Make hay while the sun shines...
What a great opportunity to take advantage of record low rates.
Just when it looked as if mortgage rates couldn't fall any further, they did.
Rates on 30-year fixed-rate mortgages (excluding jumbos) hit an average of 4.3% in September, the lowest level since 1953, according to Freddie Mac, and are still hovering below 4.5%.

Fifteen-year rates are even more mouthwatering: 3.8%.
Mind you, those are averages.
The most creditworthy borrowers can do even better, snagging rates perhaps a quarter of a percentage point lower.
So what's in this for you?
A lot, potentially.
If you have a credit score of 720 or higher and at least 20% equity in your home, you might use these crazy-low rates to shorten your mortgage term, free up cash, or even add to your real estate holdings, for example.
Whatever you decide, don't wait too long. "The consensus is that rates will gradually move up in the new year," says Frank Nothaft, chief economist for Freddie Mac.
Freddie projects that the average 30-year fixed will hit 5% by the end of 2011.
It's easy to see why more than a quarter of borrowers today are choosing a 15-year mortgage, according to analytics firm Core-Logic, up from about 9% in 2007.
A 15-year lets you save in two ways:
You get a rate that's about half a percentage point lower than that of a standard 30-year, plus you can save tens of thousands by retiring the loan in half the time.
Let's say you took out a $270,000, 30-year mortgage at 5.9% when you bought your house in 2005.
You're paying $1,596 a month in principal and interest and now have a $250,000 balance.
Let's further assume that you roll $5,000 in refinancing costs into a new 15-year mortgage at 3.8% (so the loan is for $255,000).
Your new monthly payment will be a heftier $1,860, but you'll save more than $147,000 in interest over the life of the loan.
What if you can't manage the bigger monthly bite?
Refi to another 30-year and simply pay more in months when you're able to, assuming you're disciplined enough to actually follow through with that plan.
Given that few new mortgages carry prepayment penalties anymore, kicking in extra money shouldn't be a problem, says Keith Gumbinger, vice president of mortgage data tracker HSH Associates.
Caveat: If you have only a few years left on your current mortgage, or you plan to move soon, a refi may not pay off.
Calculate how long it will take to break even on your closing costs, up to three years is typical. Improve cash flowFreeing up cash may be your biggest priority right now.
Maybe you're trying to replenish your emergency fund after being out of work, or you have lots of high-interest credit card debt to pay off.
Maybe your twins got into Harvard, and you need to cover some of the tuition out of current income.
Or maybe you see enough investment opportunities around that you want to lower your monthly payment and invest the difference.
In those cases, choose a 30-year loan.

Using the previous example, if you refinance to a $255,000 30-year at 4.4%, you'll lower your monthly payment from $1,596 to $1,277.
True, you won't save nearly as much in interest as you would with a 15-year.
But that's not so bad, says Matthew Keeling, a certified financial planner in Mashpee, Mass., as long as you do something smart with the extra $319 a month you'll save.
Do your retirement plans call for moving to a house near the beach or a cabin in the mountains?
If you can afford another mortgage payment, you may want to start your search now, while rates are in your favor and prices are depressed.
Ditto if you've been wanting to buy a second home or an investment property, says Jonathan Bergman, vice president of Palisades Hudson Financial Group in Scarsdale, N.Y.
Assuming you're buying the place as a true second home, lenders generally charge the same rate they would for a primary residence.
But if you intend to rent the place out, even if just for a few years until you retire and you need rental income to qualify for the mortgage, it's considered an investment property.
And mortgage rates on investment properties are running about a half to a full percentage point higher. Still, the numbers are "pretty compelling," says Justin Krane, a certified financial planner in Los Angeles.

