Louisville Mortgage Leader

$6500 New Move-Up/Repeat Home Buyer Tax Credit

2009-11-13T15:42:00.000-05:00

November 13, 2009

$6500 New Move-Up/Repeat Home Buyer Tax Credit

The Worker, Homeownership, and Business Assistance Act of 2009 has established a tax credit of up to $6,500 for qualified move-up/repeat home buyers (existing home owners) purchasing a principal residence after November 6, 2009 and on or before April 30, 2010 (or purchased by June 30, 2010 with a binding sales contract signed by April 30, 2010). The following questions and answers provide basic information about the tax credit.

Frequently Asked QuestionsAbout the New Move-Up/Repeat Home Buyer Tax Credit

1. Who is eligible to claim the $6,500 tax credit?

Qualified move-up or repeat home buyers purchasing any kind of home are eligible to claim this credit.

2. What is the definition of a move-up or repeat home buyer?

The law defines a tax credit qualified move-up home buyer (“long-time resident”) as a home owner who has owned and resided in a home for at least five consecutive years of the eight years prior to the purchase date. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. Repeat home buyers do not have to purchase a home that is more expensive than their previous home to qualify for the tax credit.

3. How is the amount of the tax credit determined?

The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $6,500. Purchases of homes priced above $800,000 are not eligible for the tax credit.

4. Are there any income limits for claiming the tax credit?

Yes. The income limit for single taxpayers is $125,000; the limit is $225,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) above those limits. The phase-out range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $145,000 (single) or $245,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.

5. Can you give me an example of how the partial tax credit is determined?

Just as an example, assume that a married couple has a modified adjusted gross income of $235,000. The applicable phase-out to qualify for the tax credit is $225,000, and the couple
is $10,000 over this amount. Dividing $10,000 by the phase-out range of $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $6,500 by 0.5. The result is $3,250.Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $138,000. The buyer’s income exceeds $125,000 by $13,000. Dividing $13,000 by the phase-out range of $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $6,500 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,275.Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.

6. How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008? How is this different than the rules established in early 2009?

The previous tax credits applied only to first-time home buyers and were for different amounts of money.

7. How do I claim the tax credit?

Do I need to complete a form or application? Are there documentation requirements?You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on line 67 of the 1040 income tax form for 2009 returns (line 69 of the 1040 income tax form for 2008 returns).No other applications are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and repeat home buyer tests. Note that you cannot claim the credit on Form 5405 for an intended purchase for some future date; it must be a completed purchase. Home buyers must attach a copy of their HUD-1 settlement form (closing statement) to Form 5405 as proof of the completed home purchase.

8. What types of homes will qualify for the tax credit?

Any home that will be used as a principal residence will qualify for the credit, provided the home is purchased for a price less than or equal to $800,000. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences. It is important to note that you cannot purchase a home from, among other family members, your ancestors (parents, grandparents, etc.), your lineal descendants (children, grandchildren, etc.) or your spouse or your spouse’s family members. Please consult with your tax advisor for more information. Also see IRS Form 5405.

9. I read that the tax credit is “refundable.” What does that mean?

The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even the entire amount of the refundable tax credit.For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $6,500 home buyer tax credit. As a result, the taxpayer would receive a check for $5,500 ($6,500 minus the $1,000 owed).

10. Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?

Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been “purchased” on the date the owner first occupies the house. In this situation, the date of first occupancy must be after November 6, 2009 and on or before April 30, 2010 (or by June 30, 2010, provided a binding sales contract was in force by April 30, 2010).In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date. Be sure to check with a tax advisor in cases where a HUD-1 form is not used at settlement to be sure you have sufficient documentation to attach to IRS Form 5405.

11. Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?

Yes. The tax credit can be combined with an MRB home buyer program.

12. I am not a U.S. citizen. Can I claim the tax credit?

Perhaps. Anyone who is not a nonresident alien (as defined by the IRS) and who has owned and resided in a principal residence in the United States for at least five consecutive years of the eight years prior to the purchase date can claim the tax credit if they meet the income limits. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. The IRS provides a definition of “nonresident alien” in IRS Publication 519.

