive actions that follow that will lead to success (vs. wanting, hoping and waiting for them to happen). Make a plan on how you will achieve each goal with mini-plans, mini-goals and corresponding dates for each.

Follow your passion - Commit to doing more of what you enjoy doing that invigorates, provides pleasure and satisfaction and less of what you do not enjoy that leads to procrastination and stress (delegate, hire out, etc.). Your chores are other people’s challenges.

Soar with your strengths - Spend more time on those projects, tasks or activities that accentuate your talents and natural gifts and less time on the improvement of your weaknesses or shortcomings (delegate to others). By focusing on your strengths - what you are naturally good at - you will have a higher self-esteem, be more professionally fulfilled and you will ultimately be far more successful.

Be the organized executive - Being overwhelmed with clutter can make you feel busier than you actually are. Start the year fresh by doing a total catharsis or cleansing. Go through every piece of paper in every file with a goal to trash it, box it (future needs) or re-file it (near term needs). Your files will be reduced by 66 to 75 percent. You will start out the year with a refreshed attitude. Begin or end each day with 20 minutes worth of organizing, even if it means hiding piles until you can get to them.

Re-analyze your “to-do list.” Does it look more like an annual plan? Are you working 10, 12 and 14-hour days and you still don’t feel like you get it all done? Go back through your “to-do list” and prioritize it to “do it,” “delegate it” or “scratch it.” Prioritize your list so you can do more of what brings you personal, professional and monetary rewards and less of what steals your time. Make sure you add in your “want to-do list” items, as opposed to only those tasks that others ask you to do.

Compartmentalize your priorities - Once you have decided on your priorities of the day, week, month, and year, focus on the tasks at hand…setting up firewalls to keep any distractions from diluting your focus. While we have two arms, two eyes and two ears, we only have one brain, so it is extremely difficult to concentrate on two or more projects and do them well at the very same time.

Change the way you see everything - By reprogramming your brain to see opportunities vs. obstacles, challenges vs. chores and celebrate what you’ve accomplished vs. feeling bad about what you have not, you will increase your energy, improve your attitude and raise your level of professional satisfaction.

Surround yourself with positive people - Good attitudes are contagious, elevating organizations to heights previously thought unreachable, but bad attitudes are more contagious, draining energy, accelerating discontent, and destroying morale. Choose to spend your precious time with people that will support you, encourage you and celebrate in your success.

Reinvent yourself - Even performers like Madonna realize that change is cathartic, energizing and can be very good for a career. It is easy to become stale and accept the way things are if we don’t shake it up every once and a while, even in our dress and our surroundings.

While we now have new technologies like cell phones, e-mail, PDAs, wireless cards - all designed to save us time, make us more efficient and more effective - the reality is they can be pulls and distractions as well - taking us off tasks to what is truly important. Do not become a slave to technology, but instead use technology as a tool to help you achieve your goals.

Finally, we all have a goal to “get it all done,” when in reality we have to accept that we will never “get it all done.” There is no way to accomplish all that we want to do plus all that is asked from us by our work, family, friends and organizations.

The reality is wherever we spend our precious resources - time, money and energy - is where we will get the greatest results. Decide first on what results you want to accomplish in 2009, and spend your time, energy and focus to achieve your New Year’s reVolutions. .

1:54 PM - Jan. 5, 2009 - comments {0} - post comment

Finding a job in a tough market

Finding a job during tough economic times doesn't have to be tough...if you know which strategies work. Here are some tips for beating the odds:

Take Networking to the Next Level: Networking is always a great job strategy, but in the current economic climate, you need to go a step beyond letting your contacts know you are looking for a job, since many other people may be doing the same thing. Instead, develop a compelling business idea for your field or the field you would like to enter. Then, when you call or email your contacts, let them know you are researching your idea and would like to meet with industry insiders to discuss its viability. With this strategy, people will see you as someone with something to offer them, rather than as someone who needs something. And if the people you meet with like your idea, your meetings could lead to a job offer even though you never asked for a job.

Focus on Sectors That Are Hiring: No matter what industry your background is in, the skills or experience you possess may qualify you for a position in a new field. For instance, sales and customer relations are skills needed in a variety of industries. To begin, make a list of your experiences and skills that could help you find a job in a sector that is currently hiring. Then, gear your resume and cover letter to focus on these particular skills and experiences.

Aim for Your Dream Job: Many job seekers begin to panic and apply for any job that's available. This is a mistake for several reasons. First, passion and enthusiasm are your best weapons for succeeding in your job search. Employers can tell the difference between someone who really wants to work for them...and someone who will take any job. Second, when you are focused on finding a specific job versus any job, you make it easier for friends and colleagues to help you because they will have a clearer idea of who they could contact for you. Third, if you're in the middle of a job transition, why not use the opportunity to enter the profession you have always wanted to try?

Be Creative About How You Start: During tough markets, many businesses are hesitant to add new employees and increase their level of fixed costs. You can offer to begin as an independent contractor for a period of time before receiving a review and possibly a future permanent job. This would give you a chance to earn an income while demonstrating your skills and value to the company. In turn, it lets the company evaluate your performance in a less costly way, because you would not receive benefits during this time; and with less risk for the company than having to make the decision to hire a permanent employee. You could also volunteer your way to a paid job. Many nonprofit organizations have powerful executives on their boards. By demonstrating your skills and work ethic as a volunteer, you could meet important connections that could lead to your next position.

12:17 PM - Jan. 4, 2009 - comments {0} - post comment

Geting a mortgage doesn't have to be difficult

The credit crunch, the credit squeeze, the credit crisis... You've seen the headlines. You've heard about the government's $700 billion rescue plan to deal with it. But what does it mean to those looking to secure financing and take advantage of lower home prices? Can someone still get a mortgage in today's volatile market?

The answer is yes, absolutely! While the credit markets have certainly tightened compared to two years ago, nearly $2 trillion of residential mortgages will have been funded in the US by the end of this year, according to the Mortgage Bankers Association. This means there is plenty of money available to potential borrowers who know how to properly position themselves for success.

Get Back to the Basics

It's true. Just a couple of years ago, the mortgage process was incredibly simple, and it seemed mortgage funding was available to everyone. All you had to do was pick up the phone, put in an application, and wait until closing. That was it. And unless your credit rating was horrible, you didn't even need any documentation to get your loan approved.

While a lot has changed in the last two years, getting a mortgage today can still be a simple process, if you plan ahead. This means understanding documentation requirements, your credit history, minimum down payment requirements, and how to structure your mortgage with smaller down payments. It also means working with an experienced mortgage professional who knows what lenders are looking for.

