Thursday, October 27, 2011

Refinance program retooled by Obama adminstration

 
Dow Jones reports:
The Obama administration and a housing regulator on Monday unveiled a revamped home-loan refinancing program, aiming to aid hundreds of thousands of Americans whose homes have fallen in value in the wake of the housing bust.
Didn’t we just go through this last year? Well, yes, but it wasn’t working.

The plan represents the latest federal effort to tackle a key impediment to the U.S. economy--a stagnant housing market caused in part by elevated numbers of homeowners who owe more than their homes are worth. It came after numerous Obama administration efforts to stabilize the housing market have struggled in an economy with stubbornly high unemployment.
The overhaul will let borrowers refinance their mortgages regardless of how far their home prices have plunged in any given market, eliminating a previous restriction that shut out homeowners who owed more than 125% of their homes’ current value.
Officials estimated that the changes will help families save $2,500 or more, on average, annually.
The plan is also designed to streamline the refinancing process by eliminating appraisals and extensive underwriting requirements for most borrowers, as long as homeowners are current on their mortgage payments.
The refinancing program is open to homeowners whose mortgages are owned or guaranteed by Fannie Mae (FNMA) or Freddie Mac (FMCC), the two government-controlled mortgage giants whose rescue three years ago has cost taxpayers $141 billion to date.
Regulators are revamping a program rolled out in 2009, the Home Affordable Refinance Program, or HARP, which lets borrowers with homes whose values have dropped to refinance. So far, only 894,000 borrowers have used it, of which just 70,000 are significantly underwater.
Fannie and Freddie will issue final pricing information and other technical details by Nov. 15, and some banks have said they could begin taking applications under the new program by as soon as Dec. 1. Mortgage insurers have also agreed to make it much easier to transfer existing mortgage-insurance coverage, which has blocked many borrowers from refinancing.
 
Read the full article.

For your next title order or
if you have questions about what you see here, contact
Stephen M. Flatow, Esq.
Stephen's Title Agency, LLC
165 Passaic Avenue, Suite 101
Fairfield, NJ 07004
Tel 973-227-4724 - Fax 973-556-1628
E-mail Stephenstitle AT comcast.net - www.stephenstitle.com

Wednesday, October 26, 2011

Selling your home? What about the capital gains tax?

Ask the Biz Brain found in the Star-Ledger answers a question about the payment of capital gains tax upon sale of your home. It’s a worthwhile article, so it’s set out in full.

Q. I plan to sell my house in the spring of 2012 and relocate to another state. After I get a job and become familiar with the area, in about 18 months, I would like to buy another house. How long can I wait to buy a house before I have to pay capital gains on the money? Where would be a good place to invest or put the money until that time? -- Homie A.

The Brain hopes the housing market sees an upturn before your target selling date. But then again, a housing recovery will mean a higher purchase price for your new home.

If you are single, you can sell your home and any gain up to $250,000 is not taxable, and you do not have to ever buy another house, said Alan Meckler, a certified financial planner with Cornerstone Financial Group in Succasunna. If you are married you can exclude up to $500,000 in gain.

Meckler offers this example: If you are single and you originally paid $250,000 for your house and over the years you spent another $100,000 on improvements, the cost basis in the house would be $350,000. If you now sold it for $550,000, that would be a net gain of $200,000.

“You would not owe any capital gains or any form of taxes,” Meckler said.

You are also under no constraints to ever buy another home again. This law came into effect in 1997, under the Taxpayer Relief Act of 1997, he said. As always with tax rules, there are other qualifications you must pass.

“The individual or the couple need to have owned and lived in the property as their main residence for at least two years of a five-year period ending on the date of sale to qualify for the exclusion, and they may not have excluded the gain of another personal residence within the two-year period ending on the date of sale,” said Robert Bacino of Insight Financial Services in Flemington.

He recommends you consult with your tax preparer with regard to your particular circumstances in computing the actual gain or loss on the sale of the personal residence -- including state tax laws -- to determine to what extent the federal exclusion may apply and to properly report the sale on your personal federal and state income tax returns, Bacino said.

Now to the cash you’ll have to park after selling your current home but before you buy the new one. Meckler recommends you stay very conservative because you’re working with a relatively short time horizon. “You could look for a short term CD at the bank or money market account,” he said. “I would not recommend you investing in the stock market unless you had a five-year time frame.”

Good luck with your move, and Jersey will miss you!

