FHA Hikes Fees on Mortgages

DAILY REAL ESTATE NEWS | TUESDAY, FEBRUARY 28, 2012

Home buyers with mortgages backed by the Federal Housing Administration will soon see a rise in fees, the agency announced Monday. 

The agency is raising its fees in an effort to try to recoup some of its depleted reserves*, which suffered from the rising number of home owners who defaulted on their mortgages. The agency also says it’s raising fees to try to encourage the return of more private capital to the market. 

FHA loans allow for smaller down payments, as low as 3.5 percent compared to traditional loans, and they often have less stringent credit requirements, which have made them soar in popularity in recent years. (The agency insures loans but doesn’t issue them.) About 40 percent of all new mortgages for home purchases in 2010 were FHA-backed mortgages. 

In particular, FHA will increase two fees that borrowers pay. Starting April 1, it will increase its annual mortgage insurance premium for loans under $625,500,  bringing the total cost from 1.15 percent of the loan amount to 1.25 percent. Starting June 1, larger loan premiums will see an increase of 0.35 percent of a percentage point, bringing the total premium costs up to 1.5 percent of the loan amount, The New York Times reports. 

FHA also announced it will raise a fee for the upfront mortgage premium by 0.75 of a percentage point, which will now total 1.75 percent of the loan amount. 

The New York Times illustrates the impact of the increase in a recent article: For example, a borrower with a 3.5 percent down payment with a mortgage of $193,000 can expect to pay an upfront mortgage premium alone of $3,377, compared to the prior $1,930. That can be rolled into the mortgage.

The new fees will also apply to home owners who want to refinance their mortgages, the agency announced. 

The raise in fees is expected to bring in $1.25 billion in additional revenue to the agency through September 2013.

Read NAR's view of the FHA's decision to raise fees.

Source: “Buyers Face Higher Fees at FHA,” The New York Times (Feb. 27, 2012)

* Editor’s Note: FHA maintains two reserve funds. The first provides reserves to cover each mortgage that's insured for 30 years; the second is a congressionally required 2 percent reserve, which FHA draws on first to cover losses. This 2 percent reserve fund has dipped in recent years part because of continuing declines in home values, which increases the amount of reserves (and therefore more quickly depletes the reserve fund) that the agency must maintain for each mortgage. For more on how FHA reserves work, see "Myths and Facts" by NAR’s Government Affairs.

A Guide to Taxes as a Homeowner

Hey there, homeowner! We’re happy you’ve got a slice of the American dream, and you’ll get the tax breaks that go along with it. In fact, some of these tax incentives apply to even a second home. Ooh la la!

Whether you bought, sold or just happily lived in your home this year, we’ll walk you through all the tax stuff you need to know.

Just skim the “If you …” headers to find the sections that affect you.

If You Paid Interest on Your Mortgage …

You should have received a form 1098 from your lender, which will tell you how much mortgage interest you paid. You can deduct 100% of your mortgage interest and property taxes, as long as your loan is less than $1 million, ($500,000 if you are married and filing separately). If it’s over that, the IRS will limit your deduction. But here’s the catch: You have to itemize in order to claim the deduction. This is a choice that takes a little math and thought. But basically, you calculate your total itemized deduction, compare it against the standard deduction and then take the higher deduction.

You can also deduct late payment charges (please don’t consider this an incentive to pay late) and pre-payment penalties.

If You Paid Property Tax …  (Hint: You Did)

The property tax you pay each year is deductible. Usually these property taxes are paid as part of your monthly loan payments, so you can find that information on the annual statement from your lender. Real estate taxes can be deducted on federal returns even though they may not be deductible in the state where the property is situated.

If You Had a Loan Forgiven …

Depending on the time of debt, if a lender canceled it, you could be taxed as though that canceled debt were income. For example, if you had a mortgage of $10,000, paid $2,000 and the bank canceled the rest, you would be taxed as though you had $8,000 of income.

