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Displaying blog entries 1-10 of 22

The Facts on The Real Estate Sales Tax

by Samia S. Morgan

Politics are everywhere it seems as the November mid-term elections are coming closer. You may have heard rumors about a possible 3.8% sales tax on real estate sales and have wondered what the facts really are. If you are like most homeowners and potential home buyers you are in shock and may be confused about this potential tax and want to know the real deal.

Here are the facts:

1. Starting in 2013, not only will you pay the closing costs and real estate fee when you sell your house but you may be required to pay a 3.8% Sales Tax

2. You are only subject to the tax if you make over $200K a year, $250K married filing jointly.The Internal Revenue Service says that to qualify for the $250,000/$500,000 exclusion, a seller must have owned the home and lived there as the seller’s "main home" for at least two years out of the five years prior to the sale.

3. If you are fortunate enough to bring in $200K, the tax still does NOT apply to the first $250,000 on profits ($500,000 if married)

4. This new tax was implemented under the new health care bill that was signed earlier this year

5. On the bright side, in today’s economy and with home values falling, you most likely will have no tax burden if you sell your home. A typical home sale would not incur any tax. In March, for example, half of all existing homes sold for $170,700 or less, according to the National Association of Realtors.

If you’re still concerned about this possible tax, it is a good idea to check with your accountant if you are planning and selling your home and you think you will have a large profit.

 

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Financing Alternatives If You Have Been Denied

by Samia S. Morgan

It is happening more and more these days to potential home buyers; they find the perfect home at an amazing price but then are turned away because they were not approved for a mortgage loan. The real estate crisis has forced lenders to reevaluate their lending procedures and many guidelines are tighter than ever. It is not just first time home buyers either, even those buyers with good credit are being turned down for a mortgage.  

Don't be discouraged however, you may not have to walk away from owning your own home just because you were not qualified by a mortgage lender. Below are some alternative options that some home buyers are seeking to traditional mortgages. Of course everyone has a different situation but do some research, one of these may work out for you!

 Here are a few ideas:

  • Borrow From Life Insurance: You may have a whole life or other insurance policy that increases in value over time. If you borrow against that cash value, you don’t have to go through standard loan qualification.  Be sure to check with your insurance company about the risks involved
  • Owner/Seller Financing: If the seller is an investor, or if the seller owns the property free and clear, they may offer owner or seller financing options to help move the property. You will still be responsible for principal, interest and scheduled payments through a promissory note, but you probably won’t go through the rigorous qualification process that a bank requires. Typically owner or seller financing also saves mortgage origination fees and other fees tacked on by most lenders.
  • Borrow From An IRA: If you have a self-directed IRA, then you know that you can use the IRA to invest in a number of assets, including mortgages. Although you can’t use your own IRA to buy your personal home, a family member or other investor can use a self-directed IRA as the investment vehicle for your property. Private investors often step in to help with acquisition loans, although you can expect to pay a higher rate for the initial loan.
  • Lease/Purchase Option: Many investment owners are willing to offer a lease/purchase option or rent to own agreement. You are able to rent the property for a specific term, usually with higher payments than the market rate; and your rents go toward the purchase or down payment of the property.

As with any home purchase, do your homework if you are looking at alternative financing methods. Make sure the title to the property is clear and that you meet all the state lending requirements for your financing. A realtor or title company should be able to help you through the process. You also want to be sure that you are able to afford the monthly payment or repayment plan and that the investment in the home you want is sound.

 

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Interest Rates And First Time Homebuyers

by Samia S. Morgan

First time homebuyers are at a great advantage in our current real estate market. Large inventories of homes to choose from, amazing prices and mortgage rates that are at an all time low. However, what many first-time home buyers are not aware is they may not be able to take advantage of the best rates advertised. Here’s why…

Loan History

Even if you are not currently carrying a large amount of outstanding debt, lenders look at loan history, especially large installment payments. They do this to see if you have shown responsibility in handling a large loan. On-time payments and prompt pay-off can be an indicator of how you will perform as a borrower in the future. Many first-time buyers have not established a strong payment history, which can make it difficult in getting that first mortgage without higher rates and fees.

