Understanding Florida Real Estate Taxes with Florida’s Amendment 1

Florida’s real estate tax laws can be tricky to understand. There are several factors which affect the size of your property tax bill, so if you’re buying property in Florida or are relocating, it’s important to understand how taxes are calculated.

Property values are in constant flux just as the real estate market is, so getting an accurate, current assessment is important. The assessed value of the property you buy may change dramatically when it changes hands, so it’s good to be aware of the factors that might influence how much tax you pay.

As well as market rates your real estate tax bill will also depend on the tax rate for different local government bodies. The property you buy will be subject to taxes from several different bodies, including county and city government, the school board, hospital district, and water district. There may be additional taxes if you live in a masterplanned community.

On the other side of the coin, homestead exemptions and the “Save our Homes” amendment help limit the amount of your property tax bill.

County Taxes

The amount you pay in county property taxes will, of course, vary depending on the value of your property. However, they’ll also vary depending on the tax rate in your county, and where in the county you live. This is because within a county, some regions are incorporated and some are unincorporated, and unincorporated regions tend to have lower property taxes. If you live in Temple Terrace, some areas of New Tampa or the City of Tampa, for example, you’ll likely be paying more in property taxes than someone living in Lutz or some portions of New Tampa, as the former locations are incorporated and the latter are not. Unincorporated areas generally are lower because they do not have “city” taxes.

Community Development District Tax

People living in a Florida masterplanned community or community development district will likely have additional taxes to pay. These extra taxes are what enable the developers of these communities to add extra amenities to enhance the lives of residents. By sharing the cost of community and land development among residents, additional facilities such as recreation centers, parks, walking trails, and sports facilities can be added.

Depending on the community, the tax may have two separate parts. One is a fixed amount that is payable for a fixed amount of time (usually no more than twenty years) – the bond portion. The second amount can vary from year to year depending on the needs and budget of the community. If you’re interested in relocating to one of these communities it’s important to find out how much residents are expected to pay each year, as the total varies widely depending on the community, the different villages within the community and the types of facilities and services the master planned community provides as a whole.

Note that the responsibility for paying these taxes is tied to the property, not to the owner. If the property changes hands, payment of community fees and taxes becomes the responsibility of the new owner. An owner does have to option to pay off the bond portion of the CDD for their property, thus reducing the amount owed yearly to only include the working capital needed to maintain the community.

Property Tax Homestead Exemption

Under the homestead exemption, all legal residents of Florida can deduct $25,000 from the assessed value of their primary residence. This essentially reduces the taxable value of the property, and reduces how much eligible Florida residents pay in property tax. Certain groups of homeowners, such as senior citizens, veterans, and the blind, may qualify for other exemptions.

The $25,000 homestead exemption is not granted automatically, however. To be eligible in any given year you must take possession of the homestead by December 31, and then apply for exemption no later than March 31 of the next year.

Since January 9, 2008, eligible Florida homeowners can gain a further $25,000 exemption under Amendment 1. This exemption is received automatically by any homeowner who applies and is approved for the original homestead exemption.

The second exemption is calculated as follows:

• The first $25,000 value of the home is the original exemption.
• The second $25,000 is fully taxable. This is necessary to allow Florida towns and cities where assessed property values are low to continue collecting the revenue they need to run local government.
• The third $25,000 is the new Amendment 1 exemption. It is exempt from all taxes except for school tax. This allows schools to continue receiving the funding they need (if this third portion was totally exempt, schools wouldn’t receive enough funding for their schools).

The "Save Our Homes" Amendment

The Save our Homes (SOH) amendment prevents annual property assessments increasing more than 3% or the percentage increase in the Consumer Price Index (whichever is lower). This guarantees any homeowner who receives a homestead exemption that the assessed (taxable) value of their property will not increase more than 3% per year.

SOH protects existing Florida homeowners, but if you’re buying Florida property and you are not a Florida resident and it is not your primary residence, SOH won’t apply to your purchase. The assessed value cap is lifted automatically when the property changes hands. It is important for new home buyers to rely on the current market value and not on the previous owners tax assessment as it is likely that the home will have an artificially low assessed value, especially if it’s been owned by the same person for a number of years.

Once you buy a home, you can apply for homestead exemption, and receive automatic SOH protection once the exemption is approved for the next tax year.

What does that mean? If you buy your home prior to December 31, 2008, you will have the benefit of whatever the prior homestead status is for your bill that tax year. Once the new year begins and providing you have applied by March 31, your new Homestead exemptions will be reflected in the following November’s 2009 tax bill. Remember taxes are paid in arrears.

“Save Our Homes” Portability

Amendment 1 has also changed the way SOH works. Under Amendment 1, SOH protection now has “portability,” meaning you can transfer a portion of your SOH benefit to a new homestead, if you meet the qualifying criteria.

Under the old pre-Amendment 1 system, a homeowner who had lived in the same homestead for several years had a substantial property tax benefit, as their home’s assessed value was capped. However, while they would enjoy lower property taxes, they were also more or less trapped in that home, as moving to a new homestead would mean a sharp increase in property taxes (as they would not be protected by SOH).

Amendment 1 has changed that by allowing Florida homeowners who receive SOH protection to transfer that protection to a new homestead. They must, however, apply for SOH within two years of purchasing the new property to be eligible to transfer the accumulated tax benefit to the new home. For example, a homeowner who gave up their old homestead after January 1, 2007, would have to claim for their new homestead by March 3, 2008 to be eligible for SOH portability.

