2011 Energy Tax Credits: What You Need to Know to Collect

Posted on February 4, 2011 by Dee & Tom Cryer

Washington is giving you less green for going green, as the feds reel back the 2011 energy tax credits from a lavish $1,500 to a paltry $500.

Other limits on energy tax credits besides $500 max

  • Credit only extends to 10% of the cost (not the 30% of yesteryear), so you have to spend $5,000 to get $500.
  • $500 is a lifetime limit. If you pocketed $500 or more in 2009 and 2010 combined, you’re not entitled to any more money for energy-efficient improvements in the above seven categories. But if you took $300 in the last two years, for example, you can get up to $200 in 2011.
  • With some systems, your cap is even lower than $500.
  • $500 is the max for all qualified improvements combined.

Certain systems capped below $500

No matter how much you spend on some approved items, you’ll never get the $500 credit–though you could combine some of these:

System Cap
New windows $200 max (and no, not per window—overall)
Advanced main air-circulating fan $50 max
Qualified natural gas, propane, or oil furnace or hot water boiler $150 max
Approved electric and geothermal heat pumps; central air-conditioning systems; and natural gas, propane, or oil water heaters $300 max

And not all products are created equal in the feds’ eyes. Improvements have to meet IRS energy-efficiency standards to qualify for the tax credit. In the case of boilers and furnaces, they have to meet the 95 AFUE standard. EnergyStar.gov has the details.

Tax credits cover installation—sometimes

Rule of thumb: If installation is either particularly difficult or critical to safe functioning, the credit will cover labor. Otherwise, not. (Yes, you’d have to be pretty handy to install your own windows and roof, but the feds put these squarely in the “not covered” category.)

Installation covered for:

  • Biomass stoves
  • HVAC
  • Non-solar water heaters

Installation not covered for:

  • Insulation
  • Roofs
  • Windows, doors, and skylights

How to claim the 2011 energy tax credit

  • Determine if the system you’re considering is eligible for the credits. Go to Energy Star’s website for detailed descriptions of what’s covered; then talk to your vendor.
  • Save system receipts and manufacturer certifications. You’ll need them if the IRS asks for proof.

This article provides general information about tax laws and consequences, but isn’t intended to be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice, and remember that tax laws may vary by jurisdiction.

By: Donna Fuscaldo

Published: January 26, 2011

Donna Fuscaldo has written about alternative energy for Dow Jones, the Wall Street Journal, and Fox Business News for more than a decade. She is currently renovating her house with an eye toward energy efficiency and green technologies.

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Get Your 2010 Energy Tax Credits: Filing Tips for Form 5695

Posted on February 3, 2011 by Dee & Tom Cryer

Sidestep snares in the complex IRS Form 5695 to get all the 2010 energy tax credits you’ve got coming.

Fill out the right part of Form 5695

What type of system did you install? If it’s one of the following, complete Part 1 for Nonbusiness Energy Tax Credits.

Max credit: 30% of the cost of the improvement, up to $1,500.

If you installed one of these souped-up systems, complete Part 2 for Residential Energy Efficient Property Credit.

Max credit: 30% of the cost, with no limit except for a kilowatt limit on fuel cells.

What do I need on hand to fill out Form 5695?

  • Receipts that show the amount you spent. The feds won’t pay for installation for some items. For those, the receipts must separate out the labor so you can add just the cost.
  • Manufacturers’ certifications indicating that the improvements are eligible for the credit. Store them in a safe place in case the IRS asks for them in the future, but no need to file them with your return.

Coordinate with Form 1040 and other forms

For Part I, it’s pretty simple: Just enter the total of all this part’s credits (as shown on line 11) on Form 1040, line 52.

For Part II, it can get complicated because other credits, claimed on other forms, can affect the amount of your Part II credit.

If you need to fill out any of the following forms, have all the information needed to complete those at hand, because Form 5695, line 25, coordinates with all of them. (In fact, you’ll find it simplest to prepare all these forms more or less simultaneously.)