Small Down Payment

First time homebuyers can be at a disadvantage as they do not have a cash profit from selling a previous home to offer as a substantial down payment. With lenders now tightening their restrictions and usually requiring 20% down this large sum of money can be difficult to obtain. Without the downpayment you will probably see a higher interest rate. Larger mortgages come with higher interest rates, and loans with small percentages down are seen as higher risk to the lender. Many lenders will charge a higher rate based on their assessment of the loan’s risk.

Negotiating Skills

First-time borrowers should make the time to shop around for mortgages. You should also do your homework and become familiar with mortgage terminology, different loan packages and options, FHA programs and creative ways to secure your loan. Many first-time buyers are unaware of the many options available to them and lack the experience to negotiate better terms.

Finally, make sure that your credit score is up where it should be (above 700) and that you have steady income from a reliable employer. Both of these criteria will make a significant difference in your interest rate.
 
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Don't Overlook Details When Closing

by Samia S. Morgan

With so many beautiful homes on the market today and at amazing prices, it can be easy to find the home you have always wanted. However, it is vital to not overlook the details and inspect for potential flaws. Your potential new home should be thoroughly inspected top to bottom, before you get to the closing table.

The professional home inspection should reveal most defects in the home and this will be your opportunity to revise your offer or negotiate the repairs into the deal.

Make sure that your offer includes a contingency for a home inspection. The home inspection will reveal significant defects with foundation, plumbing, electrical and damage if the home has any of these problems. The savvy home buyer will also test other features in the home that may not be a part of the inspection.  Check appliances, sprinkler systems, garage doors, and wet areas (for mold or water damage) and get a pest inspection. Your state may also require seller disclosures, in which the sellers must list any problems with the home.

Material facts are an important part of seller disclosures. A material fact can be any defect or situation that can impact the buyer’s decision to move forward on the purchase or the price and terms of the property sale. Structural defects, property taxes, fire or flood damage and a death in the home are examples of material facts.

It is easy to get caught up in the excitement of purchasing a new home, but don't be in such a hurry to close that you overlook flaws that can cause headache and extra expense down the road.

 

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Do You Know Your Debt To Income Ratio?

by Samia S. Morgan

If you are obtaining financing to purchase a new home, it is important to understand that your lender will look at what is called a debt-to-income ratio. Of course your lender will look at various different aspects of your financial situation but this is an important aspect and the loan could be denied if the ratio is too high. Below is more information on why is it important to you and how it effects your financing.

What the debt-to-income ratio means is that lenders will do a comparison of the money you earn to the money you owe. It includes credit card debt, existing mortgages, auto loans, and any other personal debt.

Your mortgage lender will look at your Debt-To-Income (DTI) to evaluate your ability to afford your new mortgage. You should have a good idea of what your DTI ratio is before you approach a lender or consider buying a new home.

You ultimately want to achieve a low DTI ratio. A high number means that you have less disposable income and less ability to maintain the home once you purchase it. With foreclosures at an all time high, lenders are not willing to assume any additional risk in lending.

Most lenders seek DTI ratios in the 20-36% range or lower, with no more than 28% of debt dedicated to the mortgage itself. While some lenders will consider higher ratios, DTIs in the upper 30% range are considered high risk.

There are several different calculators available online to help you determine your ratio, and you can always check with your financial institution for guidance on determining your DTI ratio.

Here’s a simple formula:

  1. Add all your monthly payments (mortgage or rent, car, credit cards, any other debt payments)
  2. Add your gross income (before taxes), bonuses, alimony, or any other outside income and divide by 12
  3. Then divide the total number in (1) by the final number in (2)
  4. The result is your DTI ratio


Whether you are ready to buy a new home or are just interested in your financial health, it’s a good idea to know your DTI and understand the steps to lower your ratio and become as close to debt-free as you can.