However, thanks to the Mortgage Debt Forgiveness Relief Act of 2007, the IRS will not charge income tax on a canceled debt. That means if you got a loan modification, short sale or foreclosure on your primary residence, you won’t be hit with a tax bill for it. This applies to up to $2 million in debt ($1 million if you are married, filing separately), that you took on to:

• Buy your primary home
• Improve your primary home
• Refinance the loan for your primary home

This will only be in effect through 2012, so if you are considering a loan modification or other cancellation of debt, try to fit it in this year if possible.

If You Made Energy-Efficiency Improvements to Your Home …

The Nonbusiness Energy Property Credit is for homeowners who made energy-efficient improvements such as installing insulation, new windows or furnaces. For 2011, you can get a credit worth 10% of the cost of the qualified efficiency improvements you made. You can claim up to $500 over your lifetime.

What if your electricity comes from your own green sources? You should check out the Residential Energy Efficient Property Credit. This credit gives homeowners 30% of what they spend on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines and fuel cell property. No cap exists on the amount of credit, except for fuel cell property.

If in this coming year you decide you want to go green for your home, the IRS suggests that you check for a certification statement that the item is eligible for a tax credit before you purchase. This can normally be found on the packaging or the company’s website. Full details are available on Form 5695.

If Your Home Was Damaged in a Disaster …

If your home was damaged by a disaster like a tornado or fire, you might be able deduct the amount that wasn’t reimbursed by home insurance. To do so, you need to know your AGI. Then multiply that by 10%, and subtract that and $100 from the amount of damage not reimbursed.

Example: Let’s say your home sustained $20,000 in hurricane damage, but you were only reimbursed $10,000 by your insurance company. $20,000-$10,000 = $10,000 in unreimbursed damage. Your AGI is $70,000, so $70,000 x 10% = $7,000. $10,000 – $7,100 = $2,900 in deductible damage.

Special Note: Should You Take the Home Office Deduction?

Provided you are actually eligible for the home office deduction (learn more so you don’t get audited), deducting the expense could either be a smart decision or a poor one. That’s because once you claim that home office, it doesn’t count as part of your private residence anymore. When you sell your house sometime down the line, you’ll either make a profit or a loss. If you make a profit, the value of your home office will be taxed as a capital gain, at a maximum rate of 25%, costing you money. If you make a loss selling your home, you can deduct the value of the home office as a loss, making you money.

How the math works out for your depends on your situation, so it’s smart to talk to your tax preparer before you deduct your home office.

If You Paid Closing Costs …

Any origination fees that you paid your mortgage lender at closing are deductible, even if your lender paid the closing costs. You can find the exact figures on your HUD-1 settlement statement, which you received from your escrow provider or title attorney at or just after closing. If you can’t seem to find it, contact your real estate agent or mortgage broker to request it.

If You Paid Property Taxes …  (Hint: You Probably Did)

Like we explained above, usually your property taxes are paid to your lender as part of your loan. But if you bought your house this year, you probably paid your fair share of the property taxes upfront. You can find out how much you paid on your settlement documents, and deduct it.

If You Paid Mortgage Discount Points …

When you pay a “point” toward your mortgage, that means you paid the equivalent of 1 percentage point of your loan upfront at closing in order to get a lower interest rate. This doesn’t go to pay off your loan, but it can save you money in the long run, which is why people do it. If you paid mortgage points, you can deduct them if:

• The loan is secured by your primary residence
• The loan was used to buy, improve or build the home
• Paying points is a common practice in the geographic area of your new home
• The points are calculated as a percentage of the loan principal
• The points are clearly outlined on the buyer’s settlement statement, and
• The amount of cash you put into the purchase of your home (including down payment, closing costs, etc.) is at least equal to the amount you were charged for the points you paid on the loan

If you paid points to refinance your home instead of buying or improving your home, you deduct a portion of what you paid each year, spread out over the life of the loan. For example, if you paid 1,000 in points to refinance a 10-year loan, then you could deduct $100 each year.