  • Form 1040—lines 47 through 50, which refer to other credits you may be eligible for
  • Publication 972—the child tax credit
  • Form 8369—mortgage interest credits you may have
  • Form 8859—tax credits applicable only to residents of the District of Columbia
  • Form 8834—electric vehicle credit
  • Form 8910—alternative motor vehicle credit
  • Form 8936—electric drive motor vehicle credit
  • Schedule R—care for the elderly or disabled

One form that’s irrelevant to completing 5695: Schedule A. That’s only for deductions, not credits. And you don’t even need to itemize to claim energy tax credits.

The pitfalls of Form 5695

You’ll find many places you can go wrong in both parts of the form:

Adding ineligible amounts into the form. Just because a product has an Energy Star label doesn’t mean it’s eligible for a credit. Check the details of what’s eligible for the credit and what’s not at Energy Star and make sure the product comes with a manufacturer’s certification.

Failing to keep track of this year’s energy tax credits for future years. Hang on to your tax credit paperwork (including receipts, certifications, and a copy of your completed Form 5695), because if you sell your house you’ll need to record the tax credit amount for tax purposes.

  • Say you bought your home for $100,000 (the basis) and sold it for $400,000. Your profit is $300,000. But by taking tax credits, you lower your basis, so when you sell the house, you increase your profit in the eyes of the IRS. If you’re in your home for a long time and it appreciates, you increase your chances of getting hit with capital gains. Still, there’s little cause to worry: The government gives married couples selling a home a free pass on up to $500,000 of profit.

Failing to file this form at all—or only partially. If you’re eligible for a lot of different tax credits, you can conceivably reduce your tax liability to zero. If that’s the case and you want to tack on the 2010 energy tax credit, you’re out of luck. The feds consider it nonrefundable. If it were a refundable tax credit, the IRS would write you a check.

  • Loophole only if you added a Part II improvement: You can carry the energy tax credit forward to 2011—or even beyond, at least as far as 2016. Even if you’re not eligible this year because you reduced your tax liability to zero, file Form 5695 anyway to make it easier to do the carryforward next year. Or just hold off installing that wind turbine until a year when you anticipate you’ll have fewer tax credits.

Forgetting certain credits that affect Part II—and vice-versa. Pay special attention to line 25: Certain other credits may ultimately affect your ability to fully claim Part II credits—just as Part II credits may affect other credits. Follow the line-by-line instructions in each form carefully. It’s easy to forget a number here.

Ack, I want help filling out Form 5695

If you find Form 5695 exasperating, you may be eligible for free tax preparation help from the:

  • Volunteer Income Tax Assistance Program
  • Tax Counseling for the Elderly
  • IRS at 800-829-1040.

Major tax preparation software, such as TurboTax, include this form in their packages.

By: Barbara Eisner Bayer

Published: January 27, 2011

Barbara Eisner Bayer has written about personal finance for the past 17 years. She works hard to translate IRSese into plain English. She has unbounded respect for CPAs.

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Schedule A Form: 6 Home Deduction Traps

Posted on February 2, 2011 by Dee & Tom Cryer

Get an “A” on your Schedule A Form: Dodge these tax deduction pitfalls to save time, money, and an IRS investigation.

Trap #1: Line 6 – real estate taxes

Your monthly mortgage payment often includes money for a tax escrow, from which the lender pays your local real estate taxes.

The money you send the bank may be more than what the bank pays for your taxes, says Julian Block, a tax attorney and author of Julian Block’s Home Seller’s Guide to Tax Savings. That will lead you to putting the wrong number on Schedule A.

Example:

  • Your monthly payment to the lender: $2,000 for mortgage + $500 escrow for taxes
  • Your annual property tax bill: $5,500

Now do the math:

  • Your bank received $6,000 for real estate taxes, but only paid $5,500. It may keep the extra $500 to apply to the next tax bill or refund it to you at some point, but meanwhile, you’re making a mistake if you enter $6,000 on Schedule A.
  • Instead, take the number from Form 1098—which your bank sends you each year—that shows the actual taxes paid.

Trap #2: Line 6 – tax calculations for recent buyers and sellers

 

If you bought or sold a home in the middle of 2010, figuring out what to put on line 6 of your Schedule A Form is tricky.