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Inspections For Termites

by Samia S. Morgan

In most states a termite inspection is a necessary requirement in the home sale process. If a home has termites, they can create significant damage and even destroy a home if left untreated.

In most cases if  evidence of termites is seen, there’s a good chance the infestation is already quite advanced.

If you are a homeowner and have any concerns about termites in home, the best course of action is to locate a pest control or termite inspection to confirm any problems.. Of course, pest inspections are an important part of the overall inspection process, so make sure you hire an expert in the field:

  1. Check out online or yellow page listings under Pest Control for a licensed, bonded inspector. Your real estate agent can also be helpful in location a company for you.
  2. Request estimates for the inspection cost and compare rates.
  3. Make sure that you get a copy of the inspection report and course of action needed before signing any contract papers.


As mentioned above, most states require a clear pest control if you are buying or selling a home. The inspector looks for termite infestation as well as other pest infestation, plumbing leaks, obvious roof leaks, dry rot and water damage. Make sure that all areas of the home are accessible for the inspector. Try to stick with companies that do inspection and treatment only – and leave any wood repair to carpenters or contractors.

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A $10,000 Reminder

by Andy Block - Mortgage Advisor

Recently I’ve had a lot of questions about the California tax credit, so I thought I’d send along this reminder for you to forward to your clients as appropriate.

Beginning May 1, new California legislation took effect that provides a tax credit up to $10,000 to residents who buy their first home or a newly constructed home.

This legislation has allocated $200 million to fund tax credits for qualified home purchases; $100 million is for buyers of new, unoccupied homes and the other $100 million is for first time buyers of existing homes.

The tax credits are available to home buyers on a first-come, first-served basis. This is an incentive for buyers to act now (as a reminder, the $100 million allocated for last year’s new home buyer program was depleted in just four months).

A notable feature of this year's legislation is that buyers of newly constructed homes may choose to reserve a tax credit prior to the close of escrow. This will become important as California nears the $100 million cap for homes that may not close escrow before the cap is reached. Buyers that are applying for the First-Time Buyer Credit (purchasing existing homes) will not be able to reserve the tax credit before escrow closes. Details about how to reserve the tax credit can be found here.

Below are some highlights of the new tax credit program:

•    Buyers of existing homes must close escrow between May 1, 2010 and December 31, 2010.
•    Buyers of new homes can reserve their credit by entering into an enforceable contract between May 1, 2010 and December 31, 2010. They must file the proper paperwork with the tax board and close escrow by August 1, 2011.
•    First-time home buyers are eligible whether they buy a newly built or an existing home.
•    Current homeowners looking to trade up must buy a newly built home in order to receive the tax credit.
•    If a taxpayer qualifies for both tax credits, the law specifies that that the New Home Credit be applied (only one tax credit is allowed per taxpayer).
•    The tax credit is worth up to 5% of the purchase price of the home, or $10K, whichever is less.
•    The credit will be allocated evenly over three years. If a buyer qualifies for the full $10,000 tax credit, they’ll get up to $3,333 per year. They will need to consult with their CPA for details and eligibility as related to their specific situation.
•    The buyer cannot be a dependent and the home purchased cannot belong to a relative.
•    The buyer is required to live in the home for at least two years or forfeit the credit (i.e., repay it to the state).

Please contact me to discuss your clients' specific mortgage or financial strategies.

Andy Block - Mortgage Advisor & Financial Advisor
Opes Advisors

Email Me

Direct: 650.931.0605
Fax: 650.931.0601

License #01096311
400 S. El Camino Real
Suite 250
San Mateo, CA 94402
Fax 650.931.0601


Opes Advisors is licensed as a registered investment advisor with the Securities and Exchange Commission (SEC) and is licensed as a Residential Mortgage Lender by the CA Dept of Real Estate.

Author and Business are endorsed by Samia Realty Group
Move2CA - our website
San Francisco Bay Area Home Search  - find San Francisco Bay Area properties for sale
What’s Your San Mateo - San Francisco Bay Area Home Worth? - get current market information for your San Francisco Bay Area home

Expanding Guidelines & Improved Pricing

by Samia S. Morgan

The purchase market certainly has been heating up – which is great news for all of us!