In others words, the mortgage market of today looks a lot like it did ten years ago, long before the proliferation of the exotic and unconventional mortgage products that flooded the market from 2000 to 2006 – risky products that are now being blamed for some of the financial woes we're facing today. Fortunately, these products are no longer available. Unfortunately, this means you'll need to do a bit more work to get a mortgage than you might have had to a few years ago.

This means being prepared to supply income and asset documentation to support what is on your application. This could include your most recent pay stubs and bank statements, W-2s for the previous two years, and tax returns if you are self-employed or have non-salaried income.

If you want the best interest rates and the lowest costs, you'll need an excellent credit score as well – 720 or higher. You can, however, even with FICO scores in the low 600s, get a lower interest rate on a home loan guaranteed by the Federal Housing Administration (FHA) - but you'll need a minimum investment of approximately 3% (please consult your mortgage professional for your required minimum investment.) This is a great option for you if you don't have the 10% or even 20% you might otherwise need to qualify for a low-interest fixed-rate mortgage.

Two years ago, yes, you probably wouldn't have needed a down payment at all, as 100% financing was commonplace. But this is no longer the case. To qualify for 100% financing today, you'll have to qualify for either VA or USDA loans from the government. The Veteran's Administration (VA) and the US Department of Agriculture (USDA) have special programs that allow 100% financing for those who qualify. What is particularly attractive about both of these loans is that monthly mortgage insurance is not required and interest rates are very competitive.

Other than being a Veteran, there are few restrictions involved in securing a VA loan. To qualify for a USDA loan, however, there are some income limitations and the property you're purchasing needs to be located in a designated "non-metro" area. Ask your mortgage or real estate professional if your area qualifies. You'd be surprised how many areas actually do qualify for this valuable government program, so it's definitely worth investigating.

If you're not a Veteran and you can't qualify for a USDA loan, FHA is the way to go. The down payment requirement is minimal. One other benefit is that FHA financing is available, through some lenders, with FICO scores in the 500s, so you don't need perfect credit. There are, of course, loan limit restrictions, but for many parts of the country, these limits have increased recently, making FHA loans comparable to conforming loan limits in many cases. For first-time home buyers (that's anyone who hasn't owned a home in the last 3 years), the government has also created a special tax credit of up to $7,500 for those who qualify. And while you can't use the money as a down payment, this temporary credit can help lower your overall costs. Be sure to ask your lender about this special tax credit.

In the end, no matter which mortgage you choose, the best path for anyone buying a home today is to get yourself pre-approved – not pre-qualified. With a pre-approval in hand, you won't have to worry about the credit crisis. You will know exactly what you qualify for, and by getting pre-approved, your real estate agent will typically have the ability to negotiate either better terms or a lower price for you. And that puts you in the driver seat to take advantage of some great real estate opportunities in a buyers' market.

3:28 PM - Jan. 2, 2009 - comments {0} - post comment

2008 Cost v Value Report

Every year Remodeling Magazine reports on the return homesellers receive for improvements they make to their homes.

To see this year's report, please go here:  http://www.realtor.org/rmohome_and_design/articles/2008/0812_costvsvalue_2008

The results show that, no matter the economy, proper renovations result in added value when it comes time to sell.

7:30 PM - Dec. 30, 2008 - comments {0} - post comment

The Real Estate "Perfect Storm"

This article was written by James A. Crumbaugh, CEO of Allison James Estates and Homes Real Estate

”The Perfect Storm.” What could I possibly mean when I say that the real estate industry is about to enter the perfect storm?

After 35-plus years in the real estate industry, I’ve watched good and bad markets come and go. There are always mitigating factors that cause these markets, both good and bad, to make an abrupt change. Those that have spent a couple of decades in the real estate industry will tell you this: when a market changes from bad to good or the opposite, it almost always happens very quickly, particularly when a market goes from good to bad.

I think everyone reading this article will agree - that is what happened this time as well, when the real estate market went south on us.

So what do I mean when I say that the real estate industry is about to enter the perfect storm? Let’s look at several factors. The first factor is (at the time the original article was published) a new national election was about to take place with a change of leadership.

Markets tend to pause when we are in this phase, waiting to sense what the change will mean. Next, with the possibility of a recession facing the United States, with several states already experiencing a recession, the stock market is going to continue to retreat.

When the stock market starts to retreat as it is now, investors almost always start to look at real estate, because it’s a tangible item-it’s concrete, something they can fully grasp.

Then, you have to take a look at where the real estate industry is at this moment. With the exception of Texas, we have in most states a severe real Estate issue facing this country. We have declining prices in most areas as well as a huge over-supply of inventory. Yet, we also have some of the most attractive mortgage interest rates available in quite a while, and contrary to popular belief, there is still plenty of mortgage money available for the qualified borrower.

Let’s now take all these issues and throw them into a paper bag, give that paper bag a good shaking and then dump it out. What do you have?

It is the perfect storm for the real estate market. Real estate prices are at a very attractive level. In fact in some areas, due to an over-correction, the properties are undervalued.

Mortgage interest rates are very low and very attractive and we have a huge over-supply of resale inventory. You add all of this together, and for the real estate investor and the natural real estate buyers, the ones who what to move up or move down or move to a new area or whatever the reason is, you have one of the very best times in years to buy property.

The year of 2008 is going to go down in the history books as the year that the current real estate market makes a u-turn and starts to stabilize and appreciate again. Everyone keeps saying now is the time to buy. Let me tell you, it’s not only the time to buy, it’s one the very best times to buy we will see for years to come.

7:11 PM - Dec. 28, 2008 - comments {0} - post comment

Use those gift cards

Gift cards have become extremely popular. In fact, the variety of cards offered and the sheer convenience of these little plastic gems have created a new global culture of gift–giving that few could ever have anticipated. The National Retailers Federation estimates that a total of $97 billion in gift cards – $26.3 billion during the holidays alone – were purchased in the US last year. This year, however, experts say that this hassle–free holiday gift may have met its match: a tough economy.

Earlier this year, when Sharper Image declared bankruptcy, nearly $20 million in gift cards were instantly voided, forcing shoppers to suddenly reconsider the merits of the gift card. Remember, unlike banks accounts, gift cards are not protected by the FDIC or anyone, and there is no guarantee that you can redeem the value of the card if a company goes under. And with other major retailers filing for bankruptcy protection recently (Circuit City, Mervyns, and Linens–N–Things, to name a few) giving gift cards this year could be as risky as playing the stock market.