Don’t simply enter the number from your property tax bill on line 6 as you would if you owned the house the whole year. If you bought or sold a house in midyear, you should instead use the property tax amount listed on your HUD-1 closing statement, says Phil Marti, a retired IRS official.

Here’s why: Generally, depending on the local tax cycle, either the seller gives the buyer money to pay the taxes when they come due or, if the seller has already paid taxes, the buyer reimburses the seller at closing. Those taxes are deductible that year, but won’t be reflected on your property tax bill.

Trap #3: Line 10 – properly deducting points

You can deduct points paid on a refinance, but not all at once, says David Sands, a CPA with Buchbinder Tunick & Co LLP. Rather, you deduct them over the life of your loan. So if you paid $1,000 in points for a 10-year refinance, you’re entitled to deduct only $100 per year on your Schedule A Form.

Trap #4: Line 10 – HELOC limits

If you took out a home equity line of credit (HELOC), you can generally deduct the interest on it only up to $100,000 of debt each year, says Matthew Lender, a CPA with EisnerLubin LLP.

For example, if you have a HELOC for $200,000, the bank will send you Form 1098 for interest paid on $200,000. But you can deduct only the interest paid on $100,000. If you just pull the number off Form 1098, you’ll deduct more than you’re entitled to.

Trap #5: line 13 – Private mortgage insurance

You can deduct PMI on your Schedule A Form, as long as you started paying the insurance after Dec. 31, 2006. (Also, this is also a good time to review your PMI: You might be able to cancel your PMI altogether because you’ve had a change in loan-to-value status.)

Trap #6: line 20 – casualty and theft losses

You can deduct part or all of losses caused by theft, vandalism, fire, or similar causes, as well as corrosive drywall, but the process isn’t always obvious or simple:

  • Only deduct losses that are greater than 10% of your adjusted gross income (line 38 of Form 1040).
  • Fill out Form 4684, which involves complex calculations for the cost basis and fair market value.  This form gives you the number you need for line 20.

Bottom line on line 20: If you’ve got extensive losses, it’s best to consult a tax pro. “I wouldn’t do it myself, and I’ve been dealing with taxes for 40 years,” says former IRS official Marti.

By: Barbara Eisner Bayer

Published: January 27, 2011

Barbara Eisner Bayer has written about personal finance for the past 17 years. She works hard to translate IRSese into plain English. She has unbounded respect for CPAs.

 

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How to Talk to Your Lender About Foreclosure

Posted on February 1, 2011 by Dee & Tom Cryer

By: Jerry DeMuth

Published: June 11, 2010

When facing foreclosure, the first step is to get in touch with your lender to discover your options.

Review the details

Start by reviewing all correspondence you’ve received from your lender. The letters–and phone calls–probably began once you were 30 days past due. Also review your mortgage documents, which should outline what steps your lender can take. For instance, is there a “power of sale” clause that authorizes the sale of your home to pay off a mortgage after you miss payments?

Determine the specific foreclosure laws for your state. What’s the timeline? Do you have “right of redemption,” essentially a grace period in which you can reverse a foreclosure? Are there deficiency judgments that hold you responsible for the difference between what your home sells for and your loan’s outstanding balance allowed? Get answers.

Pick up the phone

Don’t give up because you missed a mortgage payment or two and received a notice of default. Foreclosure isn’t a foregone conclusion, but it’s heading in that direction if you don’t call your lender. Dial the number on your mortgage statement, and ask for the loss mitigation department. You might stay on hold for a while, but don’t hang up. Once you do get someone on the line, take notes and record names.

The next call should be to a foreclosure avoidance counselor approved by the U.S. Department of Housing and Urban Development. One of these counselors can, free of charge, explain your state’s foreclosure laws, discuss alternatives to foreclosure, help you organize financial documents, and even represent you in negotiations with your lender. Be wary of unsolicited offers of help, since foreclosure rescue scams are common.

Be sure to let your lender know that you’re working with a counselor. Not only does it demonstrate your resolve, but according to NeighborWorks, homeowners who receive foreclosure counseling are 1.6 times more likely to avoid losing their homes than those who don’t. Homeowners who receive loan modifications with the help of a counselor also reduce monthly mortgage payments by $454 more than homeowners who receive a modification without the aid of a counselor.

