My New Blog

Summary of interesting events unfolding within the last few days. Tid bits of information for those who do not have the time to read the full stories.

Fed cuts Fed Funds rate and how it translates to us.

Benchmark such as one-year T-Bills or the London interbank offered rate would be lowered causing ARMs rate to be lowered. Borrowers with ARMS and do not plan to move should switch to 30-year mortgages currently at the lowest since summer of 2005. Take this opportunity while it’s here because it may be fleeting. The long-term interest rates which influence 30-year mortgages do not always move in sync with the Fed's actions.

Tax breaks for homeowner.

a) Itemize deductions means mortgage interest can be deducted as long as it exceeds standard deductions of $5,350 for single and $7,850 for head of household and $10,700 for married couples filing jointly.

b) Mortgage insurance (if you pay less than 20% down payment) is deductible until 2009. This deduction is phased out for taxpayers with AGI of more than $100,000 and is eliminated if AGI excess $110,000.

c) Basic maintenance, repair or home improvement costs are not deductible. However, keep tract of these expenses to calculate the property's tax basis.

d) Energy-efficient home improvements. If windows, doors or skylights met the requirements of of the federal Energy star program in 2011, you may be entitled to 10% of the product's costs.

e) Points are generally deductible if it was a first mortgage on the property. In the case of a refinance of a loan, all or some of the point charges may be deductible. However, check with your tax preparer first.

f) Property taxes is fully deductible as long as it is based on the assessed value of your property. The amount is usually reported on 1098 form.

Help from the Seattle mayor.

Seattle mayor Greg Nickels announced that the city would provide $200,000 through nonprofit Solid Ground and the Urban League to 40 families of up to $5,000 interest free loan to get them caught up to date with their mortgages. To qualify, households must earn less than 80 percent of median income or up to $48,000 for a family of of two and up to $60,000 for a family four.

How does Short Sales work?

Short sales are deals between borrowers and lenders to sell a house for less than what is owed on the mortgage. Following are some pros and cons.

Pros - Short sales avert a foreclosure that can damage borrower's credit since foreclosure can put borrowers out of the housing market for up to 10 years.

Pros - Lenders prefer it because foreclosure is time consuming and costly.

Cons - Borrower's credit can still be dinged by about 75 to 100 points.

Cons - Interests payments, taxes go uncollected and legal fees need to be paid.

Conditions: Borrower must be unable to pay existing mortgage and the property must be worth less than what they bought it for.