There are five strategies that can help home owners, buyers and sellers navigate today’s turbulent housing and mortgage markets.
1. Understand and Utilize the New Tax Credits. Many home owners are not aware that the latest government stimulus package gives them a special tax credit of up to $1,500 for making certain home improvements. If you are buying a primary residence and have not owned a primary residence in the last three years, you may qualify for the $8,000 first time homebuyer tax credit. You cannot use this money as part of the down payments but it can be claimed as a tax credit for your 2008 tax return even if you purchase the home in 2009. You just need to file an amended 2008 return and the IRS will send you a check for $8,000.
2. Consider Paying Points for Your Mortgage. Mortgage points are upfront fees that you pay to get a lower mortgage interest rate. One point equals 1% of the loan amount. In the past it almost never made sense to pay points. But with the new mortgage securitization process, Wall street investors are demanding higher upfront fees for borrowers with credit scores below 740 and lenders don’t have as much flexibility as they used to have when pricing loans. This means the interest rate savings can be significant when upfront points are paid.
If you are buying a home consider negotiating for the seller to pay points. In addition to the significant interest savings you will receive a tax deduction this year for points the seller paid on your behalf. If you are selling a home consider offering to pay points as part of your marketing efforts. This will make your home more affordable and make it stand out in the marketplace.
3. Carefully Structure Your Real Estate Short Sale Transaction. A real estate short sale occurs when an owner sells their property for less then is owed on the mortgage and the lender gives permission to do this by forgiving the difference and/or releasing the mortgage lien on the property.
If you are selling your home as a short sale make sure to negotiate for a release and full mortgage satisfaction from your lender. Otherwise lenders may wait a year or two for your financial situation to improve and then file a deficiency judgement against you to try to recover the money you still owe them. The only way to advoid this risk is to have the lender release the mortgage lien and agree in writing to a full satisfaction of the mortgage.
If you are buying a home in a short sale, make sure the deal is closable. Approximately 30% of short sales are not closeable because the lender will not agree to it. One way to avoid this problem is to have your Realtor verify the status of the sellers hardship package with the lender.
4. Utilize the Special Options Available to People 62 or Older. If you are 62 or older, you can utilize a reverse mortgage to buy a new home without making any mortgage payments. This might be helpful if you are considering a move and are worried about trying to sell your home into a down market. Reverse mortgages can also be used to supplement your income that may have declined due to unfavorable economic or financial market conditions.
5. Carefully Interview Your Mortgage Professional. It is very important that you work with a Certified Mortgage Planning Specilist who has the training and experience to guide you through the home buying or refinancing process.
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