13. Is a tax credit the same as a tax deduction?

No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $6,500 in income taxes and who receives an $6,500 tax credit would owe nothing to the IRS.A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $6,500 in income taxes. If the taxpayer receives a $6,500 deduction, the taxpayer’s tax liability would be reduced by $975 (15 percent of $6,500), or lowered from $6,500 to $5,525.

14. Is there a way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 or 2010 tax return?

Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the down payment.Buyers should adjust the withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.In addition, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. As a result, some state housing finance agencies have introduced programs that provide short-term second mortgage loans that may be used to fund a down payment. Prospective home buyers should check with their state housing finance agency to see if such a program is available in their community. To date, 18 state agencies have announced tax credit assistance programs, and more are expected to follow suit. The National Council of State Housing Agencies (NCSHA) has compiled a list of such programs, which can be found here.

15. If I’m qualified for the tax credit and buy a home in 2009 (or 2010), can I apply the tax credit against my 2008 (or 2009) tax return?

Yes. The law allows taxpayers to choose (“elect”) to treat qualified home purchases in 2009 (or 2010) as if the purchase occurred on December 31, 2008 (or if in 2010, December 31, 2009). This means that the previous year’s income limit (MAGI) applies and the election accelerates when the credit can be claimed. A benefit of this election is that a home buyer in 2009 or 2010 will know their prior year MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.Taxpayers buying a home who wish to claim it on their prior year tax return, but who have already submitted their tax return to the IRS, may file an amended return claiming the tax credit using Form 1040X. You should consult with a tax professional to determine how to arrange this.

16. For a home purchase in 2009 or 2010, can I choose whether to treat the purchase as occurring in the prior or present year, depending on in which year my credit amount is the largest?

Yes. If the applicable income phase-out would reduce your home buyer tax credit amount in the present year and a larger credit would be available using the prior year MAGI amounts, then you can choose the year that yields the largest credit amount.

Note: This information has been provided to be used as a general guidance and is not intended to constitute as legal advice, tax advice, accounting services or professional consulting. Before making any decision or taking any action you should consult a professional advisor. Information is subject to change without notice and was originally complied from many sources including federalhousingtaxcredit.com.

Please contact us if you have additional questions concerning the $6500 new move-up/repeat home buyer tax credit.

Jason Thompson & Chris DeMuth
Mortgage Professionals
Louisville Mortgage Leader
(502) 774-0117 or (502) 777-6267
NMLS#:196475 & NMLS#:148312

LouMortgageLeadr@aol.com

$8,000 First-Time Home Buyer Tax Credit- Extended

2009-11-11T11:20:00.000-05:00

November 11, 2009

**$8,000 First-Time Home Buyer Tax Credit- Extended

In what has been urged as a must-have by real estate professionals and builders, the $8000 tax credit for first-time home buyers (previously due to expire Nov. 30), has been extended. As you know not only has it been extended, but it has also been expanded to include more buyers. Read below for additional details...

Frequently Asked Questions About the First-Time Home Buyer Tax Credit

The Worker, Homeownership, and Business Assistance Act of 2009 has extended the tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence. The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify. For sales occurring after November 6, 2009, the Act establishes income limits of $125,000 for single taxpayers and $225,000 for married couples filing joint returns.The income limits for sales occurring on or after January 1, 2009 and on or before November 6, 2009, are $75,000 for single taxpayers and $150,000 for married taxpayers filing joint returns.

1.Who is eligible to claim the $8,000 tax credit?

First-time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1st, 2009 and before December 1st, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs.

2. What is the definition of a first-time home buyer?

The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.

3. How is the amount of the tax credit determined?

The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.

**4. Are there any income limits for claiming the tax credit?
(New Info!)

Yes. For sales occurring after November 6, 2009, the income limit for single taxpayers is $125,000; the limit is $225,000 for married taxpayers filing a joint return. The tax credit 1. amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $125,000 for single taxpayers and $225,000 for married taxpayers filing a joint return. The phase-out range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $145,000 (single) or $245,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.

5. If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?

Possibly. It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose MAGI exceed the phase-out limits.

6. Can you give me an example of how the partial tax credit is determined?

Just as an example, assume that a married couple has a modified adjusted gross income of $160,000. The applicable phase-out to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.

Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.

*Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.

**7. How is this tax credit different from the tax credit that Congress enacted in early 2009? (New Info!)

The tax credit’s income limits were increased and the program’s deadlines have been extended.

