Archive for January, 2013

Most taxpayers can begin filing their federal income tax returns, and many can file for free through the agency’s Free File program.

Have you filed your 2012 tax return yet? Millions already have filed today.


Like racers in the starting blocks, these taxpayers have been poised to send their returns to the Internal Revenue Service for weeks, but had to wait.


Because Congress waited until Jan. 1 to approve the American Tax Relief Act, which includes many provisions affecting 2012 tax returns, the IRS needed time to get forms and instructions updated and its computers reprogrammed.


The IRS is ready to take returns from most (but not all) taxpayers today. It’s now accepting returns that are filed the old-fashioned way, filled out paper and snail-mailed in, as well as electronic filings.


And the tax agency’s Free File option also is open for business.


Free File 2013


Free File first appeared on the tax-filing scene 10 years ago. Now it is old hat.


Sure, there are some tweaks each year. But basically, the filing routine is the same. A group of commercial tax preparation software companies, known as the Free File Alliance, agrees to make a version of their software available to eligible taxpayers via the IRS Free File site.

You can use the IRS Free File program to prepare and file your taxes this year at no cost (just in case you thought the name Free File was just a catchy alliterative title) if your adjusted gross income is $57,000 or less. This income threshold applies to all filing statuses.


And you have 15 tax software companies from which to choose. Or you can use the Help Me Find a Free File Company IRS search tool to determine which one best fits your filing needs.


Fillable forms for free


If you make too much money to qualify for Free File this year, the IRS is once again offering Free Fillable Forms.


These are online versions of the most commonly used IRS tax forms. Instead of buying and loading tax software onto your personal computer, you simply open up the forms you need, enter your tax information and e-file the documents at no charge.


But since it’s just forms, not software, you get only basic calculations of the data you enter on the forms. You must know what goes where. And you must transfer any amounts to other forms as needed.


Still, it is free.


So if your return isn’t too complicated, and you’re comfortable filling out the forms, they may be just the ticket this tax season.


Happy filing!


Compliments of: Martha Small | Austin Portfolio Real Estate | 512.587.0308

Original Article by: MSN Money partner

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After years of declining return on investment, remodeling has turned a corner this year. The best return on the money is from economical replacement jobs and lower-cost room upgrades.

Homeowners are getting a better return on their remodeling dollar now than in the past two to three years. The value recouped when a home sells improved this year for each of 35 remodeling projects studied by Remodeling Magazine’s 2013 Cost vs. Value report.

Rising home prices get the credit. Owners around the country are recouping 61% of remodeling costs when they sell. The survey finds that smaller projects and practical replacement jobs lead the list.

The last study, in fall 2011, showed returns falling across the board. Return on remodeling investment had been dropping since 2005. But the payback of 58 cents on the dollar in 2011-2012 was the worst since the survey was begun in 2003.

Encouraging signs
The new data are a sign that the housing recovery may finally be on solid footing, Remodeling Magazine editor Sal Alfano says. (Bing: What are the experts saying about real estate in 2013?)

“We thought it would happen last year,” he says. “We’re still kind of waiting to see if this is the real thing, but the signs everywhere seem to point in the right direction.”

Return on average remodeling investment by year

Year Cost Recouped at sale Ratio
2013 $42,038 $25,464 60.6%
2011-2012 $44,734 $25,829 57.7%
2010-2011 $45,593 $27,367 60%
2009-2010 $50,908 $32,497 63.8%
2008 $49,866 $33,568 67.3%
2007 $47,739 $33,458 70.1%
2006 $43,209 $32,873 76.1%
2005 $36,849 $31,932 86.7%
2004 $36,274 $29,204 80.5%
2003 $38,286 $31,591 82.5%

Not all remodeling projects pay back equally well. The survey numbers represent average payback for all 35 projects in nine regions around the country. This year’s survey used feedback from about 3,900 real-estate agents who responded regarding how each project would affect a home’s resale value.

The survey also used project-by-project data on material and labor costs in each of the nine regions. A local economy or real-estate market can have a big effect on the projects’ performance in the regions, as you’ll see.