The protection isn’t limited only to people who purchase new property. A Florida homeowner with multiple properties can transfer homestead status and SOH protection from one property to the other. However, because these protections only apply to a primary residence, they must also be willing to change their primary residence. There are stiff penalties for claiming homestead status on a property that is not your primary residence.

To apply for SOH portability you must apply for a new homestead exemption and also make a separate application to transfer the SOH benefit to your new homestead. You’ll need DR-501T and DR-501R application forms, which you can obtain from the Florida Department of Revenue web site and turn in to office of the county appraiser where your new homestead is located.

How much can you transfer? It depends on whether you’re moving to a house of greater or lesser value than the house in which you currently live. If it a home of greater value, you can transfer up to $500,000 worth of SOH protection from your original homestead. If it’s less in value, you can transfer up to 50% of the new property’s value in SOH protection.

Stay with me here…

For example…

Your current homestead has a value of $300,000 and SOH exemption of $150,000.

If your new property has a value of $500,000 you’ll receive portable benefits of $150,000.

If your new property is valued at $200,000 you’ll receive $100,000 worth of protection (in this case 150,000 of 300,000 is 50% - so you would apply the 50% to the new property value to arrive at your dollar amount of reduction of assessed value).

Assessment Cap for Non-Homesteads

Under Amendment 1, there is now an assessment cap for non-homestead property. This applies a cap of 10% on the assessment of both residential and non-residential property.

As of January 1, 2008, all non-homestead property will be assessed at market value only. However, the assessed increase from year to year is capped at 10%. In addition, the assessed value of the property cannot exceed market value.

Essentially, this means the assessed value of non-homestead property will be equal to market value. If a non-homestead property is appraised at $350,000 in 2008, it will be tax assessed at $350,000. If the property is capped at 10% cap in 2009, its assessed value could not increase above $385,000, regardless of market performance.

Non-homestead property owners can apply for this assessment cap in 2009.

Tangible Personal Property Exemption

The fourth Amendment 1 change is a $25,000 tangible personal property exemption. To qualify, business owners must file a TPP return by April 1 in the year in which they wish to apply. If you file and your TPP is less than $25,000 in value, there’s no need to file again unless your TPP value increases over that amount. Tangible personal property includes any owned and leased items used by a business.

Calum MacKenzie is Broker/Owner of Real Living Southern Homes a leading Tampa real estate company serving the Wesley Chapel FL real estate and New Tampa FL real estate markets.

Get Ready for Florida Hurricane Season

Hurricane season is fast approaching for those of us living in Florida. With it comes the risk of heavy winds and floods that can do plenty of damage to our homes. It’s time to dust off disaster supply kits and make sure they’re full of all the supplies you might need, and make sure your family knows what to do in the event of a hurricane.

Your Family Disaster Plan

A disaster plan is simply an action plan that you’ll carry out if a hazard affects your home and family. It includes preparation activities you do before the hazard becomes a threat, and activities you might need to carry out during a storm or other emergency.

• Determine the types of hazards you might be affected by, and how your home is most vulnerable. Check out some ways in which you can minimize the risk of damage or safety threats during a storm.
• Check your insurance and make sure you’re covered for flood damage in some way (standard homeowner’s insurance rarely covers floods).
• Take classes in CPR, first aid, and disaster preparedness.
• Locate rooms or areas in your home which are safe from hurricane hazards. Generally this will be an interior room which has no windows.
• Determine escape routes from your home (these might vary depending on the hazard involved) and choose one or more meeting places where your family can gather if separated.
• Plan what to do with your pets if you have to evacuate your home.
• Choose a contact person—a friend or family member who lives out of state—that family members can contact if needed. Make sure you have at least two ways to contact that person (such as email, home phone, cell phone).
• Create and maintain a disaster supply kit, and make sure your family knows where it is and what it’s for.
• Check your disaster supply kit when a hurricane watch is issued and make sure you have all necessary supplies on hand.
• Discuss all of these issues with your family to make sure everyone understands what to do during a storm.

Creating a Disaster Supply Kit

A disaster supply kit is full of all the things you might need in the event of a storm doing enough damage that you lose your electricity supply or become isolated from the rest of the world.

When creating and maintaining disaster supply kit, it’s important to make sure that everything that goes in the kit stays in it. Don’t be tempted to remove items from the kit for any reason—it’s far too easy to forget to replace them. (Of course, you can use your own discretion when deciding whether or not to buy items such as blankets, pillows, and clothing especially for the kit.)

What should you include?

• Plenty of water—a good rule of thumb is one gallon per person per day, with at least three days’ worth for each person in the household.
• Enough food for three to seven days. Include only non-perishable food such as canned or dehydrated items, and also add some plastic utensils and paper plates, as well as a can opener and cooking implements.
• First aid kit
• Toiletries and personal care items
• Blankets and pillows
• Clothing
• Battery-operated flashlight and radio, and plenty of spare batteries
• Books and toys for you and the kids
• Important documents, including insurance policies, social security & bank account numbers, wedding and birth certificates. Keep these in a waterproof document sleeve.
• Tools (battery or hand-operated)
• Pet care items for any pets you own, including a leash and muzzle for dogs, and a cage or carrier for any small pets.

Some items, such as prescription medication and documents, won’t be a part of your disaster supply kit at all times, but you can gather these items when you hear of a hurricane watch and add them to the kit.

Store kit items in a safe and secure location, in water-tight boxes or bags, and make sure everyone in the family knows where your emergency supplies are located.