Discussing alternatives

The most attractive option that’ll allow you to keep your home is a loan modification that reduces your monthly payment. A modification can entail lowering the interest rate, changing a loan from an adjustable rate to a fixed rate, extending the term of a loan, or eliminating past-due balances. Another option, forbearance, can temporarily suspend payments, though the amount will likely be tacked on to the end of the loan.

If you’re unable to make even reduced payments, and assuming a conventional sale isn’t possible, then it may be best to turn your home over to your lender before a foreclosure is completed. Your lender can approve a short sale, in which the proceeds are less than what’s still owed on your mortgage. A deed-in-lieu of foreclosure, which amounts to handing over your keys to your lender, is another possibility. The earlier you begin talks with your lender, the more likelihood of success.

Jerry DeMuth has written about mortgages and other financial issues for more than two decades for trade publications, major newspapers, and consumer magazines. His writing has received four awards and has been included in eight non-fiction books.

Posted in Foreclosure, Short Sale | Leave a comment

5 Steps to Owning a Home Again After Foreclosure

Posted on January 31, 2011 by Dee & Tom Cryer

By: Barbara Eisner Bayer

Published: July 8, 2010

Foreclosure is just a one-time event–with discipline and perseverance, you can get a mortgage and become a homeowner again.

1. Stick with a job after foreclosure

Did you fall into foreclosure because of the lack of a steady job? If you did, the first step toward homeownership after foreclosure is finding and holding one. And if you already have one–stick with it, unless you can move to a better one. Note that potential lenders will require stable employment before they’ll give you a new mortgage loan after a foreclosure. Even if it means taking a lower-paying job, it’s worth it.

2. Rebuild your nest egg after foreclosure

Establish a safety net. Financial planners generally recommend three to six months of living expenses in a liquid account, but since you’re coming out of foreclosure, six is a minimum to show stability and that you’re able to pay your bills–including your mortgage–for an extended period if you lose your job.

3. Raise your credit score after foreclosure

This is the hardest and most time-consuming part. After foreclosure, your credit score, according to myFICO, probably dropped by about 150 points. You’ll need to raise it back up with perseverance.

Pay bills on time and keep your credit card balances below maximum levels. The foreclosure will stay on your credit report for seven years, but if you prove your money management skills have matured, it will become less of a red mark as years go by.

Tip: Consult a housing counselor. The U.S. Department of Housing and Urban Development offers free housing counseling for distressed homeowners with a foreclosure in their past. A counselor can help you with money management and budgeting. Counseling works–an evaluation of a program in Indianapolis discovered that credit scores greatly improved because of education and counseling, and increased average borrowing power by $4,500 per family.

4. Reduce your waiting time for a mortgage after foreclosure

Normally, you would have to wait seven years after foreclosure before you can apply for a new mortgage under Fannie Mae rules. (Fannie Mae changes rules frequently. You can check the latest rules at Fannie Mae’s site.)

However, you might wait only three years if you can show extenuating circumstances for your foreclosure, which are defined as “events that are beyond the borrower’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations.” These include:

  • Losing a job
  • Getting divorced
  • Having unexpected medical expenses

There’s one last alternative if waiting isn’t your thing–you can obtain seller financing, essentially bypassing the traditional mortgage. If both parties are amenable, you can enter into a lease with an option to buy, or take a mortgage directly from the seller. You’ll most likely have to show some hefty reserve funds, but if you’ve turned around your financial situation quickly after your foreclosure, it’s worth a shot to deal directly with the seller.

Keep in mind that sellers may be motivated to agree to this if they need to sell and the potential buyers they’ve met with can’t obtain a conventional mortgage–perhaps because they’ve been through foreclosures, too.

5. Be honest about your foreclosure

When you’re ready to apply for your new mortgage, don’t try to hide your foreclosure. On the contrary, be proactive and reveal the steps you’ve taken to remedy the problems that led to your foreclosure.

Tip: Try a mortgage broker, who can work with a variety of lenders to find you a loan. When you work directly with a retail lender, like a bank, they have a limited pool of loans to offer you. But a good mortgage broker–one with a vast network of lendersóhas many options, and may be able to find a mortgage solution if the foreclosure in your past is creating challenges in obtaining one.