The good news is, with US retail sales expected to shrink this holiday season, retailers will be working hard to get their share of your holiday budget, no matter how large or small. This means major sales and deals that could make going to the mall this year a much better option than simply handing out gift cards anyway. Because of these deals, what a $50 gift card would have purchased last year could turn into a much more valuable and memorable gift for everyone on your list.

Either way, if you receive any gift cards this year, or you still have a few you haven't used yet, be sure to redeem them right away.

6:56 PM - Dec. 24, 2008 - comments {0} - post comment

How the Fed rate cuts affect consumers

This article is by Vicki Lee Parker of rismedia.com.

Last month, the Federal Reserve cut interests rates for the sixth time this year in its efforts to restrain the credit crisis. The move that reduced the rate to 1% was a shot in the arm for Wall Street, which was up 10.1% last week. But what have all these cuts meant for the average consumer?

To find out, I spoke with Mark Vitner, Wachovia economist; Bill Hardekopf, CEO of www.LowCards.com; and Jeff Williams, a mortgage consultant with Allied Home Mortgage in Raleigh, N.C.

Here’s a breakdown on how they say the low interest rates have-or haven’t-affected some key consumer finance issues.

- Credit cards. Hardekopf said that lowering interest rates doesn’t automatically mean credit card rates will decrease. But over the past year, the rates cuts have kept the average advertised credit card rates stable at about 12%.

In other words, if you have good credit, you can still find low credit card rate offers. In fact, Hardekopf said that Capital One is currently offering zero percent on balance transfers and new purchases for 12 months.

“It’s certainly possible that others (credit card companies) will do the same,” Hardekopf said. The problem is that fewer people will qualify for the lower rates.

“The advertised rates are still low, but they are reclassifying the perimeters of what is considered good credit. Now, more people are falling into the average and poor credit categories,” he said.

To qualify for these low rates, people have to do everything possible to keep their credit score high, he said. That means pay your bills on time, don’t skip payments, don’t apply for a bunch of new credit cards, and keep credit card utilization low-at most, 30% to 40% of your credit limit.

- Mortgages. Many people assume that if the Fed lowers the interest rate, mortgage rates will also decrease. That simply isn’t the case, said economist Mark Vitner. He explained that mortgages are backed by mortgage securities, which aren’t doing well right now. Still, mortgage rates are hovering at about 6.45%, which is not nearly as high as in previous major economic downturns.

- Home equity lines of credit. This is an area where consumers may see some immediate relief, said Vitner. These loans are more closely tied to the prime rate, which moves in close concert with Fed interest rate cuts and hikes. “The interest cost on (HELOCs) will be less and make it easier on consumers. That frees up a little extra income for spending,” he said.

- Refinancing loans. Clearly, lower rates make refinancing cheaper. But determining whether this is a good option is a little more complex, said Jeff Williams of Allied Home Mortgage. If you have an adjustable home loan, it should be adjusting down, which is good and there is no need to refinance. But if you have an adjustable loan that is scheduled to reset at a much higher rate, refinancing may be a good option.

A number of banks are urging people to use the low rates as an opportunity to refinance into a 15-year or 20-year mortgage loan. But Williams said this may not be a good idea for everyone. He said that unless you are very secure in your job, it may be safer to stay with a 30-year loan, which typically has a lower monthly payment than a 15-year or 20-year loan.

- Car loans and personal loans. If you are shopping for new car or a personal loan, the lower interest rates will likely mean good news for you, said Vitner. “Lower rates means it’s cheaper to borrow money.”

- Saving accounts. Lower rates ultimately mean the money you earn on your savings will decrease. Now is a good time to shop around for the best rates. Hint: Online banks such as E-Trade Bank and HSBC Direct tend to offer higher returns on savings accounts and CDs than many traditional banks.

2:55 PM - Dec. 22, 2008 - comments {0} - post comment

Are Safe Deposit Boxes Safe?

We all have important documents and valuables in our homes that we want to protect from theft and disaster. For many people, safe deposit boxes at banks provide a safe place to store those valuables outside of the home. After all, file cabinets and even fire-resistant cases in your house are still susceptible to intense fires, water damage, and even theft.

But, did you know that safe deposit boxes may be susceptible as well? In fact, during the attack on the World Trade Center and Hurricane Katrina hundreds of bank vaults were damaged or destroyed. Worse yet, valuables stored in a safe deposit box aren't insured by the bank if damage or theft occurs.

And if you use a safe deposit box to sock away cash for an emergency, you may be surprised to know that a safe deposit box isn't completely protected. Law enforcement officers can get a court order to raid your safe deposit box, and if the IRS ever freezes your assets, that freeze includes your cash and valuables in a safe deposit box.

All this doesn't mean that you should hide valuables and cash in your closet or drawer...but it does mean you should take precautions and specific steps to make sure your valuables are protected if you put them in a safe deposit box. If you have a safe deposit box or are considering getting one, the following steps can help you make sure your documents and valuables are protected:

• Call your homeowners insurance company to make sure the contents are covered, especially when placing jewelry or collectibles of value in the safe deposit box.
• Put important documents such as marriage licenses, car titles, insurance policies and family records in airtight plastic bags or sealed containers to help protect them from water damage.
• Make copies of your important documents and store them at home or with your attorney, so you can access your information if something does happen to the originals. Remember, important legal documents such as wills and power of attorney documents should always stay with your attorney. You can place copies in your safe deposit box or keep them at home, if you want to have access to the information. But leave the originals at the attorney's office.
• Make an inventory list of everything in your safe deposit box and keep the list in a safe place at home or in another location. You may even want to take pictures or a videotape of the contents just in case you need to show more proof if something happens.

Finally, make sure you inform your family members and your attorney about your safe deposit box! Otherwise, the contents may revert to the state when you pass away.

2:51 PM - Dec. 20, 2008 - comments {0} - post comment

First Time Buyer Tax Credit

The $7,500 home ownership tax credit that the federal government created earlier this year as part of the Housing and Economic Recovery Act (H.R. 3221) is another tool to encourage potential buyers to jump off the fence and get into the real estate market. 