Some items may need to be replaced periodically even if you don’t use the kit—this includes batteries, and may include first aid and food items.

What should you do when a Hurricane Watch is Issued?

If a hurricane watch has been issued for your area, your actions will depend on whether or not you need to evacuate your home.

If you’re able to stay in your home, assemble your disaster supply kit and check for any items that need to be replaced. Stock up on any supplies you need, fill your car with gas, and grab some extra cash (in case ATMs and banks close). Carry out your pet plan, notify your contact person of the hurricane watch, and check up on your neighbors, too. If a hurricane does show up, gather your family in your home’s safe room, along with your disaster supply kit.

If you’ve been ordered to evacuate, or live in a vulnerable area, you’ll need to decide on a destination and inform family and friends (including your out-of-state contact) where you’re headed. Evacuate to the home of family members or friends in a safe area if possible, or try a motel or hotel in a safe location. Shelters will usually be a last resort, as these may be uncomfortable, and many don’t accept pets.

One of the worst feelings for family and friends is not being able to reach you and know that you are alright. Decide on one out of state contact and let your family and friends know ahead of time who that is and how to reach them.

Assemble your disaster supply kit, take care of your pets, grab extra cash, fill up your car’s tank, and secure your home. Before leaving, map out a route you’ll take to get to your destination—don’t get on the road until you know where you’re going and you have a safe route to get there. Be patient and leave as early as possible.

Calum MacKenzie is Broker/Owner of Real Living Southern Homes a leading Tampa Bay real estate company serving the Wesley Chapel FL real estate and New Tampa FL real estate markets.

Florida Home Inspections: Common Issues

What’s the most important consideration when buying a home? Price, location, size? Most people won’t ordinarily think a home inspection is particularly crucial—it’s something that most of us do, but we don’t necessarily stop to consider just how important it is. The home inspection gives you a complete idea of what problems are present in the home, and what’s needed to fix them, so it is a vital part of buying a home.

There are certain problems that are commonly found in home inspections that, if left undetected, could mean thousands of dollars worth of repairs for an unwary home-buyer. In addition there are issues that are unique to states such as Florida, due to our distinctive climate. These are definitely worth paying attention to, particularly if you’re relocating from out of state and haven’t considered the problems that a warm, moist climate can present.

Water Damage

The Florida climate is absolutely brutal in terms of the damage it can do to wood and wood-based products. Regular maintenance of paint and caulking will eliminate 90% of the potential problems, but for many homeowners that maintenance just doesn’t get done.

Wooden doors without rain protection, siding in contact with grade, and poorly protected trim or siding are all vulnerable to water damage. Even stucco homes are vulnerable if stucco begins to crack and allow water access to the frame beneath. The damage done to wood framing on stucco homes can be huge, because the stucco hides what’s going on in the wood.

Application and regular maintenance of caulk and paint will prevent these issues (or help prevent them worsening if the home you buy is affected by water damage). Alternatively, consider whether you’d be better off with a masonry-built home with aluminum, stucco, and other materials in place of wood siding, framing, and trim.

Electrical Issues

Electrical problems are often caused simply by aging, damaged wiring, but that’s not the biggest problem your home inspection might uncover. More problematic than an older wiring system is the damage that a homeowner can do if they hire a non-licensed electrician, or even worse, do the work themselves without prior experience or knowledge.

Common issues found in these situations include exposed wiring without the necessary conduit protection, outlets with reversed polarity, junction boxes left open in attics or behind walls, double-tapped circuits, unsafe exterior wiring, and badly-constructed GFI outlets. Often, such issues arise when a homeowner decides to remodel their kitchen or bathroom, but fail to check out current code requirements. The result is that the modifications may not be up to code (this is more likely for older homes, as electrical codes have changed significantly in the past couple of decades).

Plumbing Problems

Plumbing issues such as leaky faucets, water heaters, shower stalls, or toilets are common, but usually fixed fairly easily. A more significant problem occurs in the long term when water intrudes behind tiles, and shower or tub surrounds. These can be more costly to fix.

All these problems are easily avoided by sealing grout lines with grout or caulk, and repeating the application as needed. These simple measures can save thousands in unnecessary repairs and prevent the mold problems that often result, too.

Aging, Damaged, or Leaky Roofs

Florida’s climate and weather isn’t particularly friendly to roofing materials. Materials such as metal panels and concrete tiles will tolerate the weather as long as they’re installed properly and conform to manufacturer’s requirements. Shingles, however, are almost guaranteed to start taking damage soon after installation.

Harsh winds are part of the problem, but the main culprit is actually the hot Florida sun. In general, a shingle roof will last around fifteen years (even if it has a 20, 30, or even 40 year rating).

Roof failures are usually on the perimeters of the roof, or anywhere where the roof is penetrated, such as around chimneys, plumbing vents, or attic vents.

Air Conditioning Problems

Air conditioning issues might not be a big deal in all states, but people in Florida use their AC systems ten months out of the year—more than anywhere else in the country. Despite the fact that so many people rely on their AC so heavily, they don’t often get regular maintenance. In fact, the number one reason that AC systems experience problems is simply poor maintenance, rather than a mechanical failure.

Home inspections usually find leaking ductwork, dirty air handling coils or filters, and low refrigerant levels, any of which can lead to an inefficient, badly-running AC system. Changing filters regularly, plus annual servicing will keep your AC running well for a long time to come.