If you would like to read the article on line, go here

For your next title order or
if you have questions about what you see here, contact
Stephen M. Flatow, Esq.
Stephen's Title Agency, LLC
165 Passaic Avenue, Suite 101
Fairfield, NJ 07004
Tel 973-227-4724 - Fax 973-556-1628
E-mail Stephenstitle AT comcast.net - www.stephenstitle.com

Monday, October 10, 2011

Using your home to get rid of $80,000 in credit card debt

Bankrate.com’s Steve Bucci is its Debt Adviser. He answers a question from someone with an $80,000 credit card bill.
Dear Debt Adviser, I am considering refinancing my mortgage. My plan is to take cash out in order to pay off my credit card debt. I owe $80,000 on credit cards, which is actually more than the $63,000 I owe on the house. Would this be a well-advised move, in your opinion? I can very easily handle the new monthly payment. With the savings from not making credit card payments I can make additional payments on the mortgage principal. My current mortgage has 11 years remaining, and the new mortgage would be for 15 years. So in other words, I'd be paying my house off in about the same time frame, anyway. I appreciate your advice. -- Robert
Before he answers, Mr. Bucci has to pick himself up from the floor. Here are the highlights from his response.
Dear Robert, Before I answer your question, I must make a comment: $80,000 on your credit cards?! Because I am the Debt Adviser, I can't help but address your $80,000 in credit card debt first. That is a huge amount of debt. Before you do anything, I want you to seriously analyze how you acquired so much debt. Before doing anything, you must be very sure that you can live day to day without racking up another $80,000 in new debt after any refinancing.
First, remember that the refinancing will not really pay off anything. It will just move your debt around. Furthermore, it could end up hurting you ultimately. That's because your $80,000 in credit card bills will be converted from an unsecured debt to a mortgage secured by your home.
The real message here is that Robert could lose his home over a debt that could be cleared in bankruptcy if everything hit the fan. But there are refinancing options.
Let's say you decide to do a traditional 15-year fixed-rate refinance of your existing mortgage with a cash-out option to pay off the $80,000 credit card debt. If so, I would encourage you to organize your budget so you can repay the loan in five to seven years. As an alternative, depending on the current rate of interest on your existing mortgage loan, you might consider using a home equity line of credit, or HELOC, instead of obtaining a new, larger first mortgage. The HELOC interest rate would likely be lower. You should be able to pay off the debt in a shorter period of time. That would save you on interest payments. It will also reduce the time period where you'll be most at risk to financial surprises like illness or a layoff. My experience is that as soon as you make yourself vulnerable to a problem, it shows up.
A traditional refinance may be the best option if your goals are to: first, get a lower rate on your primary mortgage, and second, pay off the credit cards. However, if you already have a fairly low interest rate on your mortgage, a HELOC might be the better option. I want you to lose your debt, not your home. So here's an added note of caution: You are taking on added risk with either a HELOC or a mortgage. You are moving a rather large debt from unsecured terms -- credit card accounts -- to a secured loan using your home as collateral. If for any reason you default on your new loan, your home is at jeopardy. I've seen enough unexpected things happen to otherwise smart people because they took on a risk they didn't understand.
There is also a tax risk. If the unthinkable should happen and you go into foreclosure, the $80,000 used to pay off your credit cards would not qualify for debt forgiveness under the Mortgage Forgiveness Debt Relief Act. The result: You would owe income taxes on the $80,000 when you can least afford it.
 Read the full article.  To ask a question of the debt adviser, go to Bankrate.com.


For your next title order or
if you have questions about what you see here, contact
Stephen M. Flatow, Esq.
Stephen's Title Agency, LLC
165 Passaic Avenue, Suite 101
Fairfield, NJ 07004
Tel 973-227-4724 - Fax 973-556-1628
E-mail Stephenstitle AT comcast.net - www.stephenstitle.com

Sunday, October 9, 2011

Denied a mortgage? Maybe here’s why

The New York Times’ Vickie Elmer addresses reasons for mortgage loan application rejection.
“WE regret to inform you...” Nobody applying for a new mortgage or a refinancing wants to see or hear these words. But last year more than two million people were turned down for home loans, according to federal data, often because they didn’t meet certain lender requirements or because their applications were incomplete or otherwise problematic. Lenders’ underwriting criteria have become more rigorous in recent years; some banks have tightened up beyond federal requirements.
Here are the six biggest triggers for rejection, according to industry experts.
  • INSUFFICIENT INCOME Lenders want to make sure you can afford to make the mortgage payments. Someone who earns, say, $40,000 a year need not bid on a $750,000 apartment, unless there’s a trust fund with quarterly payouts or other money available. Also, lenders typically look for at least a two-year track record of income, which could hurt those who may have switched jobs recently.
  • CLOUDY FINANCIAL PICTURE. Generally, total debt payments, including the mortgage, cannot exceed 45 to 50 percent of your adjusted gross monthly income. Borrowers may be surprised at what counts and what doesn’t.
  • BAD CREDIT Lenders typically reject applicants with a FICO score below 620. Failing to pay your mortgage on time affects your score.
  • LOW APPRAISAL. This is the predominant reason people are denied home loans today, according to industry experts.
  • PROPERTY PROBLEMS. Issues within an apartment unit or a house such as major repairs have to be addressed. In our area of NJ, there are several condominiums with lawsuits pending against them that have turned into deal killers.
  • INFORMATION MIX-UPS. About 12 percent of new mortgage applications were denied because of unverifiable information or incomplete credit applications, according to the Federal Financial Institutions Examination Council.
Read the full article.
For your next title order or
if you have questions about what you see here, contact
Stephen M. Flatow, Esq.
Stephen's Title Agency, LLC
165 Passaic Avenue, Suite 101
Fairfield, NJ 07004
Tel 973-227-4724 - Fax 973-556-1628
E-mail Stephenstitle AT comcast.net - www.stephenstitle.com