 When you combine the tax credit with today’s low interest rates, wide selection of for-sale inventory, and affordable home prices, many of the pieces are in place for you to buy now. But tax credits can be confusing. To help you understand how the credit works and why it would help, here are the details:

 1. Buyers have until July 2009 to make a purchase that qualifies. 

The tax credit was passed in July of this year as part of the Housing and Economic Recovery Act (H.R. 3221). It’s worth up to $7,500 and can be taken in a single tax year. Authorization for the credit ends July 1, 2009, so if you wait to buy in the first half of 2009 you can take the credit on your 2009 tax return. Taxpayers can take the credit on their 2008 tax return if they bought their house this year after April 9.

 2. Buyers don't really have to be "first-timers."

The tax credit is actually available to any individual or household that hasn’t owned a home for at least three years. And the NATIONAL ASSOCIATION OF REALTORS® has asked Congress to expand the credit to all buyers, not just those who haven't owned a primary residence in recent years.

 3. Even if buyers exceed the income limit, they can benefit from the credit. 

The actual credit amount is set as a percentage of the home purchase amount. That percentage amount is 10 percent, so you can get 10 percent of the home price credited against tax liability, up to a maximum $7,500. Sounds like a great deal. But what if you make more money than the income limit of $75,000 for individuals and $150,000 for households? Good news: Individuals whose income exceeds the $75,000 limit but don't make more than $95,000 can still take the credit but on a reduced basis. The same thing applies to households earning up to $170,000. By the way, any house is eligible as long as it’s a primary residence and is in the United States.

 4. Think of it as an interest-free loan.  

The federal government requires the tax credit to be paid back in small, 6.67-percent increments over 15 years, although repayment will be no more than $500 yearly and payments will not start until 2011. For that reason, some analysts have likened the credit to a 15-year, interest-free loan to help make home buying affordable. NAR is pushing congress to remove the repayment provision, making this tax credit a true tax credit rather than an interest-free loan. 

 5.  You don't have to be authorized before making a home purchase. 

There is no pre-purchase authorization, application, or other approval process. Eligible buyers simply have to claim the credit on their IRS Form 1040 tax return and/or any form that the IRS might devise. 

 6. New-home construction qualifies. 

For a home that a buyer constructs, the purchase date is the first date the buyer occupies the home.However, any home that is not a primary residence, such as a vacation home or income property, does not qualify.   

 NAR Asking Congress to Expand Credit  

 As mentioned above, NAR has asked Congress to do away with the repayment provision of the first-time buyer tax credit and expand the credit to all home buyers, not just first-timers. The proposals were part of a four-point housing stimulus plan the association submitted in mid-October.  

 “Housing has always lifted the economy out of downturns, and it is imperative to get the housing market moving forward as quickly as possible,” said NAR President Richard F. Gaylord. “It is vital to the economy that Congress take specific actions to boost the confidence of potential homebuyers in the housing market and make it easier for qualified buyers to get safe and affordable mortgage loans.

11:33 AM - Dec. 18, 2008 - comments {0} - post comment

Fight off the Bear market

”In wild and excessive swings of the stock market, investors have two choices: run and hide (go to cash or CDs), or take advantage of the situation. The run-and-hide approach can permanatize your losses, and, further, requires you to time your re-entry,” says Leon LaBrecque, the managing partner and founder of LJPR, LLC, a firm managing over $300 million in assets. LaBrecque is also a faculty member of the CMPS Institute, an organization that certifies mortgage bankers and brokers.

“There are a few who think this is the end; under the doomsday scenario, you are betting on the end of the world, but since you can’t collect from anyone if you win, you win nothing. Thus, this nasty and ugly mess is likely to be temporary (temporary is an ethereal term, and could mean three quarters to three years). Notwithstanding the time frame to some semblance or recovery in prices, this market presents opportunities. Stocks are on sale,” continued LaBrecque.

If you landed on earth today with cash, you’d find that houses are cheap; stocks are almost half off (more in many cases), interest rates are low, and gas prices have been reduced by half, all in a year’s time. There is a big sale going on. “Think of it this way,” says LaBrecque. “If the Dow goes back to where it was in October (back when real estate was higher, interest rates were higher, and gas was higher), you’d make 80-100%.”

Here are five ideas LaBrecque suggests you use to take advantage of the sale:

Tax-free returns, part one: Roth IRA contributions. LaBrecque and his firm like Roth IRAs; he advised they’re a virtually perfect vehicle for accumulation. “You put after-tax money into a Roth, and your withdrawals, including any appreciation and income, are tax-free,” he says.

Of course there are a few catches so be sure to discuss your individual situation with your financial advisor.

“Overall, Roth IRAs are good wealth accumulation tools; they’re even more attractive in a market sale.”

Roth conversions. What could be better than investing five or ten grand at a market low that will appreciate tax free? How about sticking a lot more in. Here’s where you look at a Roth conversion. “A Roth conversion is where you take an existing IRA, whether nondeductible, traditional, or rollover, and convert it into a Roth.

Of course there are catches with this strategy also so talk to an expert before making your final choice,” said LaBrecque.

Taking care of the kiddos, tax-free. “§529 plans (Like the MESP) and Coverdell ESAs are tax-free education savings vehicles,” continued LaBrecque. “Making a deposit to a §529 in a down market gives more potential appreciation on a tax-free basis. Unlike previous education savings instruments (UGMA/UTMA) these plans are completely tax free and are not considered the child’s asset for financial aid purposes.”

Of course the catch: Coverdell ESAs may be used for K-12 or college; §529 plans may only be used for college or higher education. There are also some other income/contribution restrictions.

Wealth Transfers on sale. “The decline in real estate and stock values provides an opportunity to make a gift to heirs,” said LaBrecque. By gifting appreciated property (business, ranch, real estate) that has suffered a market decline, you can potentially save all of the estate taxes on any future appreciation of the property. “A gift can be made to an LLC or to an irrevocable Trust instead of directly to an individual. Trusts and LLCs can restrict the use and transferability of assets to outsiders.”

The catch: This one, with the very big bucks, is also quite complex. There are income tax consequences to consider as well (there are weird rules about the basis of property transferred by gift: usually we want something appreciated and not at a loss.) In addition the valuation procedures are critical. “Overall, this is a complex transaction with substantial benefits.”

Wash the losses right out of your head. “In a down market, it makes some sense to harvest losses, ‘harvest’ being the euphemism for simply ‘take the losses’) in your taxable (non IRA or 401(k)) accounts,” he continued. However, losses are strange: you can only net losses against gains and then take a portion (currently $3,000 a year) against ordinary income. On the other hand, since you can carry-over losses indefinitely, it makes sense to realize losses. Especially if you own mutual funds that may pay a capital gain distribution at the end of the year.