Problems in Low-traffic Areas

Those are the top five, but those aren’t the only issues a home inspector is likely to come across. Home inspectors don’t just take a tour of the most frequently-used areas of your home—they’ll want to look at attics, crawlspaces, and other hard-to-reach places that often get overlooked when it comes to maintenance. These unused places are all prime locations for termite and pest damage, water damage, plumbing, insulation, or electrical defects, structural damage, and HVAC problems.

Calum MacKenzie is Broker/Owner of Real Living Southern Homes a leading Tampa real estate company serving the Wesley Chapel real estate and New Tampa real estate markets.

Florida Homeowner's Insurance: Top Ten Ways to Save

Homeowner’s insurance may soon be increasing for Florida residents—and even more for those living in the southern part of the state. This is the ideal time to check your policy and your home to see if you can cut your costs and make up for the rates hike.

Your Policy

1. One of the simplest ways to decrease your insurance premiums is to increase your deductible. This is true of most types of insurance, but few pay off as much as increasing the deductible on your home. Increase it to $2,500 and you could save hundreds of dollars every year.

2. If you’re looking at getting a new policy, ignore the new trend for online insurance shopping. In locations that are subject to special weather conditions, there called hurricanes in Florida, it’s always best to shop locally. Work with a local agent who deals with multiple carriers, and you’ll benefit by having an agent who does the shopping for you and can help you choose the best deal from among several carriers.

3. Choose an A-rated, admitted carrier. An A-rated carrier is more likely to remain financially stable in tough times, and an admitted carrier has state-approved rates and is covered by Florida’s Guarantee Fund. Both of these factors mean more security for your policy.

4. Ask your agent about their carrier’s renewal processing process, and find out if they requote the policy each year. Choose an agent that does requote every time renewal comes up to make sure you always have the best coverage at the best price.

Your Home

5. If your Florida home was built before 2002, having it surveyed for wind mitigation factors could save you hundreds of dollars every year. This kind of survey documents design features in your home—such as FBC shingles and reinforced garage doors—that help it resist damage in high winds. In most cases you’ll save enough in the first year alone to cover the cost of the survey.

6. Storm damage is a big factor in Florida insurance rates, and one way in which you can keep your rates low is by owning a home with a hip roof rather than a gable roof. This type of roof diverts wind better than a gable roof does, and puts less strain on the house during high winds.

7. Make sure your home is within five miles of a fire station, and within 1,000 feet of a fire hydrant. If it’s too far away from either of these things, you may have to buy your insurance from Citizens, Florida’s state run insurance carrier, and means paying top dollar. As in the case of the hip roof, this tip might not help if you already own a home and plan to stay there long-term. However, if you’re looking to relocate it’s something to keep in mind.

8. Have your alarm system monitored. Overall you might not save money, but it more or less allows you to improve your home’s security for free, or close to it, as the amount you save on your insurance will typically cover the cost of having your alarm monitored.

9. If you have a diving board, a trampoline, or a dog of a dangerous breed, you’ll pay dearly for it with your insurance carrier. You may even find that conventional carriers aren’t interested in insuring you, and that means getting insurance from Citizens. You may not want to give up a much-loved family pet, but there’s no harm in questioning how much you really need a diving board.

10. Owning a property of five or more acres increases your insurance costs. In most cases you’ll need to buy a policy from a specialized carrier, which naturally costs more. However, if you don’t mind reducing your property a little, you can sell off an acre or two and reduce your premiums at the same time—reduce your land parcel to four acres or less and you’ll be able to shop around and reduce your costs.

Calum MacKenzie is a Tampa real estate agent with Real Living Southern Homes located Wesley Chapel, Florida. Visit Tampa Homes 24/7 to search the Tampa MLS.

Florida Property Insurance Changes will Affect Most Homeowners

In the wake of Hurricane Katrina and other destructive storms, getting affordable property insurance hasn't been easy. Many private insurers shed high risk clients after storms in 2004-2005, and raised assessments for others. For those who could no longer afford private insurance (or who were declared uninsurable by private insurers), state insurer Citizens Property Insurance Corp is the last resort.

Over the last year, the state has been attempting to keep property insurance rates low for those who are insured with CPIC. According to critics of the latest property insurance changes, however, Florida residents who are insured by private companies will end up paying more so that the rates can stay low for those insured by the state-owned company. The last week of March saw the Florida Senate approve some changes to property insurance that might end up increasing property insurance rates by around 3%.

The bill was backed by Chief Financial Officer Alex Sink and approved by the Senate Banking and Insurance Committee. The intended effect is to reduce Florida's Hurricane Catastrophe Fund by $3 billion. This means the state can reduce its investment in CPIC and therefore reduce its risk.

At the same time, however, the state has also voted to freeze CPIC insurance rates through to the end of 2009. CPIC insures more than 1.3 Florida residents, and the rate freeze that occurred last year was done to avoid an increase that could have seen rates up by as much as 29%.

The problem is, according to critics, that CPIC's premiums aren't high enough, and that the company won't have enough cash reserves to be able to pay out claims if a major storm hits.

This is why the $3 billion reduction in the Hurricane Catastrophe Fund is significant. The Catastrophe Fund is a sort of safety net that can kick into action when Florida is hit by a major hurricane, and is intended to reimburse private insurers a portion of the money they pay out in claims. However, with the fund now reduced by $3 billion, the deficit is likely to be made up by rate increases for homeowners.