Remodeling has benefits even when the payback ratio is not high, and this survey does not take those into account. Money spent on improvements may reward home sellers with a shorter time on the market, Alfano said in an interview. Remodeling jobs often pay back with deep enjoyment even when they don’t contribute to a family’s bottom line.

The best return
Generally, lower-priced projects are performing best. Here are the top five:

1. Steel replacement entry door. The project with the highest return is a home entry door replacement using a 20-gauge steel door, at an average cost of $1,137 and a return of 86%, on average, around the country. Fiberglass entry door replacements ($2,753, 66%) aren’t as cost-effective.

2. Fiber-cement exterior siding. The second-best job for the money involves replacing old exterior siding with newer fiber-cement siding ($13,083, 79%). Foam-backed vinyl replacement siding costs a little bit more ($13,817) and pays back less (72%).

3. Wood deck. Adding a wood deck ($9,327, 77%) gives great value. A new deck made with composite materials ($15,084, 68%) pays back less because the materials cost a good deal more.

4. Garage-door replacement. Swapping an old garage door with a relatively inexpensive new one ($1,496, 76%) also ranks high. Using a higher-end garage door ($2,720, 75%) for the replacement also performs well, ranking sixth of the 35 projects.

5. Modest kitchen remodel. A minor remodel of a 200-square-foot kitchen ($18,527, 75%) pays back nicely. It involves new, midpriced laminate countertops, new faces for existing cabinets and a new cooktop, wall oven, sink and vinyl flooring.

Replacements make up a great deal of the home-improvement work being done today, Alfano says. Most replacement projects included in the study cost less than $20,000. Four cost less than $5,000. This frugality is a reflection of the continuing pressure from the recession, he says.

Replacements with strong payback include new wood windows ($10,708, 73%) or vinyl windows ($9,770, 71% to $13,055, 71%). A new roof — that costly but necessary project that homeowners dread — gives a relatively low return if you use 25-year, 235-pound fiberglass asphalt shingles ($18,488, 63%). The return on a roof replacement of standing-seam metal ($33,880, 57%) is even worse. (Bing: What is a standing-seam roof?)

Lower-cost exterior improvements perform well for homeowners, “partly because they’re economical but also because they really improve curb appeal,” Alfano says.

The survey doesn’t ask agents why certain projects are valued more or less by their buyers. But Alfano surmises, “If you replace the front door or replace siding or the garage door, prospective buyers get a good first impression. They’re more likely to pay the asking price, or the house is going to sit on the market for a shorter time — that’s what we’re thinking.”

The remodeling industry took a brutal hit in the recession. Tradespeople slashed the price of their labor to put food on their tables. Now, remodelers report that they’re getting more leads for work and are engaged for slightly larger projects.

Until recently, Alfano says, homeowners thinking of remodeling tended to dally, requesting design and planning meetings but holding back when it came to signing on the dotted line. Today, they’re committing more quickly, and more are starting remodeling projects.

Replacement jobs kept the industry going in the recession, Alfano says. Bank loans for larger jobs were — and still are — hard to obtain. But remodelers who specialize in replacements may work closely with finance companies that are willing to lend, though typically at higher interest rates than banks. “They provide you the paper for the project, and most of these projects are under $20,000, so it’s not a huge chunk of change, like a kitchen or bathroom remodel is,” Alfano adds. “A lot of them offer same-as-cash financing so you have a year to pay.”

Cash-out refinancing is picking up, too. “Not like wildfire,” Alfano says, but since low rates have sparked a refi boom, some owners can draw on their equity. Research shows that during the boom, homeowners used nearly 35% of the equity they withdrew to improve their homes, he says.

Remodeling creeps back
In addition to replacements, modest remodeling jobs are enjoying something of a comeback. Besides the downscale kitchen and bath remodels, other projects with good payback include converting an attic to a bedroom ($47,919, 73%) and remodeling a basement ($61,303, 70%).

These are the least expensive ways to add living space to your home, since you stay within the footprint of the house and usually can extend plumbing from nearby. There’s no need to break ground or add a foundation, which add considerably to a project’s cost.

These projects may be growing in popularity because homeowners want to add space to invite elderly parents or adult children to join their household, Alfano says.


