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Financial Reform and its Future Impact on U.S. Homeowners and Buyers

by the zac team at Ponce Realty

Hello neighbors,

It seems that financial reform may have an impact on both home buyers and owners alike in the future. With the recent passing of the massive reform law, take a look at two main components that have potential to make a major impact.

Harder to Qualify for a Mortgage:

The new law governs certain guidelines that lenders must follow when making loans. Now that these guidelines are actually written into law, lenders may find it even more difficult to loosen them once the economy and housing market gets back on track. Under the new law, lenders are required to document the borrower's income. However, this new law does not specify the terms under which the loan can be made. With that being said, lenders may be persuaded to tighten their guidelines to stay within the safe zone of the new law.

Higher Mortgage Rates:

There are a couple of sections within the new law that will increase future mortgage rates. The new law will require lenders to maintain a 5% stake in loans they originate unless those loans meet a particular criteria. With that being said, lenders will not be able to remove some of the higher risk affiliated with these loans. In addition, this will cause the interest rates on these types of loans to increase.

Despite these factors, there are positive attributes to the bill such as consumer protections relating to pre-payment penalties. In addition, with mortgage rates being at record lows, buyers should take advantage now and get qualified for a mortgage opposed to waiting and being affected by the above mentioned components of the new law in the future.

3 More Housing Tax Laws Homeowners Need to be Aware Of

by the zac team @ RE/MAX Greater Atlanta

Greetings neighbors,

As mentioned in one of our previous post "4 Good Tax Laws for Homeowners...", homeowners do have a few things to look forward to in today's improving market. Here are 3 other tax laws many home owners should be aware of.

Surviving Spouse Home Sale Tax Exclusion - Did you know that a widow or widower can receive some tax relief in relation to the sale of the family home due to a provision in the Mortgage Forgiveness Debt Relief Act of 2007?

Typically a seller can exclude up to $250,00 in profit from the primary residence. If sold by a married couple filing a joint return, the tax free amount is $500,000. Previously surviving spouses could take advantage of the full sale exclusion of $500,000 only if the sale occurred during the same year of the spouse's death. If the primary home was sold after the year of death, the surviving spouse was entitled to only $250,000 of the exclusion amount.

However, now the surviving spouse can exclude up to the full amount of $500,000 if the home is sold within two years of the spouse's date of death. In addition, the surviving spouse will still need to meet the regular ownership and use requirements which are the surviving spouse must have utilized the property as their primary residence for two of the five years.

Note: The Surviving Spouse Home Sale Tax Exclusion is currently a permanent law.

Energy - Saving Home Improvements - These particular tax breaks started to appear in the 2005 energy bill and in 2009, those tax benefits were expanded. If you have made qualifying improvements to your home between Feb. 17, 2009 and the end of this year, you are eligible to claim a tax credit up to 30% of the cost of products. The maximum credit cap is $1,500 per homeowner for all home improvements combined. If a homeowner uses more extravagant energy saving improvements such as fuel cells or solar heating equipment they may receive an even larger tax savings.

Second Home Sale Limits - Beginning early 2009, tax laws regarding second home sales were changed to assist in paying for the new housing related tax breaks.

Before, those who owned more than one home could utilize one of the homes as a primary residence for two years, then sell the home, and keep any gains tax free up to $250,000 if single or $500,000 if owned by a married couple filing joint returns. Now, it is taken into consideration the total amount of time the property was used as an investment property or second home. Now, owners will owe tax on part of the money gained based on the length of time the home was used as a second home opposed to a primary home.

Note: This is currently a permanent tax law change.

4 Good Tax Laws for Home Owners To Be Aware Of

by the zac team @ RE/MAX Greater Atlanta

Hello neighbors,

Although the economy and housing market had a few hurdles, remember there is still good news for U.S. home owners. With the creation of a variety of tax laws by U.S. lawmakers, home owners are finally filling some relief. Check out 4 tax laws that all homeowners should know.

Cancellation of debt income - 2007's Mortgage Forgiveness Debt Relief Act was one of the first housing related tax relief measures that was implemented. This act enables taxpayers to omit debt forgiven on a principal residence if foreclosure occurs or if the mortgage is reconstructed. Prior to this act, homeowners were required to pay taxes on the amount of forgiven mortgage debt. In the case of foreclosures, debt was canceled.

First Home Buyer Credit - This popular credit was created in 2008 and has encountered many modifications since. This tax credit law allows first time qualified home buyers to receive up to $8000 and $6500 for non first time buyers.

PMI Deduction - Normally, if a buyer gives a down payment of less than 20 percent, the lender will require private mortgage insurance (PMI) which will protect them if the buyer defaults. In addition, premiums must be paid which usually becomes apart of the monthly mortgage payment. However, the premium payments have been deductable as an itemized expense on certain home loans issued since 2007.

Note: If your adjusted gross income is $100,000 or more, or $50,000 or more if married and filing separately, your deducted PMI amount is limited. If you adjusted gross income is more than $109,000 or $54,500 if married and filing separately you will not get a deduction.

Property Tax Addition to Standard Deduction - This is another well known tax break on homes which has been expanded. Before, real estate taxes were popular tax deductions for those who homeowners who itemized. These payments could be used to increase tax payer's deduction totals.

Now, those homeowners who do not itemize can claim a portion of their real estate tax payments as part of the standard deduction. An additional $500 for single homeowners and an additional $1000 for joint filers can be added to the standard deduction amount of the taxpayer's.

 

 

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Photo of Zac Pasmanick  Real Estate
Zac Pasmanick
RE/MAX Metro Atlanta Cityside
1189 S. Ponce de Leon Avenue
Atlanta GA 30306
Office: 404-564-7272

 

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