Last year, the state actually increased the Catastrophe Fund by $12 billion, but this year has been reduced by $3 billion. The fund was increased last year to reduce costs for insurers, and indirectly for homeowners. However, by increasing the Catastrophe Fund, the state of Florida was also increasing its own level of risk.

The state now wants to start decreasing its investment in the fund to reduce its risk. The net effect, however, will likely be the opposite of that which it originally intended. With private insurers taking on more risk relative to last year, the end result is more than likely going to be increased property insurance rates. The estimate is around 3% overall, with a slightly higher increase possible for Southern Florida residents.

Chief Financial Officer Alex Sink admits that an increase in rates is possible, but also says that if insurers try to increase rates to an unreasonable level, the state will step in.

Calum MacKenzie is the Broker/Owner of Real Living Southern Homes a residential real estate brokerage located in Wesley Chapel, Florida and serving the Tampa Florida real estate and Land O’ Lakes real estate markets.

USDA Guaranteed Residential Loans Available to Some Florida Residents

How many residents of Florida (or anywhere else in the country, for that matter!) know that the United States Department of Agriculture backs a guaranteed home loan program that allows rural residents to qualify for home loans if they’re unable to do so by conventional means? And how many residents of New Tampa, Wesley Chapel, and Land O’ Lakes know that this loan is available in these locations?

Most people who do know about the USDA loan program think that it’s strictly limited to highly rural areas, but in fact, it’s available in many locations that are commonly thought of as much more suburban. Programs such as these aren’t often well-known to the general public, but given that this one’s available in Land O’ Lakes, New Tampa, and Wesley Chapel it’s definitely in your best interests to learn more about it if you are interested in living in one of those areas. The USDA guaranteed home loan program is a fantastic opportunity that makes it easier for moderate income families to afford their own home.

Main Benefits to Homeowners

Moderate income families living in these Florida locations can really benefit from this program. The main benefit is that you don’t need a down payment, and in fact this is one of the major intentions of the program. The idea is that families who could otherwise afford the mortgage, but who don’t have a large enough down payment, can get into their own home without having to wait and save more. The loans offered by the program are thirty year fixed rate mortgages that provide the following benefits:

• Credit score requirements are more flexible
• No predetermined maximum loan amount (loan amount based on income criteria, your repayment ability, and the home’s value)
• No need for a down payment
• You can include the cost of home improvements and repairs in the loan
• No restrictions on lender
• No need to purchase monthly mortgage insurance (so your mortgage repayments will cost a little less each month)
• No limit on gifted funds
• The loan is guaranteed

Eligibility Criteria

To be eligible for one of these USDA home loans, you must meet the following criteria:

• The property needs to be in an eligible location
• Be purchasing residential property
• Must not already own a home in the local area (the exception is if your existing home is either functionally inadequate or structurally unsound)
• Be unable to qualify for conventional financing (this doesn’t include FHA or VA)
• Be a US citizen
• Have the legal capacity to receive a loan
• Intend to occupy the new home permanently (meaning it can’t be a second home or vacation home)

Credit and Financial Requirements

There are some financial and credit requirements, too. First of all, applicants with a credit score higher than 660 are preferred. You can still apply if your score is lower than that, however. If your score is lower than 620, there are some additional qualifying criteria. You can not have:

• Undergone bankruptcy discharge or foreclosure within the past 36 months.
• Been more than 30 days late on consumer debts, had any accounts converted to collections, any outstanding judgments, or two or more late rent payments, within the past 12 months.
• Tax liens or delinquent government debts (student loans are included).
• Any outstanding collection amounts.

There are also some income limits, and some requirements that focus on your ability to repay the loan. To qualify, your income must be within 115% of the US median income. There are some deductions available, including costs of daycare and care costs for elderly family members and other dependents.

In addition, your monthly house payment, taxes, and insurance total should be less than or equal to 29% of your gross monthly income. Your total monthly debt, including any other debts as well as the house-related debts, should be equal to or less than 41% of your gross monthly income.

For homes built after January 2001, this ratio can be expanded to 31%-43%.

What can you do with a USDA Home Loan?

The loan can be used for a pretty wide-ranging set of reasons. There aren’t too many restrictions on what type of residential property you can fund, as long as you meet all the other eligibility criteria. With the USDA home loan, you can:

• Buy/build a new home
• Buy an existing home
• Buy an existing home and make improvements
• Refinance your existing guaranteed rural housing loan
• Buy a condominium (however, it must be “mature” rather than of new construction)
• Buy a manufactured home (in this case, it must be brand new, and be bought directly from an approved dealer or contractor)
• Cover the costs of legal feels, title services, establishment of an escrow account, and loan closing costs. Note, however, that there’s no cash back at closing and the loan can only be used to pay housing-related debts.

Florida’s Amendment 1 – What It Means to You

On January 29, voters spoke loud and clear. Amendment 1 passed with nearly 65% of the vote - an astounding percentage. With the passage of Amendment 1, many people will be seeing some major changes in their tax bills. Are you one of them? Here's quick rundown on the four sections of Amendment 1, what each section is, and how it might apply to you.

Part 1: Portability

The first part of Amendment 1 allows those who received a homestead exemption to transfer their Save Our Homes benefit to a new home under certain conditions. Under the old system, many people were "trapped" in their homes - unable to move because a move would mean a drastic increase in their taxes. The large increase in tax was due to the yearly 3% cap that a homesteaded property is privy to. So if property values increased more than 3% every year, a homesteaded property's assessed value capped out at 3%. You can see that a homeowner that has resided in a home for a number of years would see a substantial tax benefit by means of a lower assessed value. Under the old plan, each time you purchased a new home, you lost any accumulated tax benefit from your old home and the assessed value reset to the market value of your new home.