Compliments of: Martha Small | Austin Portfolio Real Estate | 512.587.0308

Original Article by: Marilyn Lewis of MSN Real Estate

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When you’re in the market to buy a home, your credit score is very important. Most lenders use this three-digit number (which is created by evaluating factors like how much debt you have, your payment history for things like credit cards and car loans, and the length of your credit history) to determine your credit risk. This number helps lenders predict whether you’ll pay back your loans and if you’ll pay them on time.

Mortgage borrowers with the best credit ratings generally get lower interest rates. Their monthly mortgage payments are also lower, according to myfico.com, the website for the Fair Issac Corp., which created the most-used credit rating, the FICO score. (Your FICO score can range from 300 to 850; the higher your score, the better. Credit scores tend to be better for people who have credit — e.g., have credit card accounts — and pay off their credit on time.)

Generally, consumers with ratings in the mid 700s or higher get the best interest rates. (But this depends on the economic climate — 680 was once considered a good score.)

For example, when we last checked data made available on myfico.com, a person with a better FICO score (760-850) was able to get a monthly mortgage payment for a 30-year fixed mortgage that was about $41 lower than someone who had a credit score of 700-759, according to the website’s calculations. That person with the better FICO score would spend $492 less on mortgage payments over a year’s period than the person with a lower score.

So, if you can increase your credit rating, you could save money over the length of your mortgage. (We all like to save money!) But raising your credit score isn’t easy and takes time. (Like getting into shape, or sticking to a diet.) But if you keep to it and are diligent about it, you can increase your credit rating. Here’s how:

  • Check your credit report

    Keep tabs on your credit report by getting a free report once a year with freecreditreport.com (be careful of other scam sites). Go over it carefully, and make sure there aren’t any errors, such as a payment that was reported late that wasn’t, and mentions of accounts that don’t belong to you. Report any errors on the provided form.

  • Pay bills on time

    Lenders don’t like to see late payments — even paying bills just a few days after the due date can negatively impact your score. Not paying your bills on time will lower your credit rating. Also, the longer you keep paying your bills on time, the better your credit score will be.

  • Reduce credit card debt

    Work to keep the balances low on your credit cards — try to keep them well below your credit limits. Pay off as much credit card debt as you can, paying off the cards that are closest to their credit limits first. (Lenders like to see credit activity, but it doesn’t look good if it appears that you are stretched to your credit limits.)

  • Don’t open/close accounts

    Also, don’t open new cards while trying to increase your rating, but don’t close old accounts, either. (Both could negatively affect your score.) If you are new to credit, rapidly opening new credit accounts could make you look risky and will also lower your credit age. (Lenders prefer people with stable and lengthy credit histories.)

  • Use your old cards

    If you have any credit cards you haven’t used in a while, try using them again. By making charges on the cards that you took out a long time ago, you’re improving the age of your credit history and will look like a more reliable borrower.


Compliments of: Martha Small | Austin Portfolio Real Estate | 512.587.0308

Original article by: Trulia

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Use this checklist from Trulia to make sure that all these needed tasks for your move are completed before the big day:

  • Hire a moving company

    Using recommendations from people you know and organizations like the American Moving and Storage Association (AMSA) and the Better Business Bureau, hire a moving company. Be sure to get competitive bids first. Look to hire a company six to eight weeks before your move.

  • Take inventory

    Make a list of the belongings you plan to move and their worth, to better track them.

  • Get additional insurance, if needed

    Look into how much insurance coverage your mover and your homeowner’s insurance company provide for your belongings during your move, and if need be, purchase additional insurance from your mover or from a third-party insurer.

  • Cut back

    The less stuff you own, the less you’ll have to move. Whittle away at your possessions through garage sales, online selling or by donating items to charity.

  • Get supplies

    Moving requires plenty of boxes, packing tape and protective packaging like bubble wrap or crumpled newspaper. Try to get used boxes and newspapers from friends and family and from local stores, and if you have to, buy fresh supplies. Don’t forget markers and labels to clearly identify what’s in which box.

  • Be organized

    Working several weeks before your move, map out which items will be moved to which room in your new place. Pack items according to in which room they’ll be placed. Pack heavier items first, placing lighter items on top. Pack breakables in their own boxes, clearly noting “fragile” on the box.