8. How do I claim the tax credit? Do I need an application?

Participating in the tax program is easy. You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on Line 69 of their 1040 income tax return. No other applications or forms are required, and no pre-approval is necessary. However, you will want to be sure you qualify for the credit under the income limits and first-time buyer restrictions.

9. What types of home will qualify for the tax credit?

Any home that will be used as a principle residence will qualify for the credit. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes and houseboats. The definition of principle residence is identical to the one used to determine whether you may qualify for the $250,000 /$500,000 capital gain tax exclusion for principle residences.

10. I read that the tax credit is “refundable” what does that mean?

The fact that the credit is refundable means that the home buyer can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit. For example, if a qualified home buyer expected notwithstanding the tax credit, federal income tax liability of $5000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the tax payer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).

**11. For a home purchase in 2009 or 2010, can I choose whether to treat the purchase as occurring in the prior or present year, depending on in which year my credit amount is the
largest? (New Info!)

Yes. If the applicable income phase-out would reduce your home buyer tax credit amount in the present year and a larger credit would be available using the prior MAGI amounts, then you can choose the year that yields the largest credit amount.

12. Instead of buying a home through a home builder, I hired a contractor to construct a home on a lot that I already owned. Do I still qualify for the tax credit?

Yes. For the purposes of the home buyer tax credit, a principle residence that is constructed by the home owner is treated by the tax code as having been “purchased” on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after January 1. 2009 and on or before April 30th, 2010 (or June 30th, 2010, provided a binding sales contract was in force by April 30th, 2010. In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date and may now qualify for the recently added new construction home tax credit.

13. Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?

Yes. The tax credit can be combined with the MRB home buyer program. Note that the first-time home buyers who purchased a home in 2008 may not claim the tax credit if they are participating in an MRB program.

14. I am not a U.S. citizen. Can I claim the tax credit?

Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of "nonresident alien" in IRS Publication 519.

15. Is a tax credit the same as a tax deduction?

No. A tax credit is a dollar for dollar reduction in what the tax payer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS. A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15% tax bracket and owes $8,000 in income taxes. If the taxpayer receives an $8,000 deduction, the taxpayer’s liability would be reduced by $1,200 (15% of $8,000), or lowered from $8,000 to $6,800.

16. I bought a home in 2008. Do I qualify for this credit?

No. but if you purchased your first home between April 9, 2008 and January 1, 2009 you may qualify for a different tax credit.

17. Is there a way for the home buyer to access the money allocable to the credit sooner than waiting to file their 2009 tax return?

Yes. Prospective home buyers who believe they will qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the down payment.

Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would become liable for repayment to the IRS of income tax and possible interest charges and penalties.

Note: This information has been provided to be used as a general guidance and is not intended to constitute as legal advice, tax advice, accounting services or professional consulting. Before making any decision or taking any action you should consult a professional advisor. Information is subject to change without notice and was originally complied from many sources including federalhousingtaxcredit.com.

Please contact us if you have additional questions concerning the $8000 tax credit extension.

Click here for info on the NEW $6500 Move-Up/Repeat Home Buyer Tax Credit

Jason Thompson & Chris DeMuth
Mortgage Professionals
Louisville Mortgage Leader
(502) 774-0117 or (502) 777-6267
NMLS#:196475 & NMLS#:148312

LouMortgageLeadr@aol.com

Raise Your Credit Score 100 Points in 45 Days!

2009-11-04T11:47:00.000-05:00

November 4, 2009

Louisville, KY

RAISE YOUR CREDIT SCORE 100 POINTS IN 45 DAYS

Many individuals today have blemishes on their credit reports. Whether it is from a dreaded case of Identity Theft or not being punctual about paying bills on time, these credit mishaps can cost an individual thousands of dollars in interest if not corrected.

However, there is hope and some simple things can be done to improve a credit score one hundred (100) points in forty-five (45) days.

Let’s take a look:

WHAT MAKES UP A CREDIT SCORE?

A credit score is made up of five components:

• Payment History 35%

• Balances Carried 30%

• Credit History 15%

• Mix Of Accounts 10%

• Inquiries 10%

PAYMENT HISTORY – 35%

Payment history is based on paying bills as agreed and on time. The majority of the payment history is based on the most recent six months and the highest weight is on the highest pay history. For example, a mortgage loan would be rated first and then the next biggest payment, whether it is an auto loan or credit card with a high payment, would rate next.