Under the new amendment, you get to take your accumulated tax benefit with you as long as you apply it to another homestead within two years. A seller that had homestead exemption in 2007, and who either sold or abandoned their homestead in 2007 will be eligible to take their Save Our Homes benefit with them if they move to a new home in 2008 and apply for homestead portability. From 2008 onward, you can take your Save Our Homes benefit with you as long as you transfer it within the same year or the following year.

In order to receive this benefit, you must apply by March 1, 2008 to your property appraiser for your new homestead exemption and for the transfer of the "Save Our Homes" benefit to your new homestead for 2008.

In order to take advantage of portability, you have to make two separate applications - one for your new homestead exemption, and one to transfer the Save Our Homes benefit for 2008. You'll find the application forms DR-501T and DR-501R on the Florida Department of Revenue website.

Here's a quick FAQ regarding portability:

1. How much is the portability benefit worth?
You can transfer up to $500,000 of portability benefit to a new homestead. If your new homestead is worth more than your old one, you transfer the dollar amount. If your new homestead is worth less than your hold one, you transfer the percentage. For instance: your current homestead is assessed at $300,000, but under Save Our Homes, $150,000 of that is exempt. If you move to a new home that is assessed at $500,000, your portability benefit will be $150,000. If you move to a new homestead that is assessed at $200,000, your portability benefit will be 50%, or $100,000.

2. Is the change of homestead and transfer of Save Our Homes automatic?
No. You need to apply for each benefit separately.

3. How do I apply for portability?
You simply turn in a completed application form to the office of the county appraiser in the county in which your new homestead is located.

4. Does portability only apply if I buy a new home?
No. If you already own a second property, you can transfer your homestead exemption to one property to the other and transfer the Save Our Homes benefit as well. Make note that your Homesteaded property must be your primary residence.

5.Am I eligible for portability this year?
If you filed to give up your old homestead after January 1, 2007 and are claiming a new homestead for 2008, you're eligible, but you have to file your application for portability by March 3, 2008.

Part 2: Additional $25,000 Homestead Exemption

The second part of Amendment 1 is an additional $25,000 homestead exemption. The exemption is available to anyone who is already claiming the original $25,000 exemption. In order to claim it, you don't have to do anything. It will automatically be applied to your 2008 tax assessment. In Hillsborough County, the average savings will be $250-300 per household. This is how it will be calculated:

First 25,000 of value - exempted from taxes
Second 25,000 of value - fully taxable
Third 25,000 of value - exempted from all taxes except the school taxes

Why isn't the second 25,000 of value exempt? It is designed to protect cities and towns within Florida that may have many lower assessed property values, particularly in more rural areas. If the exception applied to the second 25,000 of value, many of these cities and towns would not collect enough revenue to run their local governments.

Why does the second 25,000 exemption still allow for the schools taxes to be collected? Simple answer is that the revenue is needed to fund our schools.

Part 3: Tangible Personal Property Exemption

According to the DOR:
Tangible personal property is all goods, chattels, and other articles of value.   It includes: machinery, equipment, furniture, fixtures, signs, window air conditioners, supplies, leased, loaned, borrowed, or rented equipment used in a business, mobile home attachments on rented land (carport, screened porch, Florida room, etc.) furniture and appliances in rental properties.

The third part of Amendment 1 is a $25,000 exemption on all tangible personal property. Business owners must complete the TPP return and file it by April 1 each year. If it's determined that your total tangible personal property is less than $25,000, you won't have to file again. The first $25,000 of tangible personal property is exempt from taxation under Amendment 1.

Part 4: 10% Non-Homestead Assessment CAP

The final part of the amendment is a 10% limitation on assessment of non-Homestead property, both residential and non-residential. As of January 1, 2008, state law requires that all non-homestead property be assessed at just market value, and be reassessed annually, but the change resulting from the reassessment can not exceed 10% of the current assessed value, and the assessed value can not exceed the market value. In 2009, owners of non-homestead property will be able to apply for the 10% non-homestead assessment CAP.

In practical terms, that means that as of January 1, 2008, the assessed value of your non-homestead property will be equal to its market value. If your property is appraised at $350,000, it will be assessed at $350,000 for tax purposes. In 2009, if you apply for the 10% CAP, the property assessment can not be any higher than $385,000 - 10% above this year's assessed value - no matter how much the market value increases. If the market value of the property is less than that, then the assessed value can be no higher than the market value.

You'll find any forms needed to apply for the various exemptions at the DOR web site or at your county appraiser's web site.

Calum MacKenzie is the Owner of Real Living Southern Homes a residential real estate brokerage located in Wesley Chapel, Florida and also serving the New Tampa and Land O’ Lakes real estate markets.

It's the Right Time for the First Time

It might be the single most common question a realtor hears - is this a good time to buy a house? While the answer depends on your personal circumstances, there are certainly times and circumstances that make "yes!" the right answer for most people. If you're a first time home buyer, this is one of those times. What's bad news for home sellers has created an excellent market for anyone who is in the market for a home.

But I keep hearing the housing market is falling apart. How can that be a good time to buy?