    Separate valuable items and important documents (e.g., jewelry, birth certificates, bank statements, etc.) and place in a fire-safe box. If you can, personally move them yourself.

    Pack items you’ll need right away in your new home (e.g., toiletry, medicines and clothing) in a separate box and make sure you can find it easily once you’ve relocated.

  • Stop services

    Set a date to have utilities and other services (cable, magazine subscriptions) terminated at your old place.

  • Start services

    Make preparations so that needed services (phone, cable, utilities, mail service) are up and running when you move into your new home. Register with or locate new doctors, schools, babysitters, etc., in your new location.

  • Notify

    Let the United States Postal Service, friends and family, schools, employer, your bank, your lender, your credit card company and other businesses who serve you know of your change of address.

  • Unpack

    If you have the time, give yourself at least a day or two to unpack and settle in to your new location before diving back into your job and daily routine.


Compliments of: Martha Small | Austin Portfolio Real Estate | 512.587.0308

Original Article by: Trulia

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Renting and thinking about buying? Start with a solid budget plan that includes strong credit and savings.

Living from one paycheck to the next may be the norm for many people. But homebuyers need a better strategy.

“If buying a home is your goal, then it needs to be your priority,” says Tim Kirchner, vice president of MetLife Bank in Irving, Texas. “Most people need to sacrifice a little and stick to a budget in order to save for a home.”

A good budget plan begins one or two years before a buyer makes an offer. Here are four tips for renters who plan to become homeowners.

1. Build strong credit
When it comes to securing a loan at the best mortgage rate, credit is king.

“The most important focus for all potential buyers should be improving their credit score,” says Jean Badciong, chief operating officer of Inlanta Mortgage in Waukesha, Wis. “A low score can prevent someone from buying a home or at least from qualifying for an affordable mortgage rate.”

Greg Holmes is national director of sales and marketing for Credit Plus, a company in Salisbury, Md., that provides credit reports to mortgage lenders. He says potential buyers should request their free credit report at AnnualCreditReport.com.

“Some people who think they have good credit don’t, while people who think their credit is bad may be surprised that it is actually OK,” Holmes says. “Everyone should check their report for accuracy and fix any mistakes. It can take months to correct errors.”

To improve their credit scores, buyers should pay off past-due bills, pay every bill on time and reduce their balances on every account to less than 30% of the credit limit, Holmes says. Also, it is best to have three to five credit accounts, such as a car loan, student loan or credit card, for one year or longer.

Holmes says he does not recommend switching credit cards frequently to get the best rate, though.

“Lenders do not want to see a lot of credit inquiries or too many new accounts because this could indicate someone who is about to take on a lot of extra debt,” Holmes says.

Kirchner says people often do not realize the consequences of paying bills late or missing a payment, which can affect your credit report for a long time.

Some young people assume they can improve their credit scores as an authorized user on a parent’s card. But Badciong says this will have no impact on their score.

2. Save cash
Christine Howard, a senior loan officer with Inlanta Mortgage, says future homebuyers should make “virtual” mortgage payments today to build up savings and learn to budget for actual mortgage payments down the road.

“Renters can estimate a mortgage payment and set aside the difference between that payment and their rent each month,” Howard says. “If they are paying $800 in rent and estimate their mortgage will be $1,100, they can put $300 per month in a special savings account.

“Not only does this help them save for a down payment, but it demonstrates to a lender their ability to afford that higher housing payment.”

Kirchner says he recommends that future buyers create a simple budget and set a savings goal.

“If they find they can save $300 a month, then they will have $3,600 at the end of the year,” Kirchner says. “Lenders want to see that pattern of savings, and buyers will need at least 3.5% for a down payment on a (Federal Housing Administration) loan or at least 10% for a conventional loan.”

Kirchner recommends setting up an automatic transfer of funds into a savings account through your employer or your bank.

3. Reduce debt
While buyers increase their savings, they should also reduce their debt.

“Paying off debt tops saving in terms of priorities because of the interest payments on the debt, which exceeds the amount of interest they can earn on their savings,” Kirchner says. “Lenders want to see that you are managing your debt and keeping your credit-card balances low.”