• Bills Paid As Agreed

• Most Recent 6 Months

• Highest Weight On Highest Pay History
– Mortgage
– Biggest Payment

BALANCES CARRIED – 30%

Balances carried is rated based on the balance to limit ratio. Being that this component makes up 30% of the credit score, it is best to keep the balance to limit ratio low. Let’s take a look at an example:

Let’s say a borrower has two credit card accounts, one Visa with Citibank and one Visa with Bank of America, and both accounts have credit limits of $10,000 but, one is maxed out and the other has a zero balance.

If the credit accounts are left as is, it will result in a lower credit score because balance to credit limit ratio is 100%.

On the other hand, if the borrower spread the balance between the two accounts and owed $5,000 on each, the balance to credit limit ratio would only be 50% resulting in a positive affect to the credit score and would create a higher credit score.

It is important to note, mortgage and / or installment loans do not require the same approach as they have less of an impact with the balances carried component.

• Keep Balances As Low As Possible

• Outstanding Balance Versus Available Credit Affects Credit Score

• Leave Credit Card Balance As Is = Lower Credit Score

• Spread Balance Between Cards ($5,000 each) = Higher Credit Score

• Mortgage / Installment Less Of Factor

CREDIT HISTORY – 15%

Credit history simply means the longer the account has been open the higher the credit score. However, to achieve the higher credit score the accounts need to be paid as agreed.

Additionally, many people have been advised to close accounts that they never use. Not the case! This can actually have a negative impact on the credit score. Never close old credit accounts, especially if the accounts have a long history.

• Longer Credit History = Higher Credit Score

• Long Credit History Paid As Agreed / Positive Impact To Credit Score

• Never Close Credit Accounts -Especially If Long History/Negative Impact To Credit Score

MIX OF ACCOUNTS – 10%

Mix of accounts. The ideal credit score is made up of both installment and revolving accounts and looks like this:

-Mortgage Loan
-Auto Loan
-3-5 Credit Cards (Or More)

Additionally, when obtaining an Equity Line of Credit apply for a loan amount greater than $40,000. If the HELOC is greater than $40K, it will fall into the mortgage category. If the HELOC is equal to or less then $40K, it will be classified as a revolving account. Max out the HELOC and it will have a negative impact on your credit score.

• Ideal To Have Installment & Revolving Accounts

• Mortgage Loan

• Auto Loan

• 3 - 5 Credit Cards (More is OK too)

• HELOC Should Be Greater Than $40K Or Will Report As Revolving Account vs Mortgage

INQUIRIES - 10%

Inquires have several factors to consider. First, if shopping around for a mortgage or a car, borrowers have forty-five days to complete their shopping spree. If all credit reports are pulled within a forty-five day period, it will only count as one inquiry. For example, if a borrower applies with XYZ Mortgage Company and decides to switch to another mortgage company both inquiries will only count as one as long as the second mortgage company pulls the credit report within 45 days.

However, if the borrower is shopping for both a mortgage and an auto, one inquiry will count for each.

Each inquiry made averages about five points. After ten inquires per year, inquires will no longer affect the score.

• Shopping Around?

• Each Inquiry Averages 5 Points

• Only First 10 Inquiries Count Each Year

• After 10, Will Not Affect Credit Score

INQUIRIES THAT DO NOT HURT THE SCORE

Several types of inquiries do not affect the credit score at all:

• Job Related

• Insurance / Utilities

• Account Review

• Personal (http://www.annualcreditreport.com/) and obtain free credit report)

• Promotional (pre-approved offers in the mail)

BLEMISHED CREDIT CAN BE COSTLY

Blemished credit can be very costly and can result in higher interest rates on mortgage loans, auto loans, credit cards, and insurance premiums. By taking steps to improve your credit score, you could save hundreds even thousands of dollars over the term of a loan.

