The Phoenix Real Estate Advisor

Dealing with Debt After Retirement

Reverse mortgages designed to help “house rich, cash poor” seniors meet their day-to-day expenses have gained popularity. Equity is taken out of the home, so debt increases and equity diminishes over time, (unless the property value increases and offsets this use of equity).

Many lenders offer reverse mortgages, and most are set up so that there is no monthly payment as long as the owner or co-owner(s) reside in the home. There are no minimum income requirements, and most plans allow the owner to retain title to the property until they have lived in a different permanent residence for at least 12 full months, sell the property, die, or the end of the loan term is reached.

The Home Equity Conversion Mortgage (HECM) is the only type of reverse mortgage insured by the Federal Housing Administration (FHA). Even if the original loan on the home was not an FHA loan, the reverse mortgage can be.

Seniors should first consider all their options and take a realistic look at monthly expenses. The AARP warns not to take too big of a chunk out of home equity, as this may affect the ability to collect Social Security Income (SSI). As an alternative, the retired home owner can consider downsizing to a smaller dwelling, or relocating to a less expensive neighborhood. Visit http://www.aarp.org for more information.

For more information about how this can help you , please give Jim Carney a call at-

Jim Carney
Loan Officer
Amercian Mortgage Specialists
Phone: (623) 544-3370
Fax: (623) 201-1606
JimCarney@amsaz.com

In an effort to always bring you the best in real estate services I’d like to introduce Jim Carney of American Mortgage Services. Jim is a “lifer” in the business and is premier lender (mortgage banker not mortgage broker) in Arizona. Jim is a resident of Sun City West and offer a full range of services including refis, new purchase loans, reverse mortgages and more.

You know how careful we are about who we introduce you to. After several interviews and Jim’s commitment to quality service and fantastic communications we’re happy to bring him to you. Here’s a little information about his company-

Founded in 2001, American Mortgage Specialists, Inc. has grown to become one of the largest mortgage banks/brokers in the West. Thanks to our professionalism and service, we have become a leading choice for homeowners and real estate agents as well as a preferred partner in the lending community.

FYI- Just so you know we never take kick-backs or receive any financial incentives based on you using one of our referred business providers. By doing that there is no incentive to refer you to any one person…just people that give the same high quality service as we do to make sure the your purchase goes smoothly.

To contact Jim Carney directly you can contact him at-

Jim Carney
American Mortgage Specialists
Phone: (623) 544-3370
Fax: (623) 201-1606
JimCarney@amsaz.com

Many people don’t realize that if they have taken a home equity loan / line of credit (second mortgage) and they need to sell their home because of a hardship, that both the first and second mortgage banks must approve a short sale. 

In some cases, the bank holding the second mortgage are not giving approval.  If they are, they are conditional approvals which require a promissory note at closing, or a cash payment (sometimes partial, sometimes in full) at closing.  We are seeing this mostly for second mortgages which were not used as purchase money mortgage.  In other words, if you didn’t use the second to buy the home, but used it to buy furniture, pay bills, buy a car, or anything else besides being part of the mortgage at time of purchase.

However, we are also seeing some of these same banks - with a little bit of persistance on our part - willing to negotiate after they have sent these conditional approvals or outright denials.  No gaurantees, but it does happen.

This is why it is so important to use an agent to help you with your short sale that is well trained and knowledgeable about your options with short sale listings.  Knowing who to call and what to say is vital in this process.

So if there is anything I can do to help, please let me know.  If you do not live in the Phoenix area, that’s okay, I will gladly help you find an agent in your area that is skilled in this process. Just give me a call…

I am here to help…

Lynn Otlewski, CDPE
RE/MAX Integrity, REALTORS®
623.238.3875
lynn@ValleyREadvisor.com

TAX CREDIT OVERVIEW

Who Gets What?
First-Time Homebuyers (FTHBs): First-time homebuyers (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000
Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.
Current Owners: The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.
Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

What are the New Deadlines?
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

What are the Income Caps?
The amount of income someone can earn and qualify for the full amount of the credit has been increased.
Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible
Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

What is the Maximum Purchase Price?
Qualifying buyers may purchase a property with a maximum sale price of $800,000.
  
What is a Tax Credit?
A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual’s primary residence.