And, some more good news is that last month we started to see Mortgage Insurance (MI) companies begin to expand their Loan to Value (LTV) guidelines and improve pricing. This provides additional options for your clients with less than 20% down.

FHA financing is a great option for some buyers. However, it’s not always the best choice for buyers that can put down 5%, 10% or even 15% as they will still assume the additional costs associated with a traditional FHA loans.

The expanded guidelines are as follows:

As of 4/12/2010

Conforming
($417,000)

High Balance
Conforming
$729,750)
Single Family 95% 90%
Condo 95% 90%


Regardless of the type of loan your client utilizes, Opes Advisors continues to make two distinctions when working with our mortgage borrowers. One is the issue of qualifying. Qualifying is simply answering the question of how much and under what circumstances a lender is willing to provide you with a loan. The second issue is affordability. Affordability answers the question whether or not you should have a particular mortgage, debt structure and real estate.

For example, with these expanded MI guidelines, your clients may decide that, although they can afford to put 20% down, they’d prefer to just put 10% down. Utilizing our proprietary software, Opes Advantage™, we can actively and objectively evaluate the tradeoffs within life and show the financial impact those decisions can have on specific goals for the future.

In this case, your clients may have made the decision to put 10% down (vs. 20%) because they think they need to have extra reserves available to them. Our software can determine what that 10% “savings” will cost them in additional interest payments or even how their reduction in savings will impact their future (because they feel like the 10% “savings” has caught them up for a bit and they’re altering their saving practices). With the immediate and specific results our software provides, we can determine which variables can be adjusted to create the most significant impact on your clients’ financial futures. And, it can be instantly modified as often as needed to consider additional scenarios.

We find that clients appreciate our approach. And, seeing the details of their financial situation eliminates the insecurity of wondering where they stand and gives them the confidence to move forward with a bias for action.

Please call me to discuss your clients' mortgage or financial strategies.

Andy Block - Mortgage Advisor & Financial Advisor
Opes Advisors

Email Me

Direct: 650.931.0605
Fax: 650.931.0601

License #01096311
400 S. El Camino Real
Suite 250
San Mateo, CA 94402
Fax 650.931.0601


Opes Advisors is licensed as a registered investment advisor with the Securities and Exchange Commission (SEC) and is licensed as a Residential Mortgage Lender by the CA Dept of Real Estate.

Author and Business are endorsed by Samia Realty Group
Move2CA - our website
San Francisco Bay Area Home Search  - find San Francisco Bay Area properties for sale
What’s Your San Mateo - San Francisco Bay Area Home Worth? - get current market information for your San Francisco Bay Area home

Deciding Between Two Houses?

by Samia S. Morgan

Shopping for a home can be an exciting time, but when house hunting you may find two houses in which you cannot decide which one is the right one. It might be that you have found what seems like two perfect homes and deciding between the two can be a difficult decision.

Purchasing a home is a major decision and shouldn't be taken lightly, so it is a good idea to approach it rationally and not be guided by emotion, which can be easier said that done.

Making a decision may at times be necessary if the seller has received multiple offers. Start the decision process by making a list of your needs as well as the pros and cons of each house.  Some things you'll want to compare include:

•Which neighborhood offers the most benefits? If the two homes you are looking at are in different neighborhoods, evaluate the pros and cons. Perhaps you have children and need to be close to schools or parks or even other families with children. Also consider the proximity to shopping, restaurants as well as your work commute, church, and other services? Are the streets maintained? Do homeowners landscape and maintain their homes nicely? How long will  Don't forget to inspect the other homes in the area, are they well maintained?

•Do your research on the crime statistics in the area. You can get this information from the local police or sheriff department.  You might find theft or vandalism to be more prevalent in one area than another.

•If you have children who are in school, having a good school system is an important aspect to consider in your decision. You can find school ratings, reviews and test scores at Greatschools.com to help you make the decision that is right for you.