• Low Credit Score = Higher Interest Rate

– Mortgage Loans

– Credit Cards

– Auto Loans

– Insurance Premiums

STEPS TO TAKE TO INCREASE CREDIT SCORE 100 POINTS

Here are some simple steps to raise your credit score 100 points in 45 days:

• Pay Past Due Accounts

• Get Rid Of Late Payments

• Have Credit Limits Increased

• Do Not Close Old Accounts – Keep Active

PAY PAST DUE ACCOUNTS

Pay all accounts that show a past due balance on your credit report. Past due accounts do not necessarily mean 30 days late, past due accounts can be 1 day late and show as past due on a credit report. This can severely hurt a credit score. Pay all past due accounts as quickly as possible to increase the credit score.

However, past due accounts do not include judgments and collections. It is best not to pay judgments or collections when applying for a mortgage. Wait until the close of escrow, if possible, and pay them at closing. Paying judgments or collections could create a negative impact on the credit score as the “recent activity” date will update if the account is paid and the collection will appear to be more recent than it may have been which will cause a negative impact with the credit score.

• Pay All Accounts That Are Past Due

• Past Due Accounts Can = 1 Day Late

• Severely Hurt Credit Score

• Past Due Accounts Do Not Include:
– Judgements
– Collection Accounts

HAVE LATE PAYMENTS REMOVED

Have late payments removed by contacting creditors and requesting to have any late payments removed. If your first attempt is not successful, try again and work your way up the ladder to a manager. Be persistent, as each time you phone a new representative will answer the phone.

If you are successful and the creditor agrees to remove the late, be sure to request a letter. The letter needs to be on the company letterhead of the creditor, needs to be signed by an employee and the letter must document your name, address, account number, and the specific late payment or late payments that should be removed.

Additionally, be sure to obtain the name of the representative that you spoke with as well as a contact number and extension, just in case you do not receive the letter and need to follow-up.

• Phone Creditor And Request Late Payments Be Removed

• Be Persistent – Work Your Way Up The Ladder

• Always Get A Letter That Documents:
– Name / Address / Account Number
– Specific Late To Be Removed
– On Company Letterhead / Signed By Employee

INCREASE CREDIT LIMITS

Increasing your credit limits can increase your credit score. Every six months or so call each creditor and request that each increase your credit limit. Be sure to request that the increase be made based on your great credit history. If the creditor insists that a credit report must be pulled, think twice before you agree as this will count as an inquiry and will have a negative impact on your credit report.

• Every Six Months Request An Increase To Credit Limit On Credit Accounts

• Have Creditor Base Increase On Credit History

• If Creditor Must Pull Credit, Do Not Continue; Will Lower Credit Score

DO NOT CLOSE ACCOUNTS

Do not close accounts even if you have heard that old accounts that you no longer use should be closed. Keep accounts open and use accounts that have become inactive periodically. However, if you charge on the account be sure and pay the balance in full as soon as the bill arrives. Purchasing a tank of gas and paying it off will activate inactive accounts and report them current and in good standing. Closing accounts can actually lower your credit score, especially if the account has a long credit history

• Keep All Accounts Open

• Use Old Accounts Periodically – Charge Small Amount - Pay off Immediately

• Closing Accounts With A Long Credit History Will Hurt Credit Score

SUMMARY

To achieve a high credit score be sure and do the following:

Borrow money when you do not need it, when you do need money creditors may not give it to you.

Keep the balance to limit ratio low; do not max out credit cards. If you have to use credit cards, be sure to spread it over several accounts.

For a quick boost to your credit score, when a creditor removes a late and provides a letter, request a credit rescore. For a fee, in just a few days, your credit score will increase and this could help you obtain a better interest rate.

Never payoff a judgment or collection when applying for a mortgage loan. Try to negotiate that the account will be paid in escrow.

Increasing a credit score by just 10 points will save you $100,000 in interest on a $500,000 mortgage over the 30-year term.

• Borrow When You Do Not Need It.

• Keep Balance To Limit Ratio Low

• When Creditor Removes Late And Provides Letter – Use Credit Rescore

• Never Payoff A Collection / Judgment When Applying For A Mortgage Loan

• Increasing Credit Score By 10 Points = Interest Savings of $100,000

Over 30 Years ($500K Mortgage Loan)

Overall, as you can see, it pays to invest the time to clear up the blemishes on your credit report. If you would like more detailed information on how to improve your credit score and save money, please email or call and we’ll be glad to get you more helpful information!

