Friday, December 5, 2008

New 2nd Home Owner Tax Rules

There are some noteworthy new tax rules for 2nd home owners:

According to the new rules, even if 2nd home owners convert their second piece of real estate to their primary home, they will owe tax on part of the sale money based on how long the house was used as a second, rather than their main residence.

Monday, November 17, 2008

Alternatives to Paying Your Mortgage If Your House Is "Underwater"

According to experts, it might be better to consider some of the new alternatives recently enacted by the federal government if your house is "underwater" (i.e., you owe more than the value of your house). Some of the new programs (including FHA Secure and Help for Homeowners as well as Streamlined Modification) can modify your loan to a lower amount and/or lower monthly payments. Find out if you qualify:

Wednesday, March 19, 2008

Mortgage Rates Higher After Fed Rate Cut?

According to CNN Money, 30-year fixed mortgage rates actually go up after the Fed rate cut: the reason being that long-term mortgage rates tend to anticipate the future--the risk of inflation in particular.

On a side note, mortgage application fees may go up due to a new push for independent appraisers.

Best Time to Buy in Four Years

According to CNN Money, now may be the best time to buy a house. Some of the best values are listed below:

CityStateMedian price/% undervalued
HoumaLA$116.5 -31.2%
DallasTX$134.5 -30.0%
HoustonTX$119.3 -29.1%
ShreveportLA$101.2 -28.6%
LafayetteLA$128.8 -26.2%
College StationTX$104.1 -25.8%
Fort WorthTX$111.7 -24.9%
AlexandriaLA$93.3 -24.8%
MonroeLA$93.4 -24.6%
Lake CharlesLA$99.9 -23.8%

Monday, March 17, 2008

Santa Clara County Median Housing Prices Rise in February 2008

According to statistics, the median prices for single-family, re-sale homes and re-sale condos gained ground last month. The median price for homes rose 5.1% from January, a year-over-year loss of 1.5%. This is the first year-over-year loss since August 2003. The median price for condos rose 13%, month-over-month, and was up 6.7% compared to February 2007:

Trends at a Glance
(Single-family Homes)
Feb 08Jan 08Feb 07
Median Price:$778,000$740,000$790,000
Average Price:$988,772$1,005,253$965,600
Home Sales:424337665
Sale/List Price Ratio:98.2%97.6%99.8%
Days on Market:818771
Days of Inventory:359406132

Sales of single-family, re-sale homes bounced back from the record low set in January. There were 424 homes sold last month, a rise of 25.8% from the month before, down 36.2% from last February. Condo sales rose 2.2%, but were off 56.9% year-over-year.

Inventory continues to increase as we enter the spring selling season. The number of homes on the market rose 11.1% compared to January, and up 72.9% year-over-year. Condo inventory rose 8.7% month-over-month, and was up 61.7% compared to last February.

Saturday, March 8, 2008

Santa Clara County to Collect 9-1-1 Service Fee

The fee schedule will apply as follows per line (mobile or land), per month (Trunk lines are most often used in offices and each represent approximately 24 phone lines):

IRS Mortgage Relief Provision

Uunder the new Mortgage Forgiveness Debt Relief Act of 2007 (HR3648), enacted on December 20, 2007 and applies to debt forgiven in 2007, 2008, and 2009, taxpayers may exclude debt forgiven on their principal residence if the balance of their loan was less than $2 million. The limit is $1 million for a married person filing a separate return.

According to IR-2008-17, borrowers who had some portion of their mortgage debt forgiven in 2007 should receive a Form 1099C from the lender identifying the amount of forgiven debt. Borrowers will have to file Form 982 (specifically lines 1e, 2 and 10b).

The debt must have been used to buy, build or substantially improve the taxpayer's principal residence and must have been secured by that residence. Debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before the refinancing.

Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the new tax-relief provision. In some cases, however, other kinds of tax relief, based on insolvency, for example, may be available. The new law grants relief for principal residences sold by their owners or to borrowers who arrange a “workout” with a lender that reduces the outstanding balance of the mortgage.

The new rule also modifies the application of the exclusion when an individual converts a rental or vacation property to his/her principal residence. Under the new rule, effective Jan. 1, 2008, the owner will still have the option of receiving the benefit of the exclusion, but will be required to pay capital gains taxes on the appreciation attributable to the time that the property was used as an investment property. The amount excluded will be a fraction, determined at the time the vacation/rental property is sold. Assuming that the owner has satisfied the two-year residence requirement, the amount of gain that can be excluded will be determined by a fraction. The numerator of the fraction will be the number of years the property was used as a principal residence. The denominator will be the number of years the individual actually owned the property, measured from Jan. 1, 2008.

