Tuesday, April 13, 2010

The 3 Most Overlooked Tax Deductions For Home Buyers

Most of us all know about the 2 most common home ownership tax deductions available.

· Home Mortgage Interest
· Real Estate Taxes

But did you know that there are 3 MORE VERY IMPORTANT ADDITIONAL tax deductible items that are usually overlooked?

These are 3 important deductions that every homebuyer needs to know!

1. Points Paid By Seller (for borrower):

You say what? How could dollars contributed by the Seller (which shows up on the Seller side of the HUD statement) be a tax deduction for the buyer?

Well according to the IRS, their position is this:

“A borrower is treated as paying any points that a home seller pays for the borrower’s mortgage”

The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Points also may be called loan origination fees, maximum loan charges, loan discount, or discount points.

If you purchased a home and the seller paid “points”, these are fully deductible to you as the homebuyer! They are not deductible to the home seller.

Important Exception: The points were not paid in place of amounts that ordinarily are stated separately on the settlement statement, such as appraisal fees, inspection fees, title fees, attorney fees, and property taxes. Also, the deduction cannot exceed the amount of money you used as down payment, earnest money or other contribution totals.

Tip: Make sure your lender/escrow doesn’t apply the seller paid points directly to charges such as appraisal fees, credit reports, document preparation fees, etc. The amount is clearly shown on the settlement statement (such as the Uniform Settlement Statement, Form HUD-1) as points charged for the mortgage. The points may be shown as paid from either your funds or the seller's.

2. Mortgage Insurance Premiums: New IRS Effective Rule January 1, 2007

You can take an itemized deduction on Schedule A (Form 1040), line 13, for premiums you pay or accrue during 2009 for qualified mortgage insurance in connection with home acquisition debt on your qualified home.

Those that had to pay an up front Mortgage Insurance Premium at closing are allowed to claim that amount as a deduction.

Important Exception: If your adjusted gross income (AGI) on Form 1040, line 38, is more than $100,000 ($50,000 if your filing status is married filing separately), the amount of your mortgage insurance premiums that are deductible is reduced and may be eliminated. See Line 13 in the instructions for Schedule A (Form 1040) and complete the Qualified Mortgage Insurance Premiums Deduction Worksheet to figure the amount you can deduct. If your AGI is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums.

Tip: Don’t forget to deduct the mortgage insurance premium included in your mortgage payment every month at the end of the year as well, and for the years to come.

3. Late Charges on Mortgage Payments:

You can deduct as home mortgage interest a late payment charge if it was not for a specific service in connection with your mortgage loan.

Advice: Please consult your tax accountant for advice regarding restrictions and limitations for your personal situation.

For more information on Home owner/buyer tax deductions go to:

Thursday, April 8, 2010

Snohomish County Average Home Prices March 2010

Snohomish County average homes prices for March 2010 were $308,299. Average home prices so far this year are:

January $310,883
February $312,299
March $308,299

Prices look like they are "bouncing around the bottom". However, prices remain under pressure with bank sales and short sales. We will need to watch how the expiration of the home buyer credits, increased interest rates and more foreclosures coming on the market affect prices in the coming months

Keep in mind that these statistics are all about homes that are selling. Home sale averages are weighted heavily by sales under the $400,000. This doesn't necessary mean that home prices are still falling... it means more homes are selling in the lower price ranges.

By looking at the chart below you can see that the majority of home sales are under $300K. With so many home sales in the lower price range and few homes sold above $500K, will drag down the average.

Those looking to sell a home above $500K will find few buyers.

Monday, April 5, 2010

King County Average Home Prices March 2010 Show Continued Market Stabilization

King County average home price sales for March 2010 continue to show stablization in the Seattle real estate market. The last 14 months have home sales ranging near the $450,000 average price. March 2010 home sales came in at $458,546.

King County Foreclosure Rates March 2010

Click on graphs to enlarge.
The King County Foreclosure rates for March 2010 show that homeowners are continuing to struggle with making their mortgage payments. March foreclosures were 339 homes. However the uptick in Notice of Trustee Sale filings (mortgages in default) may indicate that banks are starting to catch up with those that haven't been making their payments.

Banks have been struggling to keep up with demand on the Making Home Affordable Plan that modifies mortgages with lower interest rates for a more affordable monthly payment.

Banks have been scrambling to hire thousands of employees to help process the backup of loan modifications applications, as well as stream line their computerized systems to meet demand.

Their are several programs now available to help those in financial distress.

The HAMP Program. This program can reduce your interest rate to as low as 2%. As of March 26th, 2010, President Obama updated the plan to include those that are unemployed.

The HAFA Program. This program is available for homeowners who: 1. do not qualify for a trial mortgage modification under the Making Home Affordable Program; 2. do not successfully complete the trial period for their modification; 3. miss at least two consecutive payments during their modification period; or 4. request a short sale or deed-in-lieu of foreclosure.

Also be aware that all these programs are FREE. You should never pay anyone a cent for a loan modification. Your current mortgage holder processes your application for FREE.

If you need some guidance on these or other programs, give us a call, we can help.

Friday, April 2, 2010

Snohomish County Foreclosure Rates March 2010

Snohomish County foreclosures rates for March 2010 were 217 homes. The uptick in Notice of Trustee sales for March 2010 indicates many homeowners are still struggling to meet their mortgage obligations.

The Hamp Program (Making Home Affordable Program) specifically designed to help these homeowners is working for some. Banks are painfully slow in processing the applications, which can take 6 months to a year or more to complete.

New programs are being unrolled as well which will include mortgage balance reductions and Short Sales under the HAFA Program.

This area of the market is changing daily. Bank of America recently introduced a Principal Forgiveness Plan to enhance it's National Homeownership Retention Program. It will systematically lower the principal balance on some mortgages. More banks are likely to follow.

Last week, the Obama adminstration announced that the HAMP program should be extended to those that are unemployed. The Wall Street Journal's recent article states "The revisions, which will also include temporary help for unemployed borrowers, serve as a recognition that the administration 's foreclosure rescue plan hasn't kept pace with the rising number of souring loans."

Programs are constantly changing, sometimes daily. If you or someone you know is struggling to meet their mortgage obligations, give us a call and we can direct you to all the current resources that are available.