How Much are First-Time Homebuyers (FTHB) Eligible to Receive?
An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.

Who is Eligible fort FTHB Tax Credit?
Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible.
This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.
As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.

How Much are Current Home Owners Eligible to Receive?
The tax credit program includes a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.
Can Homebuyers Claim the Tax Credit in Advance of Purchasing a Property?
No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.

Can a Taxpayer Claim a Credit if the Property is Purchased from a Seller with Seller Financing and the Seller Retains Title to the Property?
Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Some examples of this would include a land contract or a contract for deed.
According to the IRS, factors that would demonstrate the ownership of the property would include:
1. Right of possession,
2. Right to obtain legal title upon full payment of the purchase price,
3. Right to construct improvements,
4. Obligation to pay property taxes,
5. Risk of loss,
6. Responsibility to insure the property, and
7. Duty to maintain the property.

Are There Other Restrictions to Taking the FTHB Credit?
Yes. According to the IRS, if any of the following describe a homebuyer’s situation, a credit would not be due:
They buy the home from a close relative. This includes a spouse, parent, grandparent, child or grandchild. (Please see the question below for details regarding purchases from “step-relatives.”)
They do not use the home as your principal residence.
They sell their home before the end of the year.
They are a nonresident alien.
They are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)
Their home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
They owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2005, through July 1, 2008.

Can Homebuyers Purchase a Home from a Step-Relative and Still be Eligible for the Credit?
Yes. As long as the person they buy the home from is not a direct blood relative, the purchase would be allowed.
If a Parent (Who Will Not Live In The Property) Cosigns for a Mortgage, Will Their Child Still be Eligible for the Credit?
Yes, provided that the child meets the other requirements for the tax credit.

Jim Lee,  Sr. Mortgage Consultant
On Q Financial, Inc
480-444-7136 Direct Phone
jim.lee@onqfinancial.com

This weekend I received a call from a family member living outside Arizona, who was trying to get information for one of their in-laws about selling a home that is worth less than they owe.  I asked him a few questions to get an idea of whether or not this homeowner would qualify for a short sale or if they just want to sell their home and know they can’t get what they owe.  There is a difference.

To be eligable for a short sale on your home, you MUST be able to show the bank a hardship.  These might include loss of a job, substancial loss of income, large involuntary increase in expenses (such as major unexpected medical expenses) are the most common causes of a hardship.  In other words, you need to become “unqualified” for your mortgage.  Each bank determines hardship on a case by case basis.

I explained all this to my family member.  He said that his in-law had a huge drop in income, which in and of itself does not create a hardship.  It depends on what her expenses are.  They are not behind on their mortgage payments at this time, but has been advised to stop making payments.  I would NEVER advise that a homeowner just stop making payments.  There are other steps you can take.  She has also been advised to just move and walk away from her home.  NEVER would I advise this either!  There are other steps you can take.

I told my family member to have his in-law call me and I would refer a CDPE (Certified Distressed property Expert) agent to them in their area. 

Your home is probably the most valuable investment you have.  It is important to trust your asset to someone who knows what they are doing.   Your credit rating is just as valuable.  Your insurance rates are based on credit scores, your interest rates on your credit cards are based on credit scores.  Your ability to buy a car, buy a home, rent an apartment even changing jobs are all based on credit scores.  A forclosure on a credit report is worse than a bankruptcy.  It stays on your report for more than 7 years.  It follows you for a long time.  A short sale stays on your credit report, but in most cases only prevents you from purchasing a home for 2 years as long as everything else is paid on time.

This is why it is so important to entrust this investment to an agent who understands the process, the qualification standards and the best way to proceed for your circumstance.    

The latest statistics show that 1 out of 8 homeowners are either in default, or about to default on their home mortgage.  There is a very good chance that you or someone you know is experiencing a hardship.  Please let them know that there is help available.  In most cases, we can avoid foreclosure.   Sometimes, depending on circumstances, we can even find a way for you to keep your home. 

Give me a call.  If you, or someone you know, are out of state or out of my area, I can refer  a CDPE agent to you.  If you, or someone you know, are in my market area, I would love to help.    

Lynn Otlewski, CDPE

623.238.3875

lynn@valleyreadvisor.com