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Tips for Lowering Homeowner s Insurance Costs

1. Review the Comprehensive Loss Underwriting Exchange (CLUE) report on the property you re interested in buying. CLUE reports detail the property s claims history for the most recent five years, which insurers may use to deny coverage. Make the sale contingent on a home inspection to ensure that problems identified in the CLUE report have been repaired.
2. Seek insurance coverage as soon as your offer is approved. You must obtain insurance to buy. And you don t want to be told at closing that the insurer has denied your coverage.
3. Maintain good credit. Insurers often use credit-based insurance scores to determine premiums.
4. Buy your home owners and auto policies from the same company and you ll usually qualify for savings. But make sure the discount really yields the lowest price.
5. Raise your deductible. If you can afford to pay more toward a loss that occurs, your premiums will be lower. Avoid making claims under $1,000.
6. Ask about other discounts. For example, retirees who tend to be home more than full-time workers may qualify for a discount on theft insurance. You also may be able to obtain discounts for having smoke detectors, a burglar alarm, or dead-bolt locks.
7. Seek group discounts. If you belong to any groups, such as associations or alumni organizations, they may have deals on insurance coverage.
8. Review your policy limits and the value of your home and possessions annually. Some items depreciate and may not need as much coverage.
9. Investigate a government-backed insurance plan. In some high-risk areas, federal or state government may back plans to lower rates. Ask your agent.
10. Be sure you insure your house for the correct amount. Remember, you re covering replacement cost, not market value.

Reprinted from REALTOR magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS .
Copyright 2008. All rights reserved.

Tax Benefits of Homeownership

The tax deductions you re eligible to take for mortgage interest and property taxes greatly increase the financial benefits of homeownership. Here s how it works.

Assume:
$9,877 = Mortgage interest paid (a loan of $150,000 for 30 years, at 7 percent, using year-five interest)
$2,700 = Property taxes (at 1.5 percent on $180,000 assessed value)
______

$12,577 = Total deduction

Then, multiply your total deduction by your tax rate.
For example, at a 28 percent tax rate: 12,577 x 0.28 = $3,521.56
$3,521.56 = Amount you have lowered your federal income tax (at 28 percent tax rate)

Note: Mortgage interest may not be deductible on loans over $1.1 million. In addition, deductions are decreased when total income reaches a certain level.

Reprinted from REALTOR magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS .
Copyright 2008. All rights reserved.

Mortgage Credit Certificates and Mortgage Revenue Bonds

State and local governmental agencies and joint powers authorities can issue tax-exempt mortgage revenue bonds (MRBs) or mortgage credit certificates (MCCs) to assist first-time homebuyers purchase homes.

MCCs are designed to reduce homebuyers federal tax liability by applying the credit to their net tax due and can be used with conventional, fixed-rate, FHA, VA and privately insured loans for single family and condominiums homes. Program participants must meet program income limits, depending on the issuing locality, and live in the home for at least three years. MCCs that are issued in Federal Target areas usually have less restrictive limits than other areas. Target areas are locations where 50% of the households earn less than that area s median income.

Example:

MRBs are tax-exempt bonds that state and local governments issue through housing finance agencies (HFAs) to help fund below-market-interest-rate mortgages for first-time qualifying homebuyers. Eligible borrowers are first-time homebuyers with low to moderate incomes below 115 percent of median family income. MRB loans are offered at a 30-year below-market interest rate. Price limits and interest rates may vary within each area. Only qualified lenders can offer MRBs.

To access a current allocation award list of Counties and Cities using MCCs and MRBs, visit the California State Treasury s Office website at http://www.treasurer.ca.gov/cdlac/. Make sure to consult all the Rounds in order to obtain the complete Single Family Programs allocation information. Once you have confirmation of which program the City or County is offering, contact the local Housing authority or the Planning Department or the Economic Development Agency, depending on your locality s organizational structure. Government staff should be able to provide you with the program administrator contact information and additional details. Some MCC and MRB administrators have web sites where they post their information.

Remember, if the financial resources allocated for a particular program are not used, then they are lost. In the next funding cycle, the local government should make new requests for money and a new allocation is designated. In some cases, local funds for down payment are not being used to its full capacity leaving thousands of dollars unused in city coffers.

If a buyer has a 30-year mortgage of $130,000 with a 6.25% fixed interest rate; the interest rate amount would be approximately $ 8,081.85 during the first year. With a 20% credit, $1,616.37 of the payment would be given back to the buyer, allowing him more purchasing capabilities by allowing a lower annual household income to qualify for the mortgage.

HOUSING PRIMER

Pros and Cons of Going Condo

Condominiums and townhouses offer an affordable option to single-family homes in many markets, and they re ideal for those who appreciate a maintenance-free lifestyle. But before you buy, make sure you do your legwork.

These are some of the important elements to consider:

Storage. Some condos have storage lockers, but usually there are no attics or basements to hold extra belongings.

Outdoor space. Yards and outdoor areas are usually smaller in condos, so if you like to garden or entertain outdoors, this may not be a good fit. However, if you dread yard work, this may be the perfect option for you.

Amenities. Many condo properties have swimming pools, fitness centers, and other facilities that would be very expensive in a single-family home.
Maintenance. Many condos have onsite maintenance personnel to care for common areas, do repairs in your unit, and let in workers when you re not home  good news if you like to travel.