Jason Thompson & Chris DeMuth
Mortgage Professionals
Louisville Mortgage Leader
(502) 774-0117 or (502) 777-6267
NMLS#:196475 & NMLS#:148312

LouMortgageLeadr@aol.com

Should I Refinance My Home?

2009-10-26T15:35:00.007-04:00

October 26, 2009
Louisville, KY

This is the very same question several people have asked me this week. For some, it just wasn't the right time. For others though, it made perfect sense and once they saw the monthly savings, they wandered why they didn't act sooner!

Interest rates are obviously at historic lows right now. It is a great time for those who are purchasing, as well as for those who wish to refinance their homes here in Louisville, KY. Refinancing can save you a lot of money. Read below and find out if it is right for you and exactly how much you can save each month.

What Is Refinancing?

Refinancing gives you the chance to replace your current mortgage with a new loan having a more favorable rate and term that you can afford to manage. The new loan is offered against the same property as the collateral and may or may not exceed the current loan balance. The new loan funds are used to pay down the current mortgage while any remaining cash can be used to your best advantage.

How a Mortgage Refinance Works

This process will vary slightly from one homeowner to the next and from state to state, based on many factors. But generally speaking, this is how refinancing works for most of us here in Louisville, KY.

Step 1 - Determine Your Home’s Value
Step 2 - Determine Your Home's Equity
Step 3 - Check Your Credit Report and Score
Step 4 - Find Out if Refinancing Makes Sense
Step 5 - Get Refinancing Quote from Lender

6 Reasons Why You Should Refinance

First of all, I should point out that I’m not telling you to refinance your mortgage loan. That’s your decision. The point is that, by the time you finish reading this article, you may find that refinancing is a bad idea for you right now. Or you might find that it makes perfect sense. Either way, you’ll come to this realization on your own.

If you're thinking "Should I refinance my house?", check out the 6 reasons as to why you may make such a decision.

You want to save more:
Your monthly payments will be reduced if you get a low rate or when your loan term is extended. Keep in mind with an extended term, your monthly savings will increase but you'll be paying more in total interest for the life of the loan.

You want to pay down your mortgage quickly:
You can shorten the length of your mortgage by reducing the loan term. Monthly payments will no doubt go up, but you will be able to save more in the overall interest payment. Moreover, you'll be debt free in a shorter time.

You need extra cash to pay off credit cards:
If you have enough home equity, you can borrow more than the current loan balance. With the extra cash, you can pay off high interest debts such as credit card balances or installment loans. You gain out of it as the interest on such debt is not deductible unlike mortgage interest.

You wish to consolidate 2 loans into one:
If there's enough equity, you can consolidate first and second mortgages and refinance into a single first mortgage. The monthly payment on the new loan is likely to be lower than the combined payments on the first loan and the second mortgage.

You want to convert an Adjustable Rate Mortgage (ARM) into a Fixed Rate Mortgage (FRM):
This allows you to lock in at a low rate. You can thus repay the loan with stable monthly payments rather than variable payments over the loan term.

You want to get rid off PMI:
If your current loan balance is below 80% of the new appraised home value, you can go for a home refinance and stop paying the PMI (Private Mortgage Insurance).

How Much Can I Save By Refinancing My Loan?

The exact type of assistance and monthly savings obviously depends on the individual and many factors.

Is refinancing right for you?

Within 24 hours I can notify you by telephone or email if refinancing is right for you. I will present the best options available. No hassle. No obligation.

If you've been hesitant because you felt uncertain about the process of refinancing, there is no need to wait any longer. I will assist you and help make this as easy as possible.

Just click here and fill out a
Free No-Obligation Mortgage Refinance Quote.

I look forward to helping you soon!

Sincerely,

Jason Thompson
Mortgage Professional
Louisville Mortgage Leader
(502) 774-0117
LouMortgageLeadr@aol.com

FHA Condo Approval Process- Effective 10-1-09

2009-10-22T15:48:00.001-04:00

Newsletter October 22, 2009

Re: Mortgagee Letter 2009-19

FHA issued the above Mortgagee letter and it's a doosie....(technical mortgage term for 'you know what' hitting a fan.)

Here it is in a nutshell:

This new guidance for the condo project approval is effective for all case numbers assigned on or after Oct 1 2009. So if a case number was ordered on a property before Oct 1 2009 it can use the old condo approval and guidance, including doing a spot approval.