You must be mindful of the IRS wash sale rules though, so consult with your advisor.

11:28 AM - Dec. 16, 2008 - comments {0} - post comment

10 Real Estate Myths Debunked

With mortgage meltdowns, plummeting home prices and soaring foreclosure rates constantly in the news, it’s no wonder people are wary of the housing market these days. But contrary to popular belief, things are not as dismal as they seem, according to Lawrence Yun, chief economist of the National Association of Realtors. Yun debunks 10 commonly held beliefs about the current housing market, and FrontDoor.com offers 10 related tips.

1. Peak-to-trough home price declines to date have been about 20%. Wrong. Measurements of home price declines can be skewed depending on which homes in which markets are being measured. For instance, the Case-Shiller Index, which indicates that home prices are down 20%, is heavily skewed towards homes with subprime loans and other distressed home sales. These troubled homes have experienced a steeper decline than home prices in general, says Yun, adding that both government data based on loans backed by Fannie Mae and Freddie Mac and data from the National Association of Realtors suggest much more modest price declines. TIP: If you’re selling your home, the best thing to do is price your home right.

2. The much smaller number of new homes now under construction indicates the dismal outlook for the housing market. Wrong. The inventory of homes on the market is very high, so the last thing we need now is more new homes being built. Home builders have cut back sharply on production, which will help lower inventories and stabilize prices. The builders have done exactly what market forces are dictating under current conditions, Yun says. TIP: With many new homes completed but not sold, you can find great opportunities.

3. Even when the housing market recovers, home price growth will be only 4 to 6% per year — much less than historical average returns for the stock market. Most buyers put less than 20% of their own money into a home purchase; this borrowing power can translate to a greater rate of return. This is how Yun explains it: Home price appreciation historically has been about 1 to 2 percentage points higher than consumer price inflation, which translates into about 4 to 6% per year. But this growth rate cannot be viewed as a rate of return like the stock market. The reason is that most people do not buy a home for all cash, instead making a cash down payment and borrowing the rest. The leverage this borrowing creates can magnify returns — and losses. If price growth returns to historic norm, the price growth of 4% can easily turn into 20 to 30% rate of return if the home buyer makes a down payment of 10 or 20%. TIP: Get the fundamentals right when investing in real estate.

4. Impending baby boomer retirements and moves to small homes will cause a glut of homes on the market. Wrong. The first edge of the baby boomers has reached 60 years of age and the massive bulk of that generation will soon go into retirement, but far from trading down, many of these older homeowners are keeping their homes or moving to ones of comparable size. And even if more boomers do sell their larger homes in the years ahead, Yun points out, the rapidly growing U.S. population should absorb the inventory of existing homes on the market. TIP: Active seniors can find a retirement community that caters to their needs and interests.

5. The federal government takeover of secondary mortgage companies Fannie Mae and Freddie Mac is a bailout that will cost taxpayers bundles. Too soon to tell, says Yun. It’s conceivable that taxpayers may have to cover some losses. It’s also possible that the government takeover will result in no loss of taxpayer dollars. Even if taxpayer funds are used, the bailout would be preferable to the global economic problems that would have occurred if Fannie and Freddie had gone belly up. TIP: Uncle Sam is “bailing out” homeowners facing foreclosure. Find out more about the Hope for Homeowners plan.

6. The Federal Reserve controls mortgage rates. Wrong. Yun explains: The Fed’s activities influence mortgage rates but don’t directly control them. What the Fed sets is a very short-term interest rate called the Federal Funds Rate. Mortgage rates are determined by global savings as well as credit spreads and inflationary pressures. Over the past two years, the Fed has raised the Fed Funds Rate to 5.5%, and then cut it deeply to around 2%. All the while, the 30-year mortgage rate has averaged in the 6 to 6.5% range. TIP: Today’s rates don’t look bad compared to the 10% we saw in the early ’90s and 17% in the ’80s.

7. It’s the wrong time to buy. Wrong. All real estate is local. For those who are financially and mentally ready to buy, there has never been a better time to be a buyer in many markets. An abundant selection of homes and historically low interest rates give buyers an edge over sellers. The recently passed $7,500 federal tax credit for first-time home buyers creates an added incentive. For someone with a long-time horizon, Yun says, there is very little worry about home values since homes have historically provided a solid foundation for wealth accumulation. TIP: Compare the pros and cons of renting vs. buying to see what makes sense for you.

8. It’s the right time for everyone to buy. No. All real estate is local, and everyone is unique. Someone who is not emotionally or financially ready should not be forced or induced to join the rank of homeowners, even when a market presents good buying opportunities. Potential homeowners clearly need to understand that the decision to move up to ownership requires sacrifices, like saving up for down payment and elevating their credit scores. Homeowners who lose their home to foreclosure serve no one’s interest, Yun adds. TIP: Take a good hard look at your financial status and create a homeowner’s budget to see if you’re ready to buy a home.

9. It’s a terrible time to sell. Wrong. In markets where home sales are picking up strongly, a seller can easily get an offer if the property is priced correctly. Also, Yun says, for those looking to trade-up, selling low on an existing home is more than offset by buying the new move-up home at a lower price. When the market recovers, home price appreciation on the traded-up home will bring bigger bang for the buck. TIP: Homebuyers want bargains in this market. If you price your home much lower than your competition, you might end up with a bidding war.

10. With the advent of the Internet, more and more homes are being sold by owners (FSBOs), and real estate practitioners are becoming obsolete. Nope. According to Yun, the share of home sellers who choose to go it alone when selling their home has actually decreased from about 20% in the late 1980s to about 12% today. Even after these sellers successfully complete a transaction, only 4 in 10 say they would sell their next home without the assistance of a real estate professional. TIP: You don’t have to sign a listing contract to talk to a Realtor. Ask family and friends for referrals and interview a few. You might even get some free advice.

11:24 AM - Dec. 14, 2008 - comments {0} - post comment

Home Organization Tips

Is your clutter bogging you down? Cleaning up and getting organized doesn't have to be a big chore if you do a little at a time and maintain it. Get organized in no time with these simple tips; start by making a project list and deadline then display it where everyone in the house can see.

www.lifeorganizers.com
www.essortment.com/in/Home.Organizing/index.htm
www.discoverorganization.com/

2:12 PM - Dec. 12, 2008 - comments {0} - post comment

10 ways to boost value

Homeowners play an important part not only in how their home is perceived by prospective buyers, but also its actual appraised value. To help sellers better maximize their profit potential, Robert Jenson, CEO of luxury Las Vegas realty The Jenson Group at RE/MAX CENTRAL, offers 10 tips for readily increasing a home’s worth:

1. Paint the exterior - A fresh coat of paint can give even a relatively new home a much needed facelift, and can often be done for as low as a few thousand dollars. Select a neutral tone that is consistent with other residences in the neighborhood. Also be sure to pay close attention to eaves, gutters and drains that may also need painting.