If you stay disciplined and positive, the American dream–obtaining a mortgage and owning a home of your own–can, indeed, be yours again. Even after foreclosure.

Barbara Eisner Bayer has written about mortgages and personal finance for the past 16 years for the Motley Fool, the Daily Plan-It, and Nursevillage.com, and has been the Managing Editor for CompleteGrowth.com, Mortgageloan.com, and Credit-land.com. She’s grateful that she now knows where to turn if she ever struggles to meet her mortgage payment.

Posted in 2010 Mid Year Denver Market Watch, Buying or Selling Real Estate, Centennial, Cherry Hills Village, Colorado, Denver, Denver Housing, Denver Residential Real Estate, Foreclosure, Greenwood Village, Short Sale, Uncategorized | Leave a comment

How the Foreclosure Crisis Costs You Money

Posted on January 30, 2011 by Dee & Tom Cryer

By: Lew Sichelman

Published: July 8, 2010

Foreclosure may seem like someone else’s problem, but when it happens in your neighborhood, it’s going to cost you money, too.

Each foreclosure within 660 feet (1/8th mile) of your house can drop your home’s value by a factor of almost 0.75%, according to the Center for Responsible Lending, a consumer watchdog group.

The closer a foreclosure is to your house, the bigger the impact. A university of Connecticut study suggests one foreclosure within 300 feet of your home will lower your property value by 1%.

If you live in a neighborhood with few vacant homes and a foreclosure occurs within 250 feet, a University of California, Berkeley study suggests you could lose 2.2% of your home value.

Do troubled owners deserve help?

Some people think the homeowners facing foreclosure got themselves into trouble because they bought more house than they could afford with toxic mortgages for which they never should have been approved. At least one study of the 2007 and 2008 foreclosure crisissuggests that was indeed the case.

Foreclosures become comparable sales

Even if you don’t feel compassion for those facing foreclosure, you might feel sorry for yourself. Homebuyers and mortgage lenders use foreclosures as comparable properties to value your home when you sell or refinance. And the discount at which foreclosures sell is a hefty 27% on average.

Although most appraisers adjust the value of your home upward compared with a foreclosure, a homebuyer may consider the foreclosure equally valuable to your home and base his offer on that instead of your property’s real worth. If that happens, your real estate agent can argue that non-distress sale comparables and better condition make your property worth more.

Foreclosures lower tax revenues

Drops in property values brought on by foreclosures don’t just hurt your property value; they also cut away at the whole property tax base, the source of revenue for local government. Elected officials then have to either charge you higher taxes or cut services to make up for the shortfall.

What you can do about foreclosures

To limit foreclosure damage in your community, ask local officials to pass laws forcing lenders to maintain the properties they now own and to pay the taxes and homeowners association dues on them.

If the town isn’t forcing lenders to maintain a foreclosure in your neighborhood, organize a volunteer effort to cut and trim the shrubs at vacant houses on a round-robin basis, and report vandals or squatters to the police. A well-kept foreclosed home will attract more buyers than one with a weed-filled yard. Take trespassing laws into account as you organize your effort.

If you’re selling or refinancing and the appraiser uses foreclosures as comparable sales to determine the value of your property, ask your real estate agent to make sure the appraiser accounts for the distressed nature of those sales and the condition of the properties as they compare to yours. Ask your agent to seek out other comparable sales the appraiser might have missed, which show your home in a much better light.

Syndicated housing columnist Lew Sichelman lives in a ranch house on the western shore of the Chesapeake Bay and has been writing about housing for more than 40 years.

Posted in Foreclosure | Leave a comment

Foreclosure Alternative: The Short Sale

Posted on January 29, 2011 by Dee & Tom Cryer

By: Gwen Moran

Published: July 8, 2010

A short sale is far from hassle-free, but it’s a better alternative than foreclosure. And now you’ve got a little help from your friends in D.C. Here are the facts about short sales and how to get started.

Short sales get government incentives

Although short sales are not hassle-free, at least you’ve got the government backing you. The Home Affordable Foreclosure Alternatives (HAFA) program provides financial incentives for lenders and borrowers to avoid foreclosure through short sales or deeds in lieu of foreclosures.