Effective for case numbers assigned on or after Oct 1 2009:

The spot approval process for condo projects is eliminated.
All current condo project approvals will be invalid (w/exception of projects approved on or after Oct 1 2008) and projects must be re-approved under the new options available. Going forward, ALL projects will require recertification every two (2) years.

Yes… it's as ugly as it sounds. As of October 1 the slate was wiped clean and the only projects left on the FHA approved list will be the ones approved on or after Oct 1 2008, which won’t be many. (by the way...this is an IMPORTANT detail that is not disclosed in the Mortgagee Letter but was explained by HUD personnel in a conference call.) Once a project gets on the approved list, it will require recertification every two years after that. There will be no more continuous approvals.

HUD will accept approval packages for review from

Lenders (or)
Builders/Developers

Getting projects back on the approved list will be a long and slow process. AND until a project is approved, FHA financing is not an option.

The approval processing options apply to projects that are

Proposed/Under Construction
Existing Construction
Conversions

Projects of four or more units will have no more than 30% of total units insured by FHA

This is where you will need to do your homework- If your project is currently already over the allowed FHA loan concentration (> 30%), an approval request is futile.

Condo Conversions

Projects undergoing remodeling or rehab must be 100% complete, including common areas, before FHA will endorse. Escrow provisions will be permitted for weather related delays on common areas only.

New Construction

New Construction condos will no longer require an Early Start Letter or a 10 year warranty plan where a building permit and certificate of occupancy are issued by a local jurisdiction that performs a minimum of three inspections (typically footing, framing and final).

Going Forward

Going forward, approvals will expire two years from the date it was placed on the approved list
Project will require recertification by a lender

Lender Will Recertify and Research

Compliance with owner-occupancy requirements
New unacceptable risk conditions
Pending special assessments
Pending legal action
Hazard and liability insurance and flood insurance if applicable

I know our world has been turned upside down because of all of this. It seems like all we do is talk about and deliver bad news. A lot of this is clear as mud right now and it will take a little bit of time before we can do FHA loans on condos, but at some point we will start doing them again once we can help you get your projects approved.

Contact us for the new Project Eligibility Requirements and if you have questions about your particular condo project.

We would love to be of service to you and help expedite the approval process.

Jason Thompson & Chris DeMuth
Mortgage Professionals
Louisville Mortgage Leader
(502) 774-0117 or (502) 777-6267
NMLS#:196475 & NMLS#:148312

LouMortgageLeadr@aol.com

Louisville Metro Down Payment Assistance

2009-10-19T14:03:00.001-04:00

Newsletter Oct 13, 2009

DOWN PAYMENT ASSISTANCE

I am sure by now you know about the Down Payment Assistance Program offered by the
Louisville Metro Department of Housing and Family Services, right?

If you haven’t or don’t know enough about it, YOU SHOULD!

The $8,000 Federal Tax Credit is set to expire in 42 days and we
need something to take its place. Here are some of the program highlights:

->The program offers Metro Wide assistance, and homebuyers may qualify for a forgivable mortgage over a five (5) year period of 10% of the purchase price of the home to a maximum of
$10,000!

->In the “Target Area” neighborhoods homebuyers may qualify for a forgivable mortgage over a ten (10) year period of 20% of the purchase price of the home to a maximum of $20,000!

->The Department has also allocated closing cost assistance in the amount of up to $2,000!

->Potential homebuyers must be a 1st time homebuyer and have not owned a home within the last 3 years.

->Applicants can purchase an existing or a newly constructed home in the Louisville Metro area.

->The program is based on a first come first serve basis.

->Applications will be accepted year round based on available funds.

->As of today, there are plenty of funds available and there is currently NO waiting list.

Think about what will happen when the $8,000 federal tax credit expires on November 30th.

We have all of the information and guidelines, as well as the application packets, ready for your Buyer to begin the process with Louisville Metro Department of Housing and Family Services!

We specialize in Down Payment Assistance Programs like this one as well as others offered with KHC (Kentucky Housing Corporation).

We can find the right program for you and your Buyer.

Email for info now!

