Two Tax Breaks for Homeowners
Tax Day (April 15) is just around the corner and we wanted to remind you that recently enacted legislation has introduced two new great opportunities for tax savings. The first one is an $8,000 tax credit for first-time homebuyers and the second one is related to energy efficient home improvements. Below we have outlined the details.
First-Time Home Buyer Tax Credit
In 2008, the Federal Government through the Housing and Economic Recovery Act of 2008 authorized a first-time homebuyer tax credit of $7,500. The stimulus package of 2009 made some significant changes:
- Increased the tax credit to $8,000.
- No longer required to pay back the tax credit as long as you stay in your home for 3 years.
- Tax credit phases out for individuals making more than $75,000 or couple earning more than $150,000.
- Most types of primary residences qualify including mobile homes and house boats.
- Tax credit will reduce your tax liability and/or refund you money if you don't owe any taxes.
Although the tax credit did not turn out to be as much as had been hoped for, it is still a great opportunity for first-time homebuyers. For the complete details see this article-$8,000 Tax Credit for First Time Homebuyers
Tax Credits for Energy Efficient Home Improvements
Home improvement tax credits are now available for home improvements “placed in service” from January 1, 2009 through December 31, 2009. Home improvement tax credits up to $1,500 (raised from $500) are available for insulation, replacement windows, water heaters, certain high efficiency heating and cooling equipment, and biomass stoves. Also, the percent of the cost versus the project has been raised from 10% to 30%. For more information, see the Dept of Energy's Energy Star program http://www.energystar.gov/index.cfm?c=products.pr_tax_credits
This article contains general information. Individual financial situations are unique; please, consult your financial advisor or tax attorney before utilizing any of the information contained in this article.
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Loan Modification Guide for Homeowners
Loan modification is a hot topic and getting a lot of "hype" in the news. Below we have detailed what a loan modification means and who qualifies for the Home Affordable Modification Program which was recently launched by the Obama administration.
What is Loan Modification?
Loan modification programs are typically designed for homeowners who are having difficulty making their mortgage payment, but who can't qualify to refinance their mortgage. A loan modification is different than a refinanced mortgage which trades in one mortgage for another one. It also differs dramatically from foreclosure, a short sale, or a deed in lieu.
A loan modification usually involves reducing the underlying interest rate and in many cases it means converting the mortgage from from an adjustable rate mortgage (ARM) to a fixed rate mortgage. Other modifications can also include extending the term of the loan (for example from 30 to 40 years) and/or adding missed payments to the loan balance. The bottom line is that a loan modification is intended to reduce the payments for the borrower, make it more affordable, and reduce the risk that the homeowner will default on the loan.
Obama Loan Modification Plan
President Obama recently announced a $75 billion initiative called the Homeowner Affordability and Stability Plan (HASP). One of the principal tenants of the plan is called the Making Home Affordable initiative and it is comprised of two parts.
The part of the plan that is focused on loan modification is called The Home Affordable Modification program and is designed to reduce monthly mortgage payments for people who are close to foreclosure by modifying their mortgages and lowering their monthly payments on their loans.
Requirements for The Home Affordable Modification Program
- Mortgage balance must be no greater than $729,750.
- Home cannot be vacant or condemned and must be a primary residence—not investor owned.
- Have a loan that was originated on or before January 1, 2009
- Have a mortgage payment (including taxes, insurance, and home owners association dues) that is more than 31% of your gross (pre-tax) monthly income
- Have a mortgage payment that is not affordable, perhaps because of a significant change in income or expenses.
To find out if you are eligible, there is a simple online form at the makinghomeaffordable.gov website. Check it out here: http://www.makinghomeaffordable.gov/modification_eligibility.html.
How does it all work?
Once it is determined that you qualify, service providers will be required to follow a sequence of steps that modify the loan in order to reduce the monthly loan payment to no more than 31% of gross monthly income. For example, the interest rate can be lowered to as low as 2 per cent and the term of the mortgage can be extended to a maximum of 40 years in order to maximize the reduction in loan payment.
Starting the process and required documentation
After you have determined that you are eligible, all you need to do to get the process going is call your loan servicer (the company you pay your mortgage to) and ask to be considered for a Home Affordable Modification. You should be able to find their phone number on your latest bill.
Below is a list of the documentation you will probably be required to provide to your loan servicer. To speed the processing of your application, you should probably get this together before calling them.
- Most recent income tax return.
- Information about assets.
- Information about any second mortgage on the house.
- Account balances and minimum monthly payments due on all credit cards.
- Account balances and monthly payments on all other debts such as student loans and car loans.
- A letter describing why your mortgage is unaffordable (i.e. what caused your income(s) to be reduced or expenses to be increased).