Participation in the HAFA program requires adherence to guidelines–including a standard process and minimum timeframes–that speed the process, says Dallas-based REALTOR® Tom Branch, co-author of Avoiding Foreclosure: The Field Guide to Short Sales. The HAFA program is for homeowners who can’t keep their homes with the help of a loan modification.

Advantages of a short sale

  • You can be a homeowner again more quickly with a short sale in your past than with a foreclosure. New Fannie Mae guidelines help you qualify for a new mortgage in as little as two years after a short sale, as opposed to up to seven years after a foreclosure.
  • You will have more time to make relocation plans and save money than with a deed in lieu. A short sale may take four to 12 months. A deed in lieu of foreclosure arrangement typically requires you vacate your home within 30 to 60 days of signing, according to real estate attorney Lance Churchill.
  • You can receive up to $3,000 from your lender for moving expenses at the time of closing of a HAFA short sale or a HAFA deed in lieu of foreclosure. Relocation funds are part of the incentives of HAFA, but not necessarily for other short sale or deed in lieu programs of the lenders.
  • You can help your community’s home values. Because the lender often receives a higher amount of the remaining loan balance than it would from the sale of a home after a foreclosure, short sales help support home values in the surrounding community.

Disadvantages of a short sale

  • Your credit score will take a severe hit. But that would happen anyway with a foreclosure. Fair Isaac, creator of the FICO score, says foreclosure and short sales have virtually identical impacts on your credit score. VantageScore–a company that has created a credit score model for consumers–says a short sale will lead to only a marginally lighter hit when compared with foreclosure.
  • You may owe additional taxes. In the past, if your outstanding mortgage was $100,000 and your lender accepted a short-sale purchase offer of $90,000, you were liable for income tax on the forgiven $10,000, says Harlan D. Platt, economist and professor of finance at Northeastern University in Boston. However, the Mortgage Forgiveness Debt Relief Act of 2007, which runs through 2012, generally allows taxpayers to exclude income from the discharge of debt on their principal residence in some circumstances. Full relief is available only if the amount of forgiven debt doesn’t exceed the debt that was used to acquire, construct, or rehabilitate a principal residence. Consult a tax professional and an attorney to minimize or avoid this liability.
  • In some states, your lender may still be able to come after you for the difference between the short sale price and the amount needed to pay off the mortgage. Your actual agreement with your lender and state and local laws and regulations spell out the details. Consult a tax professional and an attorney to minimize or avoid this liability.

How to proceed with a short sale

  • Find a qualified REALTOR® experienced in short sales. Short sales are tough to navigate, and they’re further complicated by your loan type–FHA vs. Veterans Administration vs. conventional loans. Real estate agents who specialize in short sales will know the proper steps and order of the steps involved. They’ll also be able to navigate the many parties involved in the process and over-burdened loss mitigation departments. Look especially for agents who have Short Sales and Foreclosure Resource (SFR) Certification, which requires specialized training.
  • Gather evidence to support your need for a short sale as opposed to a foreclosure. You’ll need to prove that you have little or no equity in your home, you’re behind on your payments, and you’re no longer able to afford your home. You’ll need to write a hardship letter to the lender describing your circumstances, such as a divorce, job loss, illness, death, or other event that has impacted your income.

A short sale can be a time-consuming process, but if you can avoid foreclosure, it’s worth it in the long run.

Gwen Moran has been writing about business, finance, and real estate for more than a decade. Her work has been published by Entrepreneur, Newsweek.com, Financial Planning, Woman’s Day, and The Residential Specialist. She bucks the cottage trend and lives in a Colonial near the Jersey Shore.

Posted in Uncategorized | Leave a comment

When is Foreclosure Removed from Your Credit Report?

Posted on January 28, 2011 by Dee & Tom Cryer

Published: October 14, 2010

Use this handy guide to figure out how quickly you can buy a home after a major financial setback when applying for a loan through FHA, Fannie Mae, or Freddie Mac.