Different market conditions favor different kinds of buyers. Over the past several years, the housing market in Florida has been perfect for investors - people who were looking to buy low, sell high and get out quick. Property prices skyrocketed, and investors pushed the market higher and higher. Developers looking to cash in on the rising market bought up land and put up new houses to add to the existing supply of housing. Eventually, the market hit its limit - with so many houses on the market and prices so high, something had to give, and it did. Investors and developers who didn't sell soon enough found that their properties wouldn't sell at the high prices they were asking, and housing prices started coming down.

What's bad for "investors" is good for buyers.

So what you're hearing out there about the housing market falling apart is true - if you're an investor looking to flip houses or make a quick profit. If, however, you're in the market for a home and are intending to live in it for more than a few years, this is your ideal market. Here's why:

• The government has stepped in to encourage people to buy with lower interest rates on mortgages. Right now, mortgage rates are lower than they have been in some time, especially on fixed rate mortgages.

• Sellers are eager to sell. That means that many of them are offering all sorts of concessions to close a deal. You may find sellers willing to assume all closing costs, help with down payments or throw in your first few month’s mortgage payments to sweeten the deal and get you to close.

Is it a good time for YOU to buy your first home?
Of course, you need to take your personal circumstances into account when deciding if this is the right time for you to buy your first home. Some of the considerations that should weigh into your decision include:

• Your family circumstances - many couples decide to buy because they're ready to start a family, for instance. Is it emotionally time for you to buy a home?
• Your financial circumstances are important, too. Is your income stable? Can you afford a monthly mortgage payment, insurance and taxes?
• Are you planning to stay put for more than five years? Conventional real estate wisdom is that housing prices rise over the course of time. In most cases, a family that stays in their home for five (some say seven) years will see their home's value increase.

Assistance for First Time Home Buyers
If everything else is in place for you to buy your first home, but the closing costs and down payment are holding you back, there are a number of programs on the state, federal and county level that are designed to help first time home buyers get into that first home. Depending on the program, you may be eligible for down payment assistance, low interest loans, foreclosure protection, education and assistance with closing costs. Most are aimed at low-income families, but the definition of low-income varies from program to program.

Do you qualify for first time home buyer's assistance? The qualifications vary slightly from program to program, but the list below (from Floridahousing.org) is typical. You qualify for the first time homebuyer program if you:

Programs that Offer First Time Home Buyer Assistance
The most well known first time home buyer assistance programs are managed by two federal agencies, Fannie Mae and Freddie Mac. Each of them sponsor housing assistance programs for different purposes.

Fannie Mae's MyCommunity Mortgages
MyCommunity mortgages are available to help buy or refinance single family homes, condominiums and two-to-four family homes that you will live in as your primary residence. The program is designed for people who may have little to or no savings available for a down payment, and don't have a traditional credit history to show that they handle credit responsibly. Credit can be established through a history of paying rent and utilities or any other payments that you make on a regular basis. The program will also consider "non-traditional" income such as income from boarders or government benefits.

Freddie Mac's Home Possible Mortgages
Freddie Mac underwrites loans for low and moderate income home buyers, including first time home buyers. The programs sponsored by Freddie Mac help first time home buyers overcome some of the most common barriers to home ownership, including impaired credit, no down payment or lack of savings for closing costs. Freddie Mac's Home Possible initiative offers a number of different mortgages through many lenders in Florida designed for special circumstances. They include 100% loans, low interest fixed rate loans, down payment assistance and home buyer education.

Florida First Time Home Buyer Program's
In Florida and locally, the City of Tampa, and Hillsborough and Pasco County each offer home buyer assistance programs sponsored by HUD. Each program can offer assistance with down payments and closing costs, homeowner education and low interest fixed rate mortgages for qualified home buyers. The income qualifications are spread over very low, low, medium and moderate income families, with levels of assistance dependent on where on the income scale you fall.

If you've been putting off buying your first home because you were waiting for the time to be right, the time is right now.

Calum MacKenzie is Owner of Real Living Southern Homes a residential real estate brokerage located in Wesley Chapel, Florida and also serving the Tampa real estate and Land O’ Lakes FL real estate markets.

What the Mortgage Forgiveness Debt Relief Act Means For You

On December 20, President Bush signed a law that is meant to help homeowners who are facing foreclosure or who sell their homes in a short sale. Before this law, the Mortgage Forgiveness Debt Relief Act of 2007, if your bank or lender forgave a portion of your mortgage debt because the value of your home had decreased, the IRS treated the forgiveness as taxable income.

That meant that if your mortgage lender forgave $15,000 in mortgage debt because your house was worth $15,000 less than your remaining mortgage balance, the IRS treated it as earned income. When you filed your taxes, you were required to add that amount to your annual income and pay taxes on it at your regular tax rate. Just when you most needed a break, you ended up owing taxes on $15,000 in phantom income.

Not for the next three years. Under the Mortgage Forgiveness Debt Relief Act, taxpayers can exclude up to $2 million of forgiven mortgage debt on their principal residence in 2007, 2008 or 2009. If you're married filing separately, you can exclude up to $1 million in forgiven debt from your income.

What is mortgage forgiveness?
Mortgage forgiveness is a term that has become more familiar in the real estate market over the past couple of years. In essence, anytime that a lender accepts less than the full amount of the debt owed in full payment of a mortgage, the difference between the amount owed and the amount accepted is "forgiven".

Let's take a look at Sue and Jim. They took advantage of a great adjustable rate mortgage to buy a home for $350,000 four years ago. The payments were manageable until the adjustable rate did what adjustable rates do - and thanks to the changes in the housing market and the sub-prime lending market, they are now facing foreclosure. To make things even worse, the best offer that they can get on the home for which they paid $350,000 is $275,000. Although they still owe $330,000 on the mortgage, their lender agrees to accept the $275,000 as full payment of the remainder of the mortgage, forgiving $55,000 of the debt.