Beware of Loan Modification Scams
There should never be a fee for assistance with or information about the Making Home Affordable Program. If you would like credit counseling before applying for the loan modification program, HUD-approved housing counselors can help you evaluate your income and expenses and understand your options. This service is Free as well! You can find them here: http://www.hud.gov/offices/hsg/sfh/hcc/fc/ or you can call them at 1-888-995-HOPE (4673).
- Beware of any person or organization that asks you to pay an upfront fee in exchange for a counseling service or modification of a delinquent loan. Do not pay – walk away!
- Beware of anyone who says they can “save” your home if you sign or transfer over the deed to your house. Do not sign over the deed to your property to any organization or individual unless you are working directly with your mortgage company to forgive your debt.
- Never make your mortgage payments to anyone other than your mortgage company without their approval.
Related Articles
- Obama's Loan Modification Plan Explained
- HASP Explained
- Loan Modification: Is it Right for You?
- Stimulus Plan 2009-What's In it For You
- 2009 Economic Stimulus Package Explained
- $8,000 Tax Credit for First Time Homebuyers
- Saving and Managing Your Money During a Recession
- First Time Homebuyers Guide
- Financial Assistance for First Time Homebuyers
- How to Avoid Foreclosure
- What Is Foreclosure?
- What Is A Short Sale?
- What Is A Deed-In-Lieu?
- Avoiding Foreclosure Rescue Scams
- How to Buy a HUD Home
What's In the Stimulus Package For You?
President Barack Obama has signed into law the $787 billion stimulus package. The plan, is aimed at lifting the economy out of recession and intends to create millions of jobs and boost consumer spending. Below we have summarized most of the benefits that pertain to individuals and homeowners.
First-Time Home Buyer Tax Credit
In 2008, the Federal Government through the Housing and Economic Recovery Act of 2008 authorized a first-time homebuyer tax credit of $7,500. The stimulus package of 2009 made some significant changes:
- Increased the tax credit to $8,000.
- No longer required to pay back the tax credit as long as you stay in your home for 3 years.
- Tax credit phases out for individuals making more than $75,000 or couple earning more than $150,000.
- Most types of primary residences qualify including mobile homes and house boats.
- Tax credit will reduce your tax liability and/or refund you money if you don't owe any taxes.
Although the tax credit did not turn out to be as much as had been hoped for, it is still a great opportunity for first-time homebuyers. For the complete details see this article-$8,000 Tax Credit for First Time Homebuyers
Making Work Pay Credit
The making work pay credit is essentially a $400 tax credit for individuals or an $800 tax credit for couples. It is calculated by taking 6.2% of your earned income up to the amounts cited above. Many employers will probably begin adjusting their withholding sometime this year so that it will work out on average to about $15 per pay check if you are paid twice per month. Also, self-employed individuals can adjust their quarterly tax payments to reflect the credit. The credit begins to phase out to anyone making more than $75,000 per year and couples making more than $150,000 per year. As it stands now, the credit is for the years 2009 and 2010.
Finally, for retirees not eligible for the Making Work Pay credit, Congress created a one-time payment of $250. The checks are supposed to go out no later than June 17, 2009.
Car Buyer Tax Deduction
To stimulate auto buying, you will able to deduct state and local sales tax on new vehicles purchased on the day the legislation becomes law and throughout the rest of 2009. This applies to new cars, light trucks, recreational vehicles or motorcycles. This deduction is meant for everyone, thus you can take it regardless of whether you itemize other deductions on your tax return. This tax deduction phases out for single people with adjusted gross income over $125,000 or $250,000 for married couples. Finally the deduction does not apply on vehicles that cost more than $49,500.
Unemployment Benefits
In 2009 only, the first $2,400 of unemployment benefits will not be subject to income taxes. Workers losing their jobs from Sept. 1 2008 through the end of 2009 can get help with insurance premiums under COBRA, the federal law that allows you to keep coverage under an old employer's plan. The government will subsidize 65 percent of the premium cost while you will pay the remaining 35 percent of the premium cost. Your income in the year you receive the subsidy cannot be more than $125,000 for individuals or $250,000 for married couples.
Higher Education Tax Credit for Students
This is another "refundable tax credit" which means it is designed to help people who pay little or no taxes as well. This $2,500 tax credit covers the cost of college tuition and other related expenses in 2009 and 2010. You must spend at least $4,000 in a single year to get the full credit. Also, the credit phases out for individuals earning over $80,000 or $160,000 for married couples.
Tax Credits for Energy Efficient Home Improvements
Home improvement tax credits are now available for home improvements “placed in service” from January 1, 2009 through December 31, 2009. Home improvement tax credits up to $1,500 (raised from $500) are available for insulation, replacement windows, water heaters, certain high efficiency heating and cooling equipment, and biomass stoves. Also, the percent of the cost versus the project has been raised from 10% to 30%. For more information, see the Dept of Energy's Energy Star program http://www.energystar.gov/index.cfm?c=products.pr_tax_credits
This article contains general information. Individual financial situations are unique; please, consult your financial advisor or tax attorney before utilizing any of the information contained in this article.