Government entities set guidelines for credit events

The chart below outlines the criteria that government entities FHA, Fannie Mae, and Freddie Mac follow for major credit-busting events, including foreclosure. Although FHA, Fannie Mae, and Freddie Mac aren’t direct lenders, they wield a lot of behind-the-scenes influence by working with banks to guarantee loans and help lenders free up capital to provide more mortgages.

One of these entities may have made your loan possible without you even knowing it. Although for the most part banks make loans to whomever they want, they’ll likely find themselves following FHA, Fannie Mae, or Freddie Mac guidelines at a minimum in order to keep working with these useful partners.

Some lenders may have more stringent policies and others, willing to take greater risks, may work outside these entities and offer more liberal lending policies.

How to read the chart

This chart offers summaries of what can be complex rules and regulations. So:

1. Look to professionals, such as a bankruptcy lawyer and a CPA specializing in bankruptcy provisions, before making major financial decisions.

2. For HUD-approved counselors, go to http://www.hud.gov/offices/hsg/sfh/hcc/fc/index.cfm. You can also call 1-888-995-HOPE for help from the Homeownership Preservation Foundation.

3. Understand what “extenuating circumstances” means in each case:

FHA: An event that was out of the borrower’s control that made a significant impact on the borrower’s finances and led to bankruptcy or foreclosure.

Fannie Mae: A nonrecurring event that’s beyond the borrower’s control that results in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations.

Freddie Mac: A nonrecurring or isolated circumstance, or set of circumstances, that was beyond the borrower’s control and that significantly reduced income and/or increased expenses and rendered the borrower unable to repay obligations as agreed, resulting in significant adverse or derogatory credit information.

FHA Fannie Mae Freddie Mac
Foreclosure •3-year wait.
•Reduced wait if borrower has re-established good credit and can show extenuating circumstances.		 •7-year wait from the completed foreclosure sale date.
•3-year wait if borrower can show extenuating circumstances (additional underwriting requirements apply for 4 years after 3-year waiting period).
•7-year wait for a second home, investment opportunity, or cash-out refinancing.		 •5-year wait from the completed foreclosure sale date.
•3-year wait if borrower can show extenuating circumstances.
Short Sale •No wait if not in default.
•3-year wait if in default at closing of short sale.
•Reduced wait if borrower has re-established good credit and can show extenuating circumstances.		 •2-year wait if the borrower puts 20% or more down.
•4-year wait if the borrower puts 10-20% down.
•7-year wait if the borrower puts less than 10% down.
•2-year wait time if borrower can show extenuating circumstances and puts 10% or more down.		 •4-year wait.
•2-year wait if borrower can show extenuating circumstances.
Deed in lieu of foreclosure •Same as FHA’s foreclosure policy. •Same as Fannie’s short sale policy. •Same as Freddie’s short sale policy.
Bankruptcy Chapter 7 (liquidation):
•2-year wait from the discharge date of the bankruptcy.
•1-2 year wait if borrower can show extenuating circumstances.

Chapter 13 (repayment plan):
•1-year wait from the discharge date of the bankruptcy.

 Chapter 7 or Chapter 11 (reorganization, usually involving corporations or partnerships):
•4-year wait from the discharge or dismissal date of the bankruptcy.
•2-year wait from the discharge or dismissal date may be accepted if borrower can show extenuating circumstances.

Chapter 13:
•2-year wait from the discharge date or 4-year wait  from the dismissal date.
•2-year wait for a dismissal if borrower can show extenuating circumstances.

Multiple bankruptcies:
•5-year wait if the borrower has filed more than one bankruptcy petition in the past 7 years.
•3-year wait if borrower can show extenuating circumstances.

 Chapter 7 or Chapter 11:
•Same as Fannie’s bankruptcy policy.

Chapter 13:
•2-year wait from the discharge date of the bankruptcy.
•2-year wait from the discharge or dismissal date of the bankruptcy if borrower can show extenuating circumstances.

Multiple bankruptcies:
•Same as Fannie Mae’s policy for multiple bankruptcies.

Source: FHA Handbook, Fannie Mae Selling Guide, Freddie Mac Selling Guide

 

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Thinking About Buying? Be Glad, Very Glad It’s Not the 1980s! Rates Are Still Low!!