Howard says debt-to-income ratios are an important element in a loan approval. This ratio compares minimum monthly debt payments to gross monthly income.

“If your debt-to-income ratio is over 50%, you need to pay off your debt before even thinking of buying a home,” Howard says. “Some companies will relax their standards for borrowers with a strong credit score or substantial cash reserves, but in general, FHA will only go up to 43% and conventional lenders will only go to 41% for the overall debt-to-income ratio.”

4. Get educated
Although it might be premature to visit a lender two years before a home purchase, it can be valuable for consumers to know if they qualify for a mortgage, Kirchner says. He also recommends visiting open houses.

“A lot of people have no idea what $100,000 or $200,000 will buy,” he says, “so the more they look at places and neighborhoods, the better understanding they will have of the value in a home.”



Compliments of: Martha Small | Austin Portfolio Real Estate | 512.587.0308

Original Article by: Michele Lerner of Bankrate.com

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House-sitting, caretaking or ‘workamping’ can be a huge budget boost. Just think: No monthly housing costs.


If you had no rent or mortgage payment, what would that mean to your bottom line? Free accommodations are available if you’re willing to watch someone else’s property.

House-sitting tends to be a quick-hit job, but two other gigs — caretaking and “workamping” — can last for months or years at a time. Best-case scenario: You fall into a sweet spot such as spending 51 weeks a year at a multimillionaire’s Colorado ski retreat or secluded Hawaiian getaway.

Where do you look for a job like that? (Post continues after video.)

An obvious way is through word of mouth. I’ve gotten house-sitting jobs in Los Angeles, Seattle and Anchorage just by letting friends know I’m available. For me, it’s a cheap way to travel. Sometimes I get paid, and sometimes I do it in exchange for a free flop.

The most comprehensive sources I’ve seen, though, are The Caretaker Gazette, Workers on Wheels and Workamper News.

House-sitting websites exist, too. Keep in mind that these companies, like any other Internet site, may vanish without warning — taking with them your subscription. By contrast, the three sources listed above have been publishing for 18 to 30 years and all three supplement their regular publications with daily or weekly job updates.

What you need to know

“Workamping” assumes you’ll be working — part or full time, paid or volunteer — while living in an RV. Usually, that means free hookup and rent in a campground, but sometimes RVers are hired to care for private property.

“Caretaking” can mean full-time responsibility for a landscape and/or animals. It can also be as simple as living in a foreclosure or unsold property to keep away squatters and vandals.

“We are getting a lot more real-estate investors who are stuck with (homes) they can’t sell,” says Caretaker Gazette Publisher Gary Dunn. 

You’ll need references, of course. Would you hand someone the keys to your place just because he sounded nice on the phone? Some options: a current or former employer, a clergy member or even your family physician are good bets.

Or how about a previous house-sitting client? Put out the word among friends and acquaintances, get written references and parlay those experiences into other gigs.

Get it in writing
Ask for a written contract so there are no misunderstandings about what is and isn’t expected. For example, will you be paying a share of the utilities? Are you supposed to mow the lawn?

Keep your side of the bargain. If it says “no parties,” don’t invite your friends over to check out the hot tub.

A few more tips:

Get renters insurance. The homeowners insurance doesn’t cover nonresidents.

Prepare to couch-surf. If you plan to do this full time, you need places to land in case of gaps between jobs.

Organize your finances. Is there a branch of your bank in that town? Can you pay your bills online? Oh, and bring more cash than you think you need — you can always put it back.

Have an exit strategy.
Suppose the homeowner forgot to mention his six cats — and you’re allergic? Make sure you have bus fare or gas money back home.

Compliments of: Martha Small | Austin Portfolio Real Estate | 512.587.0308

Original Article by: Donna_Freedman

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The number of homes for sale continues to fall, and the median price continues to rise. Distressed sales are making up a smaller proportion of deals..


Sales of existing homes continued to rise in November, hitting their highest level in three years.

At the current pace, 5.04 million existing homes would be sold in 2012. That’s up 14.5% over last November, the National Association of Realtors reported.