2. Complete all needed repairs - To maximize a home’s worth, it should be in good condition both inside and out. Don’t wait until there is an offer on the home. Hire an inspector now, and fix any and all problems, such as roof deficiencies, leaky plumbing and electrical concerns.

3. Purchase a home warranty - Establish peace of mind that comes with knowing a home and its contents are adequately covered in the event of a loss. A transferrable home warranty protection plan can provide added security to the home owner - and buyer - in this regard.

4. Furnish the home to sell - Appeal to the buyer’s emotion. Furnishing a home can go a long ways to getting your home sold, actually increasing the odds of it selling. Give buyers the option to procure the property with or without furnishings, and have a pre-established sale price set for either scenario.

5. Upgrade front yard landscaping - Curb appeal plays a big role more so than people realize. Potential buyers driving the neighborhood may never call on the For Sale sign, if your home doesn’t look appealing from the outside. As well, buyers waiting for their Realtor to show up will often spend a good amount of time critiquing the landscaping while waiting. In addition to purposeful foliage, add landscape lighting and a weather and soil moisture-based landscape irrigation scheduling device to boost value even more.

6. Create a quick kitchen makeover - Kitchens are one of the number one room in the home where you’ll get the most bang for your remodeling buck. Countertops and appliances are the quickest fix, as are faucets, fixtures, door knobs and other easily changed items that can have a large impact on the space.

7. Think spa, not bathroom - The master bath is an important a factor in a home’s worth. Think spa, or private sanctuary, where the master bath is concerned. A space meant to be relaxing, rejuvenating and more. Give buyers something to be excited about with upgraded faucets, fixtures, lighting, cabinetry, mirrors and the like. Then dress it up with plants, candles and other inexpensive, high impact décor.

8. Install soft and hard window treatments - There’s nothing more boring than a plain window. Take advantage of this easy opportunity to give the home’s interior design more impact, while also increasing the home’s actual worth. In addition to “hard” treatments such as blinds and shutters that offer privacy, also add soft treatments hung from decorative fixtures, which can alter the appeal of a room entirely. Look to a professional to ensure the best outcome.

9. Replace carpet rather than just cleaning - Rather than simply steam cleaning old, used carpet, replace it with fresh, neutral-toned carpet with an upgraded pad for an extra luxurious feel. Spending the extra money on new carpet will really make your home stand out from the crowd, in sight, feel and even smell.

10. Don’t overlook your closets - The better organized a closet, the larger it appears and the better it reflects on a home overall. Now is the time to box up those unwanted clothes and shoes and donate them to charity. Then, invest in a closet organization system - either by a professional or self-installed - which will positively impact an appraisal.

2:09 PM - Dec. 10, 2008 - comments {0} - post comment

Where is the current real estate cycle?

This article is by Jeff Shore, founder and CEO of ShoreSelect, a real estate consultation firm with offices in California and Texas,

Real estate has been in the news just about every day as housing prices have fallen in many areas. There are all kinds of opinions about what’s going on and where this is all heading. But these opinions are just guesses and do not take every piece of the puzzle into consideration. History has shown us that the economy goes up and down all the time, and real estate has long coincided with these fluctuations.

Shore says economic cycles of all kinds (stock, macroeconomic trends, housing, etc.) are known for a tendency towards extremes and that market corrections have a way of over-reacting which is exactly what we are seeing today in the real estate market.

“The problem is that there is no one single business cycle. There are major cycles, combined with minor ups and downs, plus small random fluctuations, so if you look at the economy year by year, it looks irregular, but if you see real estate price ups and downs over the past several cycles you can see a clear cyclical pattern,” explains Shore.

So where are we in the current real estate cycle? Is waiting to buy a brand new home a safe option? These are very valid questions that require credible answers in order for home buyers today to achieve the confidence that the future can and will be better than the past.

First, don’t panic over newspaper headlines. Make an informed decision. Run your own numbers. For most buyers, there is no real need to wait for the market as a whole to officially adjust out.

“The bottom of the market is not a date, but a band of time or season,” Shore says, and therefore what constitutes the bottom for the entire country is meaningless for those looking to buy and sell homes in their own communities. “If you sit on the fence and wait for the absolute best deal, you could end up literally waiting for years. And most likely, your guess on market timing would be wrong. But if you choose to buy now, you will not only be in the driver’s seat during the buying process, you will also reap the gains of price appreciation once you become a home owner,” adds Shore.

Waiting for the right time to buy puts you at risk of missing it and getting caught in a market on the upswing. Plus, for some first-time buyers, owning simply makes better economic sense than renting. In such areas as Los Angeles, rents are getting close or surpassing a mortgage payment. And you don’t receive any tax benefits from paying rent, nor do you accumulate any price appreciation, as you would if you owned a home of
your own.

Next, realize there are always some people who need to move because of job relocations, expanding families, or a desire for better schools. In sought after neighborhoods, there’s a price to pay for waiting. You have to ask yourself, “If the price goes down much more, I’ll have other people trying to buy it, even if it’s not the absolute bottom of the market.” In the end, you might erase the savings you thought you had achieved by waiting.

For Linda Brown, a teacher with the Corona/Norco School District, the current real estate market provided the perfect opening for her life’s redirection with her new home purchase at Serafina, a new William Lyon townhome neighborhood in Eastvale.

“I visited many different neighborhoods, but nothing compared to Serafina in terms of financial value, price and the advantages of having everything brand new,” Linda describes. “I was definitely looking for a fresh start and choosing this gated neighborhood was an easy decision. While I certainly preferred the convenience and more carefree ambiance of an attached floorplan, I really liked the idea of being near the middle school and being part of the local community where my students and their families are. Thanks to William Lyon, I ultimately found a new neighborhood that I could afford and also have the opportunity to become more involved in the area where I teach, and that was very appealing.”

Shore’s advice to buyers is simple, “Live in the right home. There’s no reason to compromise in buying the home that is right for you.” Make a priority list of things that are ‘must-have’ versus ‘nice to have’ versus ‘not important.’ Write it all down and use this as a checklist to unlock the reasons about the home you’re searching for, where you want to live, and what it will take to get you there.