Posted on January 28, 2011 by Dee & Tom Cryer
Mortgage Rate 30 Year History

Mortgage Rate 30 Year History

Look closely at the graph above.  Notice when interest rates hit their peak between 1982 and 1984.  That’s when I bought my first house, and believe it or not, when we sold it, we made money on it!

My point is simple.  Right now, rates are low, inventory is still abundant and prices are at the most affordable level in the last 7-10 years.  When people are greedy, be fearful.  When people are fearful, be greedy!  Your time has come!

Posted in 2010 Mid Year Denver Market Watch, Buying or Selling Real Estate, Denver, Denver Housing, Denver Residential Real Estate, Interest Rates | Leave a comment

8 Tips for Finding Your New Home

Posted on January 27, 2011 by Dee & Tom Cryer

By: G. M. Filisko

Published: February 10, 2010

A solid game plan can help you narrow your homebuying search to find the best home for you.

 

1. Know thyself

Understand the type of home that suits your personality. Do you prefer a new or existing home? A ranch or a multistory home? If you’re leaning toward a fixer-upper, are you truly handy, or will you need to budget for contractors?

2. Research before you look

List the features you most want in a home and identify which are necessities and which are extras. Identify three to four neighborhoods you’d like to live in based on commute time, schools, recreation, crime, and price. Then hop onto REALTOR.com to get a feel for the homes available in your price range in your favorite neighborhoods. Use the results to prioritize your wants and needs so you can add in and weed out properties from the inventory you’d like to view.

3. Get your finances in order

Generally, lenders say you can afford a home priced two to three times your gross income. Create a budget so you know how much you’re comfortable spending each month on housing. Don’t wait until you’ve found a home and made an offer to investigate financing.

Gather your financial records and meet with a lender to get a prequalification letter spelling out how much you’re eligible to borrow. The lender won’t necessarily consider the extra fees you’ll pay when you purchase or your plans to begin a family or purchase a new car, so shop in a price range you’re comfortable with. Also, presenting an offer contingent on financing will make your bid less attractive to sellers.

4. Set a moving timeline

Do you have blemishes on your credit that will take time to clear up? If you already own, have you sold your current home? If not, you’ll need to factor in the time needed to sell. If you rent, when is your lease up? Do you expect interest rates to jump anytime soon? All these factors will affect your buying, closing, and moving timelines.

5. Think long term

Your future plans may dictate the type of home you’ll buy. Are you looking for a starter house with plans to move up in a few years, or do you hope to stay in the home for five to 10 years? With a starter, you may need to adjust your expectations. If you plan to nest, be sure your priority list helps you identify a home you’ll still love years from now.

6. Work with a REALTOR®

Ask people you trust for referrals to a real estate professional they trust. Interview agents to determine which have expertise in the neighborhoods and type of homes you’re interested in. Because homebuying triggers many emotions, consider whether an agent’s style meshes with your personality.

Also ask if the agent specializes in buyer representation. Unlike listing agents, whose first duty is to the seller, buyers’ reps work only for you even though they’re typically paid by the seller. Finally, check whether agents are REALTORS®, which means they’re members of the NATIONAL ASSOCIATION OF REALTORS®. NAR has been a champion of homeownership rights for more than a century.

7. Be realistic

It’s OK to be picky about the home and neighborhood you want, but don’t be close-minded, unrealistic, or blinded by minor imperfections. If you insist on living in a cul-de-sac, you may miss out on great homes on streets that are just as quiet and secluded.

On the flip side, don’t be so swayed by a “wow” feature that you forget about other issues—like noise levels—that can have a big impact on your quality of life. Use your priority list to evaluate each property, remembering there’s no such thing as the perfect home.

8. Limit the opinions you solicit

It’s natural to seek reassurance when making a big financial decision. But you know that saying about too many cooks in the kitchen. If you need a second opinion, select one or two people. But remain true to your list of wants and needs so the final decision is based on criteria you’ve identified as important.

More from HouseLogic

HOAs: What You Need to Know About Rules

A Financial Plan for Your Home

When It Pays to Do It Yourself

G.M. Filisko is an attorney and award-winning writer who has found happiness in a brownstone in a historic Chicago neighborhood. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.

 

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