Sales were up 5.9% percent from October. The national median home price was $180,600, up 10.1% from a year ago. November marked the ninth month of year-over-year price increases.

Sales of existing homes continued to rise in November, hitting their highest level in three years.

At the current pace, 5.04 million existing homes would be sold in 2012. That’s up 14.5% over last November, the National Association of Realtors reported.

Sales were up 5.9% percent from October. The national median home price was $180,600, up 10.1% from a year ago. November marked the ninth month of year-over-year price increases.

The number of homes for sale continued to fall, which is likely contributing to price increases. In November, 2.03 million existing homes were listed for sale, enough to last 4.8 months at the current sales rate and 22.5% fewer than last year. A six-month supply is considered a balanced market.

The last time fewer existing homes were for sale was December 2001, and the current supply is the lowest since September 2005, when there was a 4.6-month supply for sale.

First-time buyers made up a smaller proportion of all buyers than they did a year ago — 30% versus 35%. The investor share remained the same, at 19%. That suggests move-up buyers are inching back into the game. All-cash sales accounted for 30% of sales, up slightly from 28% last November.

The percentage of sold homes that were distressed sales stood at 22%, down from last November’s 29%. Yun predicted the percentage of distressed properties, which usually sell at a discount, would fall into the teens next year.

“Existing-home sales have improved this year,” Joseph Trevisani, the chief market strategist for Worldwide Markets, told Reuters. “Purchases are supported by the lowest mortgage rates on record. The housing market is considerably weaker than the statistics portray. Jobs, not interest rates, are the key to further improvement, but those lower rates from the Fed are putting the dollar on the defensive.”

Compliments of: Martha Small | Austin Portfolio Real Estate | 512.587.0308

Original Article by: Teresa at MSN Real Estate

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Loan officers and mortgage brokers may have their own criteria, but you can generally expect to provide these papers.

If anything about refinancing your mortgage might be described as “fun,” it would have to be locking in your new lower interest rate. But once that’s done, you’ll have to deal with the decidedly not-fun part of gathering all the documentation you’ll need to support your refinance loan application.

To get started and stay organized, it helps to have a checklist of which documents you’ll need. While each loan officer or mortgage broker might have his own specific checklist, here’s a look at what you can generally expect:

Photo ID: Typically a driver’s license or passport, this document is used to confirm your name, identity and home address.

Pay stubs: You’ll need to produce your pay stubs from at least the past 30 days. If you don’t have your pay stubs, ask your employer’s payroll or personnel department to give you these documents, which must show your name, the name of your employer and your total year-to-date earnings, says Joe Metzler, mortgage specialist at Mortgages Unlimited in St. Paul, Minn.

Asset statements: Gather monthly or quarterly statements from your various asset accounts from the past two to three months. Asset accounts include checking, savings, investment and retirement-plan funds.

If you don’t have your statements handy, you can print them from most financial institutions’ websites, Metzler says. Each statement must include your name, the name of your financial institution and the beginning and ending account balances. A printout of your current transactions “usually does not work” for loan application purposes, Metzler warns. Rather, a true statement is required.

Documentation of deposits: You’ll need documentation that shows the source of any deposit of more than a nominal sum, other than payroll.

This relatively new requirement helps the lender figure out whether you have enough money from allowable sources for closing costs and reserves, says Joe Parsons, senior loan officer at PFS Funding, a mortgage company in Dublin, Calif.

W-2 tax forms for the past two years: If you’re self-employed, earn commission or tip income or own rental property, you’re going to need to produce federal income tax returns for the past two years. Self-employed borrowers might also be required to supply a K-1 tax form, which shows your percentage of ownership of your company. If you’re a substantial owner, you’ll also be asked to supply the company’s tax returns for the past two years.

If you don’t have your tax documents, ask your tax preparer to provide them to you or get copies from the IRS. Be sure to include all the pages and schedules, including the signature page.

A copy of your most recent mortgage statement.

A copy of the original promissory note for your existing mortgage: This relatively new requirement helps lenders ensure that your refinance will offer a legitimate benefit, Parsons says.