If You Took Out a Personal Home Equity Loan …

What if you took out a home equity loan to pay for something other than your home, like tuition or home improvements? Well, it depends. Part or all of the interest you pay on that loan could be deductible for up to $100,000, or $50,000 if you are married filing separately. Here’s how the math works when it comes to tuition:

Let’s say your home is worth $200,000. You currently have a mortgage worth $150,000. So your home is worth $50,000 more than the mortgage. If you take out a home equity loan to pay for tuition, then you can only deduct the interest on $50,000 of that loan. That number would be the same whether you took a loan out for $60,000 or $200,000—you can only deduct interest on $50,000 of that loan.

If you find yourself getting hit with the alternative minimum tax (AMT), then you cannot deduct anyportion of the interest on a home equity loan when calculating AMT.

However, if you used that $60,000 loan to build a shed and install a pool, you can deduct all of the interest whether or not you fall under the AMT. That’s because you used the loan to improve your property.

If You Made a Profit on Your Home …

If you sold your house for more than you paid, you technically made what is called a “capital gain.” Usually capital gains are taxed, but the gain you made on your home—up to $250,000 ($500,00 for married couples filing jointly)—is exempt from income taxes. You just need to have:

• Owned the property for two years, and
• Lived in it for two out of the last five years before you sold it

If you don’t meet these requirements, all is not lost. If you had to sell your home because of:

• Death
• Divorce or legal separation
• Job loss that qualifies for unemployment compensation
• Employment changes that made it difficult for you to meet mortgage and basic living expenses
• Multiple births from the same pregnancy
• Damage from a natural or man-made disaster
• “Involuntary conversion” by a local government under eminent domain law, for example …

Then the IRS will cut you some slack and only tax your gain partially. Learn more at the IRS website.

Also, if the gain you made is more than $250,000 (or $500,000 if you’re married filing jointly), dig around and see if you can find the receipts for any home improvements you made. That will establish the cost basis for the home as higher. For example, if you bought your home for $300,000 and made $50,000 in improvements, then sold it for $600,000, you can deduct that entire amount ($600,000-$350,000 = $250,000). If you hadn’t included those improvements, you would have been taxed on that extra $50,000 that exceeded the limit.

This post originally appeared on LearnVest.com on Feb. 15, 2012 and was written by Alden Vick. It is republished here with permission from LearnVest.

Frequently Asked FHA 203(k) Questions And Answers

Frequently Asked FHA 203(k) Questions And Answers

Can An Investor Use The 203(k) Loan? No, in October, 1996, HUD placed a moratorium on investor participation in the 203(k) Rehabilitation Mortgage Program. You can, however, purchase a single family home and convert it into a duplex and rent out the second unit or purchase a four unit home and rent out the three other units.

Is There A Minimum Amount Of Rehabilitation Required For A Standard 203(k)?   Yes, there is a minimum $5,000 requirement for the eligible improvements on the existing structure on the property. Minor or cosmetic repairs by themselves are unacceptable; however, they may be added to the minimum requirement. Under The Streamlined 203(k) program, a minimum repair/improvement cost requirement is not applicable.

Can A Six (Or More) Unit Building Be Done Using The 203(k) Program?   No, however, the building could be renovated and reduced to a four unit building.

Can A Home Be Converted To Provide Access For A Disabled Person?   Yes, a home can be remodeled to improve the kitchen and bath to accommodate a wheelchair access. Wider doors and handicap ramps can also be included in the cost of rehabilitation.

Is There A Time Period On The Rehabilitation Construction Period?    Yes, the Rehabilitation Loan Agreement contains three provisions concerning the timeliness of the work. The work must begin within thirty days of execution of the Agreement. The work must not cease prior to completion for more than thirty consecutive days. The work is to be completed within the time period shown in the Agreement (not to exceed six months); the lender should not allow a time period longer than that required to complete the work.