•In your list of pros and cons be sure to identify the specifics of the house and your current and future needs. Does the home have enough room? Is the layout what you want?st. Then, rate how each house measures up to each need on your list.

If you are still having difficulty deciding, it is a good idea to visit  each home at least two more times, at different times of the day to get a feeling for how the house and neighborhood look and feel. It can be a difficult decision but you want to make sure you are comfortable as it is one of the largest decisions you will make.

 

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California Legislation - Tax Credit up to $10,000 to Residents

by Andy Block - Mortgage Advisor


Beginning May 1, new California legislation takes effect that will provide a tax credit up to $10,000 to residents who buy their first home or a newly constructed home.

This legislation allocates $200 million to fund tax credits for qualified home purchases; $100 million is for buyers of new, unoccupied homes and the other $100 million is for first time buyers of existing homes.

The tax credits will be available to home buyers on a first-come, first-served basis. This is an incentive for your buyers to act now (as a reminder, the $100 million allocated for last year’s new home buyer program was depleted in just four months).

A notable feature of this year's legislation is that buyers of newly constructed homes may choose to reserve a tax credit prior to the close of escrow. This will become important as California nears the $100 million cap for homes that may not close escrow before the cap is reached. Buyers that are applying for the First-Time Buyer Credit (purchasing existing homes) will not be able to reserve the tax credit before escrow closes. Details about how to reserve the tax credit can be found here.

Below are some highlights of the new tax credit program:

  • Buyers of existing homes must close escrow between May 1, 2010 and December 31, 2010.
  • Buyers of new homes can reserve their credit by entering into an enforceable contract between May 1, 2010 and December 31, 2010. They must file the proper paperwork with the tax board and close escrow by August 1, 2011.
  • First-time home buyers are eligible whether they buy a newly built or an existing home.
  • Current homeowners looking to trade up must buy a newly built home in order to receive the tax credit.
  • If a taxpayer qualifies for both tax credits, the law specifies that that the New Home Credit be applied (only one tax credit is allowed per taxpayer).
  • The tax credit is worth up to 5% of the purchase price of the home, or $10K, whichever is less.
  • The credit will be allocated evenly over three years. If a buyer qualifies for the full $10,000 tax credit, they’ll get up to $3,333 per year. They will need to consult with their CPA for details and eligibility as related to their specific situation.
  • The buyer cannot be a dependent and the home purchased can't belong to a relative.
  • The buyer is required to live in the home for at least two years or forfeit the credit (i.e., repay it to the state).

And, although it’s a small window, there are some buyers that may be able to combine this new California tax credit with the $8,000 Federal Home Buyer Tax Credit for a total of $18,000 in tax credits. To do so, the purchase contract must be signed by April 30, 2010 (for Federal eligibility) and the purchase must close between May 1, 2010 (when the California program begins) and June 30, 2010 (when the Federal program ends). For the purposes of the California tax credit, the purchase date is defined as the date escrow closes.

As always, please call me to discuss specific situations or to schedule time to review your clients' mortgage or financial strategies.

Andy Block - Mortgage Advisor & Financial Advisor
Opes Advisors

Email Me

Direct: 650.931.0605
Fax: 650.931.0601

License #01096311
400 S. El Camino Real
Suite 250
San Mateo, CA 94402
Fax 650.931.0601


Opes Advisors is licensed as a registered investment advisor with the Securities and Exchange Commission (SEC) and is licensed as a Residential Mortgage Lender by the CA Dept of Real Estate.

Author and Business are endorsed by Samia Realty Group
Move2CA - our website
San Francisco Bay Area Home Search  - find San Francisco Bay Area properties for sale
What’s Your San Mateo - San Francisco Bay Area Home Worth? - get current market information for your San Francisco Bay Area home

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Photo of Samia S. Morgan, Inc. Real Estate
Samia S. Morgan, Inc.
dba Samia Realty Group
BRE# 00967165
San Mateo CA 94403
650-678-3633