Security. Keyed entries and even doormen are common in many condos. You re also closer to other people in case of an emergency.

Reserve funds and association fees. Although fees generally help pay for amenities and provide savings for future repairs, you will have to pay the fees decided by the condo board, whether or not you re interested in the amenity.

Resale. The ease of selling your unit may be dependent on what else is for sale in your building, since units are usually fairly similar.

Condo rules. Although you have a vote, the rules of the condo association can affect your ability to use your property. For example, some condos prohibit home-based businesses. Others prohibit pets, or don t allow owners to rent out their units. Read the covenants, restrictions, and bylaws of the condo carefully before you make an offer.

Neighbors. You re much closer to your neighbors in a condo or town home. If possible, try to meet your closest prospective neighbors.

Reprinted from REALTOR magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS .
Copyright 2008. All rights reserved.

5 Factors That Decide Your Credit Score.

Credit scores range between 200 and 800, with scores above 620 considered desirable for obtaining a mortgage.

The following factors affect your score:

1. Your payment history. Did you pay your credit card obligations on time If they were late, then how late Bankruptcy filing, liens, and collection activity also impact your history.

2. How much you owe. If you owe a great deal of money on numerous accounts, it can indicate that you are overextended. However, it s a good thing if you have a good proportion of balances to total credit limits.

3. The length of your credit history. In general, the longer you have had accounts opened, the better. The average consumer’s oldest obligation is 14 years old, indicating that he or she has been managing credit for some time, according to Fair Isaac Corp., and only one in 20 consumers have credit histories shorter than 2 years.

4. How much new credit you have. New credit, either installment payments or new credit cards, are considered more risky, even if you pay them promptly.

5. The types of credit you use. Generally, it s desirable to have more than one type of credit  installment loans, credit cards, and a mortgage, for example.

For more on evaluating and understanding your credit score, visit www.myfico.com.

Reprinted from REALTOR magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS .
Copyright 2008. All rights reserved.

7 Tips for Short Sale Success.

By: G. M. Filisko

Have to sell your home for less than it’s worth Our seven tips will help you get the best price.

When you owe more on your home than it’s worth, but you have to sell, you need to squeeze every dollar possible from the sale.

Here are seven tips for navigating the short-sale process.

1. Know who you owe
A short sale has to be approved by any company that has a mortgage or lien against your home. That includes your first, second, or even third mortgage lender, your home equity line lender; your homeowners or condominium association; and any contractors who’ve placed a lien on your home. Make a list and start talking to everyone early in the process. Ask what documents they’ll need from you.

2. Pick your short sale team
You’ll need to work with a team of short sale experts, including a real estate agent, real estate attorney, and your accountant. Look for agents and attorneys who advertise themselves as short sale experts. Interview at least three, and listen carefully for signs that they understand the complexities of the short sale process.
Agents should explain how they’ll arrive at a suggested price for your home. Ask them to show you a sample short-sale package or for an example of a prior short-sale success.

3. Get your documents ready
Gather the paperwork your creditors and mortgage lenders asked to see, like your listing agreement and a hardship letter explaining why you need to do a short sale. You’ll also need proof of what you earn and what you owe as well as copies of your federal income tax returns for the past two years.

4. Expect delays
Despite a federal rule saying banks participating in the federal government’s Making Home Affordable loan modification program (http://www.houselogic.com/articles/making-home-affordable-modification-option/) must respond to short-sale offers within 10 days, it may take weeks or months for your lender to decide whether to allow you to sell your home in a short sale–and even longer if you must negotiate with more than one lender or lienholder.
Your lender and lienholders don’t have to agree to your proposed short sale. They can reject your terms or make a counteroffer, which can create further delays.

5. Anticipate demands
Discuss with your short-sale team how you should respond to common short-sale demands from lenders. For example, are you willing to sign a promissory note agreeing to pay outstanding amounts after the sale is complete

6. Know the tax implications
Any unpaid amount of your mortgage “forgiven” by your lender through a short sale may be considered income to you under federal tax rules. Ask your attorney or accountant whether you qualify to exclude that amount as income on your tax returns under the Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act. Also ask if you’ll be required to report amounts “forgiven” by other lienholders, if applicable.

7. Consider how the short sale will affect your credit and what you must pay
Ask whether your lender will report the short sale to credit-reporting agencies. Having a portion of your debt forgiven may negatively affect your credit score, but a short sale typically damages your score less than a foreclosure or bankruptcy.
Ask you lawyer whether you’ll be responsible for paying back the lenders’ loss. If the lender says it will forgive any losses on the sale of your home, get that promise in writing.

Other web resources
More on short sales (http://www.nolo.com/legal-encyclopedia/article-30016.html)

IRS information on the Mortgage Forgiveness Debt Relief Act and Debt Cancellation (http://www.irs.gov/individuals/article/0,,id=179414,00.html)

This article includes general information about tax laws and consequences, but isn’t intended to be relied upon by readers as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice; tax laws may vary by jurisdiction.

G.M. Filisko is an attorney and award-winning writer. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.

Visit houselogic.com for more articles like this. Reprinted from HouseLogic with permission of the NATIONAL ASSOCIATION OF REALTORS
Copyright 2010. All rights reserved.

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