Campbell & West San Jose Real Estate, brought to you by the Zanger Team at Referral Realty

The single largest provision in the $15.1 billion package of housing tax incentives in recently enacted Housing Assistance Tax Act of 2008 (the “Housing Act”) is a measure allowing individuals buying their first home to take a tax credit of up to $75,000 of the purchase price. Qualified homebuyers can subtract the credit amount from their federal income tax when they buy a home and even get a refund if the credit exceeds the tax. However, they are then required to pay the credit back over 15 years. The result is that the credit resembles an interest-free loan that must be repaid to the government. Here are the details of the new credit.

• The home must be in the U.S. and the taxpayer’s principle residence. Tax payer and spouse, if married, must not have owned another principle residence within the previous 3-year period.
• The home must have been purchased from April 9, 2008 through June 30, 2009. Purchases from related persons, acquisition by gift, or inheritance do not qualify, nor do houses constructed by taxpayers.
• A special rule allows taxpayers who purchase a principle residence in the first 6 months of 2009 to treat the purchase as if made on December 31, 2008, allowing a taxpayer to claim the credit for 2008 rather than 2009.
• The credit is equal to 10% of the price for the home, to a maximum credit applies to both individuals and married couples filling a joint return. A married individual filling separately can claim a maximum credit of $3, 750.
• The credit is phased out for individual taxpayers with modified adjusted gross income (AGI) between $75,000 and $95,000 ($150,000 & $17,000 for joint filers) the year of purchase. Taxpayers with modified AGI over $95,000 ($170,000 joint) cannot claim the credit.
• The credit is refundable, that is, households with income too low to owe income tax can benefit from it.
• In the second year after purchase, taxpayers who took the credit must start paying it back in equal installments over 15 years, at no interest. (For example, a first-time homebuyer purchases a home for $100,000 this coming December and claims $75,000 credit on his 2008 tax return. He would be required to pay back $500 [1/15 of the credit] on his 2010 tax return and for the subsequent 14 years, through 2024.)
• If the taxpayer sells the house, or the home ceases to be the primary residence, before total repayment of the credit, any remaining credit is due on the tax return for the year in which the home is sold or ceases to be primary residence. But, if the home is sold at a loss to an unrelated person the remaining credit is forgiven to the extent of the loss.
• No credit is allowed if: the taxpayer was ever entitled to a D.C. homebuyer credit, the home purchase was financed through tax exempt mortgage revenue bonds, the taxpayer is a non-resident alien, or the taxpayer disposes of the residence (or it ceases to be the principle residence) in the year of purchase.

~Realty Times

An interest rate lock is always a good idea in any market. But it becomes a better idea when it’s crucial to look in an interest rate and other loan costs at a level you can afford.

A changing market-especially when the change is for the worst-is one of those crucial times. During the first half of 2008, nearly a fully percentage point separated the high of 6.45 percent in recent weeks and the low of 5.48 percent in January, according to Freddie Mac.

Get off the interest rate elevator ride with an interest rate lock. A traditional rate lock is a lender’s guarantee that your mortgage will come with a specific interest rate, points, other costs and terms. Most locks are designed to protect home buyers from rising rates, but those refinancing can also benefit.

A rate lock’s terms include a specified period for the lock. If you fail to complete your home purchase or refinance before the lock runs our, and interest rates rise, brace yourself for high costs. Those higher costs could come in the form of more up front cash to keep monthly payments in line with what you can afford or what your lender will allow.

With a refinance, if your home ownership isn’t at stake, you have more wiggle room and can wait out the market, take less cash out, or otherwise cope. Of course, those refinancing to stave off foreclosure could also find higher rates without a rate lock to be just as problematic as for home owners.

In and up-and-down interest rate market, falling interest rates are another strong reason for a rate lock. If interest rates fall during that lock period, you can’t take advantage of the lower rate unless you rewrite the lock at additional cost or include a “float down” provision in the original lock.

The “float down” option grants you a lower rate if rates fall within a given window of time. Again, unless specified otherwise, float downs stick you with the higher rate if rates rise during the lock period.