Is A Contractor Required To Do The Work?   No, however, if the borrower wants to do any work or be the general contractor, they must be qualified to do the work, and do it in a timely and workmanlike manner. It is very important that the work be done in a time frame that will assure the completion of the work that will be agreed upon in the Rehabilitation Loan Agreement (signed at closing). A borrower doing their own work can only be paid for the cost of the materials. Monies saved can be allocated to cost overruns or additional improvements.

Can Mortgage Payments (PITI) Be Included In The Mortgage?   Yes, using The Standard. Up to six months of payments may be included in the mortgage if the property is not able to be habitable due to condition of the property during the rehabilitation period.

HUD's FHA Lender List is available to help you find a knowledgeable FHA 203(k) lender in your area who can answer all your questions regarding both the Standard and Streamline FHA 203(k) loan.

Locks, Lighting and Alarms; Protecting Your Home

COLORADO SPRINGS, CO, Feb 19, 2012—Your home is your most valued investment. It’s meant to keep you—and your family—comfortable and safe, and it protects you from the elements. But what is protecting your home? When it comes down to it, the security of a home lies on the shoulders of the homeowner. While 911 is the standard go-to response in home emergencies, you can't count on the police for round-the-clock protection.

“While the local police may be the first to reach the scene of the crime, and perhaps they will be able to catch the perpetrator, they can’t keep the crime from happening,” says Joe Clement, Broker/Owner of RE/MAX Properties, Inc.. So what can you do? You can protect yourself. Luckily, technology has made that task a bit less daunting.

Locks
Burglars enter through an unlocked door or window in approximately 30 percent of robberies. Before you even start thinking about an alarm system, make sure your doors lock efficiently. All exterior doors should have keyed passage locks as well as deadbolts. “All windows, garage doors, Bilco doors and sliding doors should have sturdy locks as well,” Clement recommends.

Lighting
Lighting is the next item on the list. Burglars attack under the cover of darkness where they can hide. They won’t want to break into a well-lit home where any neighbor or passerby might spot them. Motion-detecting spotlights are particularly effective because they surprise the thief and scare them off.

Home Alarm Services

Alarm services are essential. “Many homeowners shy away from them because they think they’re expensive or unnecessary. But anyone who has had their home broken into knows that any precaution taken is well worth it in the end,” says Clement.

Not only do these systems scare off the bad guys and tip off the authorities, but they can also deter break-ins before the burglar has even entered the home. Alarm companies will provide you with a sign to post outside your home, so that all prospective burglars know you’re protected.

Here is a run down of a handful of the best security systems out there, according to Clement.

Brinks Home Security – This company is rated a Consumers Digest best buy. They have low basic prices, although their premium cost is a bit on the pricier end. One of their touted features is a simple one button turn-on, instead of requiring a sequence of button presses.

ADT Security Services – ADT offers a key chain that lets the homeowner arm and disarm the system from anywhere in the home. “This is helpful if your child or spouse accidently sets off the alarm coming in; you don’t have to scramble to the panel with an obnoxious noise blaring in your ear,” says Clement. Their prices are extremely affordable.

GE Security – GE is another home security standard. They offer basic home security systems, as well as protection products for multi-unit dwellings and offices.

Guardian Protection Services – Guardian’s main advantage is that they integrate burglary protection, fire protection, and personal emergency protection, as opposed to offering them separately like most of the other companies. Their prices vary regionally.

“Once you have chosen and installed a home security system, don’t forget to use it,” Clement reminds us. Consumer Reports found that 43 percent of people with home security systems fail to consistently use their systems when they leave home. “Turn it on whether you’re heading out to do errands for a few hours, or going on vacation for a few weeks,” Clement says. “Keeping your home safe should be a top priority, and knowing it’s protected will help you relax when you’re out, regardless of where you’re going or how long you’ll be away.”