“They can look at the mortgage statement, but most lenders want to see the promissory note, too,” he says. “It’s not a big deal, but it adds more time to the process.” If you don’t have these documents, call your loan servicer and request copies of them.

Phone bill: A copy of a recent home or cellphone bill, showing your name and address.

Some lenders have added this requirement to find out whether you occupy your home as your principal residence, says Kirk Chivas, chief operating officer at First Commerce Financial in Wixom, Mich.

Divorce decree: If you got divorced within the past two years or want to use the alimony or child support you receive toward qualifying income, you’ll need to present a copy of your divorce decree.

Proof of attendance: If you’re a first-time homebuyer who has taken advantage of some state or county homebuyer assistance programs, you are required to attend first-time homebuyer education classes. You must show proof of your attendance.

You’ll probably notice that this list is “significantly more comprehensive than it was even a year ago,” Chivas says. Still, the requirements can be met if you keep track of what you need and what you’ve already supplied.

One final tip: Be sure to submit only complete and legible documents. Also, when your lender asks for multiple documents, submit all of them at once. This way, it’s easier to keep track of what you have and haven’t provided your lender.



Compliments of: Martha Small | Austin Portfolio Real Estate | 512.587.0308

Original Article by: Marcie Geffner of HSH.com

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Open House this SUNDAY, January 20th from 2:00 – 4:00 PM

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The Consumer Financial Protection Bureau has issued new guidelines for home mortgages. The rules require income verification, but don’t specify a minimum down payment.

After months of discussion, the Consumer Financial Protection Bureau has come out with rules it says will help protect consumers from toxic mortgages.

The new “Ability to Repay” rule is designed to make lenders determine that borrowers can actually pay back their mortgages. Lenders whose loans follow the guidelines for what is called a “Qualified Mortgage” are protected against certain lawsuits. While lenders can issue mortgages outside the rules, they won’t have the same legal protections.

The rules don’t include any guidelines about the size of a down payment. There had been much speculation during the two years that the rule was under discussion that a qualified mortgage would include a 20% down payment. That didn’t happen, though the CFPB is planning to issue more rules on mortgages later.

The new rules essentially end the no-doc and low-doc “liar loans,” in which customers did not have to document their income. The rules also limit borrowers’ debt-to-income ratio to 43% in most cases. Interest-only and negative amortization loans don’t qualify, and the qualified mortgages will limit fees.

Whether the rules will do anything to make loans more available is a big question. In general, the standards are similar to those lenders are using on their own now.

The rules will take effect in January 2014. You can read them here and see an analysis by the Center for Responsible Lending here. The Wall Street Journal has a Q&A.

The housing industry and consumer advocates generally praised the new rules.

“The Consumer Financial Protection Bureau’s new rules generally strike a balanced, reasonable approach to mortgage lending and implement important consumer protections,” the Center for Responsible Lending wrote in a news release. “The standard CFPB establishes for a safe, well-underwritten mortgage is appropriately broad enough to include the vast majority of creditworthy homeowners, and  it is clear enough for lenders and borrowers alike to understand. And the rules preserve legal protection for borrowers with the riskiest loans.”

Barry Rutenberg, chairman of the National Association of Home Builders, said in a statement that his organization “is encouraged that regulators heeded concerns from the housing industry to craft a broad standard that includes many of today’s sound mortgage products, including fixed-rate and adjustable-rate mortgages, under the QM standard.”

The new rules were required by the 2010 Dodd‐Frank Wall Street Reform and Consumer Protection Act, which called for restricting mortgages to people who had the ability to pay them back – something that wasn’t a concern during the heady days of the real-estate boom.

“In the run-up to the financial crisis, we had a housing market that was reckless about lending money,” CFPB Director Richard Cordray wrote on the agency’s blog. “Lenders thought they could make money on a loan even if the consumer could not pay back that loan, either by banking on rising housing prices or by offloading the mortgage into the secondary market. This encouraged broad indifference to the ability of many consumers to repay loans, which dramatically increased mortgage delinquencies and rates of foreclosures.”

Compliments of: Martha Small | Austin Portfolio Real Estate | 512.587.0308

Original Article by: Teresa at MSN Real Estate

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