Related Articles
- 2009 Economic Stimulus Package Explained
- Obama Mortgage Rescue Plan FAQ
- Obama's Loan Modification Plan Explained
- Obama Stimulus Plan FAQ
- 2009 Economic Stimulus Plans-A Glossary of Terms
- Executive Summary of the 2009 Economic Stimulus Plan
Neighborood Watch Websites and Neighborhood Link
What is Neighborhood Watch
Launched in 1972, and sponsored by the National Sheriffs’ Association, Neighborhood Watch counts on citizens to organize themselves and work with law enforcement to keep a trained eye and ear on their communities, while demonstrating their presence at all times of day and night. The program was developed in response to requests from sheriffs and police chiefs who were looking for a crime prevention program that would involve citizens and address an increasing number of burglaries.
Neighborhood Watch is not just about crime prevention. It is about getting to know neighbors and enhancing the quality of life in the neighborhood. An important goal at neighborhood meetings is to learn more about each other so neighbors are available to help each other during difficult times. These days many Neighborhood Watch groups have begun using websites to help amplify and enhace their efforts. Neighborhood Link, which was established in 1998, hosts over 36,000 neighborhood websites across the country. Out of that 36,000, several hundred are Neighborhood Watch websites.
Below are some examples of Neighborhood Watch groups around the country using Neighborhood Link Websites:
- Germantown Oaks Neighborhood Watch- Local Neighborhood Watch group in Memphis, TN
- Windhover Condo Neighborhood Watch- Local Neighborhood Watch group in Orlando, FL
- Tampa Neighborhood Watch Association, Inc.- Umbrella group for all Neighborhood Watch Groups in the Tampa Bay area
- Westown Watch Neighborhood Association- Combination Neighborhood Watch and Neighborhood Association in Phoenix, AZ
For More Information on the Neighborhood Watch Program:
- See this article on How to Start a Neighborhood Watch Program
- Find Out How to Get A Free Neighborhood Watch Website
- See this other article for an overview on Neighborhood Watch-What is It?
- USA On Watch-The Face of the National Neighborhood Watch Program
- Tools and Resoures from the National Crime Prevention Council
Source: USAOnWatch.org and the National Crime Prevention Council
Avoid Home Improvement Troubles.......
Spring is here and many homeowners begin remodeling and home improvement projects. In fact May is known as National Home Improvement month. Unfortunately, every year we hear about homeowners getting ripped off by scam artists who are posing as remodelers or contractors.
There are a number of red flags that can tip you off to a potential home improvement or remodeling scam. Below is a list of warning signs that can alert you to the fact that you might be dealing with a potential scam artist or unscrupulous contractor:
- Solicits door-to-door
- Offers you a discount for finding other customers
- Just happens to have materials left over from a previous job
- Tells you your job will be a "demonstration" or that your home will be a "model" home
- Pressures you for an immediate decision, i.e., "this offer is only good for today"
- Asks you to pay for the entire job up-front or only accepts cash
- Suggests that he can help you finance the project and that you borrow money from a lender he knows
- Does not list a business number in the local telephone directory
- Asks you to get the required building permits
There are also a few key points and best practices to keep in mind when contemplating a home improvement or remodeling project:
- Be skeptical of any contractor or handyman who solicits door to door—most well established and reputable contractors find their work through referrals.
- Try to get a recommendation for a contractor from a friend or coworker.
- Always ask for proof that a contractor is licensed and bonded.
- As for references that include addresses and phone numbers and call or visit those references.
- Always have a contract in place before the contractor/remodeler begins work.
- The contract should include the contractor’s name, address, phone and license numbers. It should also include details about what the contractor will and will not do.
- There should always be an estimated start and completion date.
- All warranties should be listed with their details.
- Any oral promises, should also be written into the contract.
- There should be a method for dispute resolution and it should be clearly delineated as to which parties bear what cost of the process.
Keep in mind, your home might be your best financial asset and you need to not only research your project, but research the individuals who you employ to complete your home improvement or remodeling project.
For more information on home improvement and how to go about them, check out this article in our neighborhood resource guide focused on finding a contractor and home improvement projects.
Help in Avoiding Foreclosure
The brochure titled, Protecting Your Investment: Understanding Home Financing and Avoiding Foreclosure offers guidance to consumers who are considering purchasing or refinancing a home and offers tips to homebuyers who are having trouble paying their mortgage. The brochure also outlines remedies to avoid foreclosure and details the devastating impact foreclosures have on the economy.
It is an excellent short brochure that details many of the key points in avoiding foreclosure. Although it was developed by the state of Massachusetts, all of the information is relevant to anyone who is considering buying or re-financing a home or who is dealing with the possibility of foreclosure.
You can get it here or vist their general information page on Foreclosure and Mortgage Lending