Colorado Springs Named #2 in Safest Cities

Study: Colorado Springs is second safest city in U.S.

A study by InsuranceProviders.com lists Colorado Springs as the second safest city in the U.S., based on crime rates, natural disaster risk and span of time between car accidents per capita. Arizona and Colorado account for five of the 10 safest cities.

The study looked at information based on three safety factors: crime rate, risk of natural disaster, and driving safety. Crime statistics were compiled from the FBI's Uniform Crime Statistics based on violent crime incidents per 100,000 people. Information from the United States Geological Survey and the National Oceanic and Atmospheric Administration was used to determine how likely a city was to experience a natural disaster such as an earthquake, hurricane or flood. Driving data from Allstate was used to determine the safest cities in which to drive based on the average number of years between accidents by drivers in each city.

As expected, being located away from coastal areas made a city safer, mostly due to the lower risk of hurricanes and earthquakes. Crime rates, on the other hand, had relatively little influence on a city's safety rating. While a high crime rate certainly knocked down a city’s safety rating, even cities with the highest crime rates compensated by having low rates of natural disasters and car accidents.

Joel Ohman of InsuranceProviders.com emphasizes that the concept of safety cannot be based on only one factor.

"To determine the safety of a city, it is important to account for a variety of factors," he said. "A city with extremely safe drivers but a high crime rate, for example, may rank lower in overall safety than cities with lower crime rates and less-safe drivers."

Arizona had the most cities on the top 10 list, with Phoenix, Tucson and Mesa ranked seventh, third, and first, respectively. Aurora came in at No. 9.

Report for this study

Read more: http://www.gazette.com/articles/city-133160-crime-based.html#ixzz1luFsWyge

Colorado foreclosures fall to lowest levels since 2006

Denver Business Journal by Mark Harden, New Media Editor

Colorado foreclosures in 2011 reached their lowest level since 2006, the state Division of Housing reported Wednesday.

New foreclosure filings in Colorado, which may or may not lead to the auction of a home, last year totaled 31,914, down 25 percent from 2010 levels. Meanwhile, foreclosure sales at auction totaled 19,622 in 2011, down 17 percent.

Both totals were the lowest statewide since 2006, the report said.

Last year’s Colorado foreclosure filings were down 31 percent from 2009’s peak of 46,394, while foreclosure sales declined 21 percent from the 2007 peak of 25,054.

In 2011’s fourth quarter alone, new filings declined 20.5 percent, to 8,540, from the fourth quarter of 2010, Foreclosure auction sales also fell between the two periods, by 13.5 percent, to 4,057, the state report said.

Sequentially, foreclosure filings rose 6.4 percent between the third and fourth quarters of 2011, while foreclosure auction sales fell 12.3 percent.

“Foreclosures really slowed down during 2011, but not all of that was due to improvements in the real estate markets. Many lenders slowed down the processing of foreclosures during the first half of 2011 to deal with legal issues,” Ryan McMaken, spokesman for the Division of Housing, said in the new report.

“Nevertheless, we do know that mortgage delinquencies are down and that home prices are stabilizing, so that also helped to push down foreclosure totals,” McMaken added.

> Click here to download the 2011 Division of Housing statewide foreclosure report.

The new report covers the entire state of Colorado. A separate monthly report series covers only the state’s 12 largest urban counties.

The most recent urban counties report, covering November 2011, said the 12 counties saw a year-over-year rise in foreclosure sales at auction for the first time in 14 months, but foreclosures for the first 11 months of 2011 were still well below 2010 levels.

Foreclosure filings are the first stage in the foreclosure process, which can either lead to a foreclosure sale of a property several months later or a homeowner avoiding a sale by paying off overdue amounts on a mortgage or settling with a lender.

Foreclosure sales figures include properties that revert to the lender as well as sales to a third party.

The state foreclosure data are mostly for homes, but include a small number of commercial properties and vacant land.