In addition, the new rule also extends the tax deductibility of Mortgage Insurance through December 31, 2010.

CalHFA, Other Agencies Can Help First Time Home Buyers

CalHFA is a state agency that provides low interest financing and programs that create affordable housing opportunities for individuals within specified income ranges. In Santa Clara County, first-time homebuyers can qualify for a loan as long as they earn no more than $118,704 for a one-or two-person household or a maximum of $136,510 for a family of three or more. Re-sale homes cannot exceed $673,953 and new homes $595,086.

Besides CalHFA, California Housing Finance Agency at, Neighborhood Housing Services at or South County Housing at also have programs that can also help first time home buyers.

New Conforming Mortgage Loan Limit: Will It Help?

With the passing of HR5140, Congress and President Bush recently raised the conforming mortgage loan limit to $729,750 from the existing $417,000 (but only for certain areas and only till the end of this year--12/31/2008). However, this may not help rates as much as people have anticipated: the reason being the lenders will need to take on more risks. Some example areas in CA that are affected by the new limit are listed below (a factor of 1.25 x existing market value is used to set the new limit: with $729,750 being the upper limit):

(Reported by Stanford Group Company 1/25/08 - Markets where Fannie and Freddie Would be Allowed to Securitize Larger Loans Based on National Association of Realtors Median Sales Price Data)

Metro AreaStateQ3 2007Median x 1.25New Limit
Anaheim-Santa Ana CA700,700875,875729,750
Los Angeles-Long Beach-Santa AnaCA588,400735,500729,750
San Francisco-Oakland-FremontCA825,4001,031,750729,750
San Jose-Sunnyvale-Santa ClaraCA852,5001,065,625729,750
(Bay area specific: in addition to the counties of Santa Clara and San Mateo, the counties at the maximum level for FHA loans and new conforming loan limits are Alameda, Contra Costa, Los Angeles, Marin, Monterey, Napa, Orange, San Benito, San Francisco, Santa Barbara, Santa Cruz and Ventura. The counties of Lassen, Modoc and Trinity are subject to a loan cap of $271,050, the lowest possible amount for an FHA-backed loan under the new law.)

A complete list of counties can be found here:
And can be looked up here:
Also here--but it seems like some counties are missing from these:

The rules for qualification under the new rules are stricter than before, however:

  • Jumbo-conforming mortgages have rather strict loan-to-value limits. If you're getting a loan to buy your principal home, you can't borrow more than 90 percent of the home's value if you get a fixed-rate loan, and you can't borrow more than 80 percent of the home's value if you get an adjustable-rate loan.
    If you're refinancing, you can't get a first-lien mortgage of more than 75 percent of the home's appraised value. The combined amount of all mortgages, including home-equity debt, can't exceed 95 percent of the appraised value. These loan-to-value ratios for refinances apply to both fixed-rate and adjustable-rate loans.
  • You can do only a "limited cash-out refinance," which means that you can borrow a little bit more than your current balance, but only to pay closing costs or borrow a round number (i.e., borrow $530,000 instead of $528,838). You can't do a cash-out refi to pay off a home-equity loan or home-equity line of credit, or to walk away from the closing table with a check for more than $2,000.
  • You have to have a credit score of 660 or higher. If you're getting the loan to buy a house, and you're borrowing more than 80 percent of the home's price, the minimum credit score is 700.
  • For second homes and investment properties, the maximum loan-to-value is 60 percent, and the minimum credit score is 660.
  • It has to be a one-unit property. That includes a single-family house, of course, and it also includes condominium units. It excludes duplexes and triplexes where the owner rents out the other units.
  • Because you can't get a cash-out refi to pay off home-equity debt, the second-lien holder has to sign off on the refinance and agree to remain in the second lien position.
    Some home-equity lenders, most prominently National City Mortgage, are refusing to agree to remain in the second-lien position, forcing borrowers to either pay off their home-equity debt or forgo refinancing.
  • You can't have had any late mortgage payments in the last 12 months. A late payment is defined as 30 days or more late.
  • The debt-to-income ratio is capped at 45 percent. That means if you have a gross income of $200,000 a year, the total debt payments can't exceed 45 percent of that, or $90,000. All ARMs are qualified based on the fully indexed rate.
  • Your life has to be an open book. You have to permit an appraisal with interior and exterior inspections, and fully document your income and assets.
  • If the loan-to-value exceeds 80 percent, you have to buy mortgage insurance.
  • You can't get a construction-to-permanent loan under the jumbo-conforming amount.