All these rate lock variations underscore the importance of being sure the language of the lock contract gives you the options you need for a sufficient term.

Get it all in writing. It’s difficult to enforce a verbal agreement. The contact should lock in the interest rate, points, and other costs, where possible. The agreement should include your name, the lock’s effective date, lock cost, what terms are locked, the lock’s expiration date and time, and any post-lock options

Lock as soon as you see the desired rate of “on application”-when you first apply for the mortgage-so that your rate is locked as you spend time getting the application approved. That’s particularly important if you barely qualify at today’s rates, and an increase would make buying unaffordable.

Of course, you can choose to set the lock on approval, especially in markets where loan applications are prolonged due to heavy demand for housing. In any event, the lock period should be long enough to allow for settlement, contingencies, and other potential delays. Locks average 30 days, but can range from 15 to 60 days.

Also consider:

• Locks cost money. Shop around for both the terms of the lock contract and cost, which varies from lender to lender. Some lenders want up-front lock fees. Others take them at settlement. There are non-refundable fees, flat fees, and fees based on a percentage of the mortgage, among the variations.
• Before choosing a lock-in period, determine the average time for loan processing. Ask your lender to estimate the time necessary to process your loan and verify the information with other realty professionals. If the loan doesn’t close on time, lenders can extend your lock for free, charge more for the extension or charge an additional percentage of the loan amount.
• Once you lock-in a rate, if you haven’t already, quickly submit the application and other required documents. You should have previously checked your credit report, prepared income, job, debt, asset, and other documents to back up your application information.
• If you have a floater, it’s your job to keep an eye on the market.

~Realty Times

While real estate markets are cyclical, features a potential home buyer looks for in her home almost always seems to start in the bathroom, according to the National Associate of REALTORS’ (NAR) annual “Cost vs. Value Report,” published each year in conjunction with Remodeling magazine. In fact, in NAR’s 2007 report, it showed an upscale bathroom remodel recouped 93.2 percent of the costs and a bathroom addition, midrange stood at 86.4 percent and an upscale remodel 85.8 percent.

“Knowing what’s in and what’s out in bathroom design is important for homeowners deciding just where to spend their makeover dollars,” Explained celebrity Interior Designer Will Smith. “I suggest they look at four key areas: the mirror, paint, hardware, and lighting. Each can be easily and inexpensively updated to provide a new, modern look for the bathroom.”

Smith, who is known for creating high-end looks for less, shares his tips for making over a bathroom on a budget-without sacrificing style.

Bathroom Mirror

What’s Out: Unframed mirrors are a thing of the past.

What’s In: A frame completes the mirror and gives a bathroom a finished, updated look. A good tip for selecting a frame is to think about what you’d frame a piece of artwork in for the room. The mirror is the focal point in the bathroom and can make a real statement with the right frame.

Paint

What’s Out: Paint is never out. It is a tried and true way to make a big impact with little cost. Colors do change though and you’ll want to stay away from mauves and pinks.

What’s In: Create a spa-like setting with paints in beige and pale tones. Some popular colors are chocolate, aqua, olive, and golds. When choosing color, remember the more contrast, the more “POP.”

Hardware

What’s Out: Mismatched hardware gives the room an uncoordinated feel. Brass finishes also add to a dated look.

What’s In: Choose brushed nickel, pewter, antique, or oil-rubbed bronze finishes that coordinate with the lighting and fixtures, bath bars, knobs, pulls, switches, and receptacle covers. These quick fixes pull the room together with one modern, cohesive, look.

Lighting

What’s Out: Take down that bright Hollywood lighting that casts a harsh light.

What’s In: Go with a fixture that adds beauty and soft lighting with shades or sconces. They can run above your mirror or flank it on each side. And remember, these accent your room’s greatest focal point so be sure to select a style that is right for you and makes a statement in the room.

“You don’t need to do a full scale renovation to get the look of an updated bath,” added Smith. “Some strategic and cost effective changes can go a long way to giving you the look you desire.”

~Realty Times