2:05 PM - Dec. 8, 2008 - comments {0} - post comment

How to save energy for your home-based business

This article is by The Alliance to Save Energy which is a coalition of prominent business, government, environmental, and consumer leaders who promote the efficient and clean use of energy worldwide to benefit consumers, the environment, economy, and national security.

For the growing number of Americans working from home-more than 30+ million home-based business owners and telecommuters who work from home at least once a week-higher energy bills for combined home offices and residences are a fact of life.

Higher heating and cooling and electricity bills to power office equipment and lighting are an inevitable cost of doing business from home. Trips to the kitchen for meals and snacks and to other areas of the home for various needs also eat up electricity, especially when lights, appliances, and electronics in other rooms aren’t turned off when they are no longer in use. The challenge of keeping home office energy bills from eating up the profits is particularly tough during frigid winters or hot summers that require home workers to run heating or air conditioning 24/7. And heating costs this winter are up10-23% above last year, depending on the fuel.

Despite these challenges, the Alliance to Save Energy says home-based entrepreneurs, telecommuters, and job-seekers can reduce energy costs while comfortably “taking care of business” with these tips:

- You’re the boss - so manage your office equipment. Activate “sleep” features on computers, copiers, and other machines that power down when the equipment is on but not in use for a while. Turn off equipment during periods of non-use to cut energy costs and improve longevity. Screen savers do not save energy.

- Don’t let profits go out the window (or door). Why waste your heating and air conditioning dollars? Plug those home office energy “leaks” by weather-stripping between moving parts (doors and their frames) and caulking or sealing between nonmoving parts (window frames and walls). Insulate that office properly-as well as your whole home. Wait until January 2009 to get a tax credit for these home energy efficiency improvements plus lower heating and cooling bills - www.ase.org/taxcredits

- Be an “Energy Star.” To cut related annual energy expenses by up to 30%, choose ENERGY STAR-certified computers, monitors, printers, scanners, copiers, fax machines, multi-function devices (machines that combine printing, scanning, and faxing), lighting, cordless phones, answering machines, audio equipment, and room air conditioners. It’s the symbol for energy efficiency.

- Ever-wakeful electronics can drain your pocketbook. Work requiring electronics such as phones, TVs, VCRs, DVD players, or cable boxes can further hike up those electric bills. That’s because they consume energy even while switched off to keep display clocks lit and memory chips and remote controls working. ENERGY STAR-labeled electronics use less energy in the “off” mode.

- Light up your office efficiently. With lights on much of the day, electricity use invariably increases. To make matters worse in warm weather, inefficient lighting can overheat your office, increasing cooling costs. Save money by installing compact fluorescent light bulbs (CFLs) and task lighting in your home office. CFLs burn cooler and use up to 75% less energy than either halogen or incandescent bulbs. Halogen torchieres are expensive to operate and burn so hot they can cause fires. Instead, choose a safer, more efficient ENERGY STAR-certified torchiere lamp.

- Treat your heating and cooling system as office equipment. While working in your home office, close off the heating/cooling vents in unoccupied rooms. Clean or replace furnace and room air conditioner air filters once a month for increased efficiency. Give your furnace or heat pump a professional “tune-up” each year, and ask the technician to make sure the system is sized and operating at peak efficiency and that ducts are not leaking. Look for ENERGY STAR furnaces and heat pumps.

- Let the sunshine in. In colder months, allow the sun to help heat your home office by keeping blinds or drapes on sun-exposed windows open in the daytime. Retain the heat overnight by closing the blinds after dark. In summer, reduce cooling costs by drawing shades/blinds on sun-exposed windows and glass doors.

2:02 PM - Dec. 6, 2008 - comments {0} - post comment

Counter tops can be a good seller upgrade

This article is by Roselind Hejl who is a Realtor with Coldwell Banker United in Austin, Texas. 

1:49 PM - Dec. 4, 2008 - comments {0} - post comment

Save on Your Credit Score this Holiday Season

With the economy slowing and holidays just around the corner, many consumers may be looking to credit cards to help them get through the heavy shopping season. While that may be a good short-term solution, you want to make sure you don't overlook the long-term impact on your credit rating. After all, the actions you take today could hang over your head for years to come--and may make it tough for you to get the home loan or car loan you want in the future.

To help you make sure you manage your credit cards--and your credit score--during the upcoming holiday spending season, follow these steps:

Double-check your card limits. Many credit card companies today have started lowering credit limits. That means you have less credit available, but it also may mean that your credit score is about to take a hit. That's because approximately 30% of your credit score is based on the amount you owe in relation to your available credit. So, if a credit card company cuts back your limit, you may find that you're suddenly almost maxed out. That's not a good sign for your long-term credit score rating.

Ask, pay down, or move around. If some of your credit limits have changed or are nearly maxed out, you can take a few steps to help alleviate the problem. First, consider simply asking for a higher limit to your card...not necessarily to use up with spending, but to allow more unused credit line to be available and therefore boost your credit score. You can also pay more money to the cards that are near the credit limit, if you can. Or, if you have cards with little to no remaining credit line, transfer some of the larger balances onto the cards with lower balances. That'll give you a more... well... balanced financial picture.

Leave home without it. One of the best tips for the holiday season is to: make a budget, identify specific items, and then leave home without your credit card. Instead, bring just enough cash to purchase the items on your list. That will help you resist the urge to impulse buy, and keep your credit card balances lower.

Pick a card... not just any card. If you can't bring cash, make a credit card plan. Identify specific items that you'll pay for on specific cards. By making a plan and spreading your purchases to different cards, you won't overspend and you won't risk running up one or two cards that are near the credit limit, which will hurt your credit rating.

Resist card offers at the counter. Retailers are famous for offering "savings" when you open a credit card. But those savings often don't outweigh the long- and short-term negatives. For one thing, opening a new account--or multiple accounts in a short period of time--can negatively impact your credit score. In addition, consumers often spend more than planned when a new card is suddenly available. So this holiday season, resist the temptation.

Stay active. If you have older cards that you don't use, make sure you keep them active. For one thing, some of those older cards help establish a longer history of positive credit. For another, the available credit on those older cards can help keep your credit score higher because it improves your overall debt-to-credit ratio. To keep those cards active, make sure you charge one or two items on them throughout the year... like, say, when you go shopping for the holidays. Then, pay them off when the bill comes in.

