Choose Your Deduction

One third of all U.S. households, 75% of households with more than $75,000 income and most homeowners itemize their deduction on their federal income tax returns. It makes sense because the interest paid on their mortgage and their property taxes probably exceeds the allowable standard deduction.

However, with interest rates as low as they have been in the last two years and the price of homes having come down considerably, it is possible that the standard deduction may be the better choice.

Each year, the taxpayer can compare the total of the itemized deductions to the standard deduction to select which method will result in the most benefits. The 2011 standard deduction is $11,600 for married couple filing jointly and $5,800 for single filers.

The Housing and Economic Recovery Act of 2008 allows homeowners to take the standard deduction and the lesser of their actual property taxes of $1,000 if filing their return married jointly. For more information, see Schedule L found on www.IRS.gov and consult your tax advisor.

Risk Determines Rate

Regardless of what a lender quotes on mortgage rates, the actual rate paid by a borrower is based on a number of variables. Lenders determine whether to loan money and at what rate based on the risk involved with the transaction.

Factors that increase the risk that the loan will be repaid will proportionately increase the interest rate charged to the borrower. If the risk becomes too high, the loan will not be approved.

• Loan amounts - conventional loans for more than the conforming limits set by Fannie Mae are considered jumbo loans and generally have a higher interest rate.
• FICO score - the lowest interest rate is reserved for the highest credit scores; the lower the score, the higher the rate borrower will pay.
• Occupancy - borrowers occupying a home as their principal residence are considered a better loan risk than second homes and investment properties.
• Loan purpose - purchase transactions generally have the lowest interest rate while refinancing a home is generally higher.
• Debt-to-Income ratio - a borrower's monthly liabilities divided by their gross monthly income develops a ratio that helps lenders to assess the borrower's ability to repay the mortgage.
• Loan-to-Value ratio - the lower the percentage of the loan to the appraised value of the property will generally lower the interest rate.

Any combination of these factors could limit a borrower's ability to secure a mortgage at the rate initially quoted. Being pre-approved by a trusted mortgage professional is the best way to know what rate you can expect to pay.

Here is our latest TV show talking about mortgage and real estate opportunities as we see them today.

Recently I met with one of our resources-attorney Leslie Kimes. We discussed divorce and real estate and the disposition of real estate to of of the spouses. I was not aware of the use of the summary real estate disposition judgement. What a unique tool!. Leslie wrote the following to share with us-call her for any of your legal needs:

Use of Summary Real Estate Disposition Judgments in Divorce Cases

As a family law attorney, I use Summary Real Estate Disposition Judgments (SREDJ) instead of Quit Claim Deeds to transfer title to property in marriage dissolution (divorce) cases to reduce costs and avoid the recording of Judgment and Decrees with the Recorder's Office. The SREDJ serves the same purpose as a Quit Claim Deed, and actually exceeds the scope of a deed by serving to convey title to all parcels of real estate owned by the parties, even if they are in different counties.

The SREDJ is drafted by the attorney and submitted to the judge for signature after the Judgment and Decree has been entered. After the SREDJ has been signed by the judge, a certified copy is obtained and recorded at the appropriate Recorder's or Registrar's Office to effectuate the transfer of title. If more than one parcel has been transferred in the Judgment and Decree, the appropriate number of certified copies are ordered and recorded in each county. This way, only one recording fee is paid for each parcel and the Judgment and Decree does not need to be recorded. There is a lot of private information in a Judgment and Decree that does not need to be on file at a Recorder's Office!

On the other hand, when a Quit Claim Deed is used, there must be a deed for each parcel, the former spouse needs to sign each deed, and a Judgment and Decree needs to be recorded with each deed. Obviously, the client is then paying twice the certified copy and recording fees as with a SREDJ.

In short, a Summary Real Estate Disposition Judgment is a much more cost-effective way to convey title in marriage dissolution cases and saves time in streamlining the signature process (judge vs. former spouse).

Leslie L. Kimes
Attorney at Law
7714 Brooklyn Boulevard
Suite 102
Brooklyn Park, MN 55443
(763) 561-9197; Fax (763) 560-7053
www.lkimeslaw.com

WE have an outlet for 203K's  Both full and streamline.  Watch this fun video to see the difference.  When you are ready to discuss your project or home buying needs, please give us a call.

FHA recently raised the monthly MIP (mortgage insurance premium) on 30 year loans to 1.15% if you put less than 5% down and 1.1% if you more than 5% down.  This is quite a dramatic change, as it was only a few years ago that it was .5%.   With the cost of mortgage insurance increasing, it might now be time to look at a conventional loan and the advantages of putting a little more down payment so that you can benefit from a lower private monthly mortgage insurance.  The private MI companies have come up with a comparison example.  Take a look:

http://www.homesminneapolis.net/insured-conventional-loan-vs-fha-which-is-better/

FHFA Extends Refinance Program By One Year

Washington, DC -- Federal Housing Finance Agency Acting Director Edward J. DeMarco has  announced an extension of the Home Affordable Refinance Program (HARP), a refinancing program administered by Fannie Mae and Freddie Mac, to June 30, 2012. The program was set to expire on June 30 of this year. In addition, Fannie Mae and Freddie Mac will make the following adjustments to their programs: Freddie Mac will exempt HARP loans from their recently announced price adjustments and Fannie Mae will conform their eligibility date to May 2009.
 
The program expands access to refinancing for qualified individuals and families whose homes have lost value. HARP has grown over the past year. In 2010, Fannie Mae and Freddie Mac purchased or guaranteed more than 6.8 million refinanced mortgages. Of this total, 621,803 were HARP refinances with LTVs between 80 percent and 125 percent. This is up from 190,180 in 2009, when HARP began.
 
For more information on Fannie Mae and Freddie Mac refinance activity, see FHFA's Fourth Quarter 2010 Foreclosure Prevention & Refinance Report. Additionally, homeowners can visit www.MakingHomeAffordable.gov for more information on the program.

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The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks. These government-sponsored enterprises provide more than $5.9 trillion in funding for the U.S. mortgage markets and financial institutions.

I just found a government site that I wanted to share.  It is http://www.HelpWithMyBank.gov  It has resources for individuals who may be encountering difficulty with their bank.  It also has breaking news on banking related information such as regulations by the FTC.   It is definitely worth visiting and bookmarking for future reference. 

The big question I have, on a topically related issue, is the 27 page settlement offer over foreclosure deficiencies in their paperwork.  I believe it involves settling with some homeowners and offering a principal reduction.  Will the banks accept that?  Can you imagine the impact?  I can come up with a million different scenarios and responses from people who have and have not experienced a reduction in home value.   This is a big big big issue in my opinion.

Stay tuned for more-the government website I've listed will undoubtedly cover it as well.

Down Payment Assistance Synopsis   Where there is a will, there is a way.  There are many many programs today that are city specific.  So, the attached synopsis is a multi county foreclosure down payment assistance pool.  Basically, there is money available for purchasers of distressed homes.  If you want to buy a home and are flexible in which area you make your purchase, we can try to find you some programs.   

Gifts and Grants can be considered towards borrowers funds on certain 3% down conventional loans   Yes, you read that right.  I just got an email today from a leading mortgage insurance company that is willing to underwrite this loan. You will need at 740 or better score.  But, what an opportunity.  In many ways, this is like FHA, but with a little higher credit threshold.  The KEY difference, besides credit score, is the lack of an upfront MI (mortgage insurance) premium and as well as a smaller required monthly premium.  This product could be a game changer for the MI company and conventional loans.