Under the Old Rules The IRS Gets Their Cut
When a bank or other mortgage lender forgives your loan or any part of it, they send you a 1099C in the amount of the debt forgiven. You are then required to count the amount on the 1099C as taxable income along with your earned income and wages. Sue and Jim from the paragraph above would have got a 1099C from their old lender. When they file their taxes for the year, that $55,000 would be added to their earned income, adding the insult of having to pay taxes on income they never saw. Instead of relief, they'd end up owing the IRS a hefty chunk of change at the next tax term.

The Mortgage Forgiveness Debt Relief Act Changes Everything
Well, not exactly everything. If you're forced into a short sale, you'll still get a 1009C from your lender, and you'll still have to file that with your taxes. Now, however, you're allowed to exclude the forgiven amount up to $2 million ($1 million if you're married, filing separately) from your taxable income. In other words, while it's still counted as income, you won't have to pay taxes on that amount of your income.

Who Qualifies for the Mortgage Forgiveness Debt Relief Exclusion?
According to the IRS, you'll qualify for this tax exclusion whether you mortgage debt is forgiven as part of a refinancing or if it's forgiven in connection with a foreclosure. In order to qualify for the exclusion, the following conditions must apply:

1. The debt forgiven must be on a mortgage for your principal residence. The principal residence is qualified based on the amount of time that you lived in it over the past five years.
2. The mortgage forgiveness must be because of loss of value in your home or because of a forced short sale in connection with a mortgage foreclosure. A forgiveness that is given in return for services performed for the lender is not allowed.
3. The debt must be forgiven between January 1, 2007 and January 1, 2010.
4. The debt forgiveness must be on the mortgage used to buy your home.

How to Claim the Debt Relief Exclusion
In order to claim the debt relief exclusion, you'll need to show the IRS how much of the debt has been forgiven. That will require some calculation on your part, because the IRS wants to see the fair market value of your home as well as the amount of your mortgage that was forgiven. Often, when the lender makes out the 1099C or 1099A, they may just put the value of the loan in the field that's reserved fair market value of the home. In some cases, the 1099C or 1099A may not include the fair market value at all.

Like your math teacher, the IRS wants to see your work. When you submit your taxes, you'll need to include documentation of the fair market value of the home as well as your calculations. If the fair market value of your home - the price that it was sold for - is not listed on the 1099C form, you may do best to hire an appraiser to document the fair market value.

The calculations can get complex if you've taken out home equity loans or a second mortgage on your home as well as the primary mortgage. In this case, special considerations may apply. For instance, the income exclusion only qualifies for "acquisition indebtedness"- money that's spent to buy your home, build a new home or that you use to make substantial improvements to your home.

Suppose you bought a house 10 years ago and paid $80,000 for it with a 100% loan. The Florida land boom was very good to you, and five years later your home had increased in value to $200,000. You took advantage of lower interest rates to do a cash-out refinance for $150,000, paid off the remainder of the original mortgage and pocketed $70,000. When time comes to sell, though, you can only get $100,000 for the property and your lender agrees to a short sale because the home has decreased in value, forgiving $50,000 of the loan amount. Can you use the Mortgage Forgiveness Debt Relief Exclusion to avoid taxes on the $50,000?

That depends, says the IRS, on what you did with the cash-out part of the loan refinance. If you used the money from the refi to pay college tuition or your daughter's wedding, then you'll have to pay taxes on the forgiven amount. If, on the other hand, you used it to make major improvements to your home, then it qualifies for the exclusion - but you'd better be able to prove the expenditures. If you're audited, you may need to provide your original warranty deed, or your HUD-1 form. You may need to show canceled checks, receipts and invoices to show the cost of improvements you made.

Filing For the Debt Forgiveness Exemption
The new law came at the end of the year, after the tax forms for this year had been printed, so you won't find anywhere on the tax forms to make the calculations you'll need to prove you qualify for the exemption. The IRS is suggesting that those who are facing a short sale or foreclosure this year use electronic tax preparation software. The private software companies have worked hard to update their own forms so that you can do all the necessary calculations within the software, then print out the results so that you can attach them to your completed tax return.

Calum MacKenzie is Owner of Real Living Southern Homes a residential real estate brokerage located in Wesley Chapel, Florida and also serving the Tampa real estate and Land O' Lakes FL real estate markets.

Seeking Florida Information???

Governor Charlie Crist is very interested in keeping the public informed.  He is very concerned about Florida's residents' awareness of government policies, current events, and legislature.  Thus, the Governor has chartered the creation of a new website: http://www.floridaperforms.com/, which will host a variety of news issues, useful links, and pertinent information regarding the current state of affairs. 

Through the site, Crist hopes that Florida's residents will better understand the issues and resolutions of the political ring, and feel free to comment about their wants and needs. Florida Performs will hopefully connect the public and the government in an effective and successful way, while maintaining a professional and informative status.  

Governor Crist feels strongly about the state acting as one sole entity when it comes to resolving the issues that greatly affect all of Florida's families and residents.  He is also open to receiving e-mails personally to hear your thoughts and views on this new site.  You can contact Governor Charlie Crist at: Charlie.Christ@MyFlorida.com.

If you are seeking information on the status of the Tampa Real Estate Market, click on Tampa Bay.