Jason Thompson
502-774-0117
NMLS #196475

Chris DeMuth
502-777-6267
NMLS# 148312

Identity Theft- Fastest Growing Crime in America

2009-10-19T09:22:00.001-04:00

Newsletter Sep. 29, 2009

Jason Thompson
Mortgage Professional
NMLS#: 196475

IDENTITY THEFT – FASTEST GROWING CRIME IN AMERICA

Good Afternoon

In today’s newsletter we will discuss and hopefully arm you, your friends, family and neighbors against identity theft.

Identity theft is the fastest growing crime in America. It may have already happened to you personally or someone you know. It is estimated that it will affect almost 10 million people this year and cost consumers several billion dollars.

Identity theft occurs when someone uses your personal information, like your name, social security number, or credit card number, without your permission, to commit fraud or other crimes.

Let’s get educated…..

A) WHY THE INCREASE IN CRIME?
*Relatively low-risk crime
*Potentially high payoff
*Easy to pull off
*Enforcement of law is inconsistent
*70% of theft is from co-workers/employees
*Wasn’t declared crime by Congress until 1998
*Cases usually too small for federal prosecution

B) HOW DOES IT HAPPEN?
*Steal mail
*Steal wallet or purse
*Phishing- sending fake emails (ex. Paypal and Ebay fakes)
*Shoulder surfing- ATM, grocery store checkout spying
*Lying on the phone- asking you to update account info
*Laptops and Wi-Fi internet access
*Access cell phones w/stored personal account information
*Dumpster rummaging- go through trash for information
*Thieves looking for social security numbers, date of birth, etc.

C) THEY STOLE IT, NOW WHAT?
*They open new bank and credit accounts in your name
*They have statements sent to their address
*They don’t make payments
*Authorize electronic transfers- draining your accounts
*Write bad checks
*Take out a loan in your name
*Rent a house in your name
*Driver’s license- your information, their picture
*Give police your information in an arrest
*They don’t show for court- warrant for YOUR arrest!

D) YOU FIND OUT WHEN?
*Start receiving statements in the mail
*Unusual spending pattern- amounts and locations
*Calls from creditors- past due bills
*Apply for car loan/mortgage and issues arise
*Your checks bounce
*Debit and credit cards not accepted- over limit

E) ACT IMMEDIATELY!
*Contact local law enforcement
*File written report and retain a copy
*Contact all three credit bureaus:
-Equifax: (800) 525-6285
-Experian: (888) 397-3742
-Trans Union: (800) 680-7289
*Contact all known creditors
*Contact all banks with accounts
*Immediately stop payment on ALL checks
*Close all accounts tampered with
*File a complaint with the FTC: (877) ID-THEFT
*Keep good records and log all communications

F) HOW CAN I PREVENT IT?
*Adopt a “need to know” approach
*Pay attention to who’s watching or listening
*Secure information on personal computer
*Use obscure passwords for all accounts
*Clear “cookies” on computer
*Don’t raise “red flag” signaling outgoing mail
*Have mail held when you’re away
*Shred mail before discarding
*Don’t carry social security cards in wallet
*Don’t carry unneeded credit cards
*Password lock your cell phone
*Review financial statements regularly
*Get periodic copies of credit report

As you can see, identity theft is serious and can greatly affect a person’s life. While some victims can resolve their problems quickly, others spend hundreds or thousands of dollars and many days repairing damage to their good name and credit record.
Some consumers victimized by identity theft may lose out on job opportunities, or be denied loans for education, housing or cars because of negative information on their credit reports. In rare cases, they may even be arrested for crimes they did not commit.
Armed with the knowledge of how to protect yourself and take action, you can make identity thieves' jobs much more difficult. You can also help fight identity theft by educating your friends, family, and members of your community so feel free to pass this newsletter on to them.

Have a great week and start taking the necessary steps today to guard against identity theft. Don’t let someone else steal your life!

Additional Resources and Links:
Equifax
Experian
Trans Union
FTC- File Complaint
Free Credit Report
More on ID Theft
Apply for a Home Loan or Refinance

This newsletter is for informational and educational purposes only. Information, views or opinions expressed in the newsletter originate
from many different sources and contributors. To subscribe or unsubscribe to newsletter,mailto:LouMortgageLeadr@aol.com
All rights reserved. Copyright 2009 Jason Thompson.