Always pay on time. Your payment record is a very large part of your credit score, so it's crucial that you have an idea how your holiday shopping will impact your credit card bills and that you make a plan to pay those bills on time. If you have trouble for any reason, contact your card companies right away to work out a plan that helps you pay down your debt... and save your credit rating from a huge hit.

6:26 PM - Dec. 3, 2008 - comments {0} - post comment

FHA loans explained

This article is by Jason Kotar, president of Kotar & Associates. Contact him at (954) 734-3504 or e-mail jason@kotarassociates.com.

With the Federal governments re-emphasis on the FHA as a key vehicle for resuscitating the real estate market, now is a good time to review FHA in more detail.

Let’s start with some basics. First, the FHA insures loans that approved lenders make, it does not purchase them as Fannie and Freddie do. If a FHA insured home goes into bankruptcy, FHA pays off the mortgage to the Lender, takes ownership of the home, and then proceeds to sell it (a HUD home.)

To mitigate its risk and provide income to offset foreclosures and defray their expenses, FHA charges the borrower insurance premiums, both an up-front and a monthly premium. The up-front premium can be included in the mortgage amount.

FHA loans are available for purchasing or refinancing a 1 to 4 unit, owner occupied home. There a number of FHA programs that cover the gamut of real estate offerings, from your “vanilla” FHA loan to Condos to REO’s to Reverse Mortgages to Rehab to Veteran loans and more. In subsequent articles we will be reviewing these programs in more detail.

Over the last number of months, FHA began implementing some changes to their programs. In addition, the Housing and Economic Recovery Act placed additional changes in FHA practices, some of which modified FHA proposed changes. I have listed some of those changes below.

Converting Existing Homes to Rentals

The FHA changed their underwriting rules to limit the ability of a homeowner to use rental income from a previous residence that it converted to a rental property, when applying for a new mortgage on a second property. Under the new rule, the homeowner must prove sufficient income to make both mortgage payments without the rental income or has an equity position in the rental property that it will not likely result in defaulting on that mortgage. There can be an exception to this rule for employment relocations.

This change mirrors the announcement by Fannie in August. Apparently, homeowners, in increasing numbers, are choosing to vacate their existing principal residence and purchase a new residence. They are then providing misleading information on the rental income of the property being vacated to justify the new mortgage. These changes effectively end “bail and buy” loans.

Moratorium on Risk Based Premiums

The Housing and Economic Recovery Act provided for a one-year moratorium on the implementation of the FHA’s risk based premiums beginning October 1, 2008. The effect of the risk based premium was to increase the premium based on the amount of the down payment.

This will not delay the implementation of an upfront premium as well as well as monthly premiums on all loans.

Seller concessions of 6% are still allowed; however, down payment assistance programs have been eliminated effective October 1, 2008.

Down Payment Requirements

The Housing and Economic Recovery Act also called for an increase in down payment required to 3.5%. That change will not go into effect until January 1, 2009.

As with any loan program, there are a number of stipulations that need to be met to gain approval. That is why it is important to choose the right FHA approved lender. Not all FHA approved lenders service all FHA loan programs.

1:44 PM - Dec. 2, 2008 - comments {1} - post comment

Details of the Rescue Bill

Large and small companies across the globe rely on access to money markets to finance their daily operations, including inventories, and payrolls. Lenders routinely make loans to these companies, and to each other, to make it all happen. When lenders have confidence in these markets, and investors have confidence in this system, we have a functional marketplace that, for the most part, is sustained by competition. When confidence in this system is shattered, however, like it has been recently, credit becomes expensive and scarce to all parties, and small and large companies alike can choke to death waiting for the short-term capital it needs to fund its long-term success. This directly affects you and your family. It means a slower economy. It means more lay-offs and less new job creation, which often means lo wer home values. It also fuels volatility in the financial markets that, as we've seen, can wreak havoc on your savings, retirement, and other investment accounts.

It is estimated that some $70 trillion in total global investment capital is available, which would be great news if our financial systems were functioning with confidence – and that's what the Rescue Bill is basically about. Like it or not, the US Government has been given unprecedented power to invest $700 billion in our financial systems in two main ways. First, as much as $250 billion to purchase stock in US banks, providing the banks with badly needed money. Second, through the purchase of certain assets to help stimulate more liquidity in the credit market. Another initiative will provide government guarantees for the short-term loans banks make to each other to run their daily operations. More importantly, these actions are in concert with similar practices by other governments and central banks.

None of these actions will solve our problems completely or save us from recession, but here's the good news. It is a positive step in the direction of stabilizing the markets. The other good news is that several other measures were tacked on to the bill to help build your confidence in the markets.

As part of the Rescue Bill, Congress also increased FDIC deposit insurance from $100,000 to $250,000 for all of an individual's accounts at a single institution. For one year, joint accounts, retirement accounts, and trust accounts are insured separately. This means a married couple can insure up to $1 million at a single bank, by making a few simple adjustments. Changes also affect revocable trusts, allowing the same amount of insurance for beneficiaries, such as your children. That means, a married couple with three kids could create enough qualifying individual and joint accounts to protect up to $1.5 million. It's important to note that the FDIC has never failed to pay a single dime of insured money when banks have failed, so you won't have to make a run on the bank or hide your money in your mattress anymore. Sm all businesses will also benefit from new increases, as well as the confidence that comes with this kind of insurance.

Within the 451 page Rescue Bill are nearly 100 tax code changes that directly affect individuals and business owners, including education deductions, sales tax, energy credits, and even new disaster aid. Other tax breaks, which were due to expire, were extended, including property tax deductions, the Mortgage Debt Forgiveness Act, and the shield for the Alternative Minimum Tax (AMT). The property tax provision, set to expire in 2008, has been extended to 2009, and allows up to $500 ($1000 for joint filers) in deductions in addition to the standard property tax deduction – even if you don't itemize! The Mortgage Debt Forgiveness Act, extended to 2012, was designed to protect those who already lost their homes due to foreclosures from facing an additional tax penalty for qualifying cancelled or "forgiven& quot; debt of up to $2 million. And, finally, the Rescue Bill also saves about 23 million Americans from the dreaded AMT, a kind of extra tax that some people have to pay on top of their regular income tax created by the Tax Reform Act of 1969.

These are just a few of the potential tax benefits created or extended by the Rescue Bill. As always, there are specific qualifying standards, and so it is essential to speak with a qualified tax professional about these and other tax benefits that could help you lower your tax bill and increase your confidence in today's tumultuous financial markets.

5:57 PM - Nov. 30, 2008 - comments {0} - post comment

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