Five Reasons to Buy a Home Now...
1. Low mortgage rates serve as an equity shock absorber. When buyers borrow at today's record-low rates, they start building equity as soon as they close. That means they can absorb a few ups and downs as the still-recovering housing market gains traction.
2. Houses are in move-in condition. Home owners have continued to spend on maintenance and repair, according to the Harvard Joint Center on Housing. As these houses enter the market, they are in marked contrast to tattered foreclosures.
3. Terrific houses are coming on the market. Foreclosures are finally starting to clear the system, and they are being replaced by some very attractive properties.
4. Appraisal regulations are finally aligned with market realities. Fannie Mae has adjusted its appraisal guidelines, giving appraisers more flexibility to set values that reflect the current market.
5. Plenty of programs. Many programs that encourage middle-class families to buy homes continue to exist, despite market downturns. Buyers who qualify can get a big boost by combining one of these programs with today's low mortgage rates.

Top 6 Reasons to Buy Your First Home Today...
1. Affordability. Based on recent property declines and current interest rates, home affordability has not been higher since it was first tracked over 40 years ago. Your grandparents couldn't have received a better interest rate than you can today.
2. Tax Breaks. The IRS allows you to deduct the interest you pay on your mortgage, your property taxes and, in many cases for those who qualify, some of the costs to buy your home and mortgage insurance. Owning a home is a great way to lower your tax bill.
3. Build Wealth. Unlike paying rent, with each mortgage payment you make, you build equity and you decrease your income tax liability. Owning a home is still the best long-term investment.
4. Appreciation. As home prices have fallen precipitously in today's tough economy, the basis for realizing appreciation in future years is very strong. Historically, even with other periods of declining value, home prices have exceeded consumer inflation. From 1972 through 2005, home prices increased on average 6.5%, according to the National Association of Realtors®.
5. Stability. Knowing you can establish roots and raise a family in one location, free of the desires or needs of your landlord to sell the property you are living in. This is something no other investment provides. You can't live in a stock, and you can't raise your kids in a bond.
6. Independence. Enjoy the freedom to do what you want to your home. After all, it's yours to do what you wish. And, with any improvements you make, you have the ability to benefit from your investment. Try that with an apartment!

How to End the Recession in a Week...
by John Adams, for the Atlanta Journal-Constitution
At the risk of offending my good friend Don Ratajczak, I am going to put on my economist hat and offer to solve our economic problems in one seven day period. News from the housing front is simply depressing, and the recovery, such as it was, seems stalled. Washington obviously needs new ideas, so here goes:
All agree that the real estate industry represents a huge sector of the economy, and when somebody buys a new house, it employs hundreds of people all over the USA. But people who are worried don’t buy houses, and a large segment of the workforce is either unemployed or worried.
Real estate led us into this recession, and it will have to be real
estate that leads us out. That’s the way it has worked for the past seven recessions in a row, so what do we need to do?
* On Monday, declare a national moratorium on all residential
foreclosures unless the lender has engaged in meaningful attempts at modification and has employed every reasonable strategy to keep the borrower in the house. Also, grant "safe harbor" status to servicers who grant modifications in good faith. That step alone will keep millions in their homes.
* On Tuesday, modify the Garn-St Germain Act to invalidate “due on sale” clauses used by federally chartered lenders to prevent buyers from taking over payments. This would allow thousands of owners to sell to buyers who are able to make the payments, but unable to meet new more stringent underwriting criteria. Lenders should still be able to require reasonable credit and income standards, but assumption should be quick and easy, and at no cost.
* On Wednesday, change the tax code to incentivize real estate investors. Eliminate all income taxes on profits derived on the sale of any home purchased as a bank-owned foreclosure, then renovated and resold within 12 months to an owner-occupant. This would cause bank-owned homes to become much more attractive to private investors, who would rush to buy them as soon as they became available. They would then renovate them with private money rather than looking for a government handout. And it would help stabilize neighborhoods by eliminating vacant houses and substituting owner-occupants.
* On Thursday, declare a six month “federal tax holiday” and simply stand back and watch the economy move into high gear. It is a fact that tax cuts create jobs, and that’s what the real estate market needs more than anything else.
* On Friday, take the day off, but notice that the stock market has recovered and every home in America has jumped in value by ten percent. Everyone will feel more confident, unemployment will decline, and the recession will officially be over.

Cost Between Renting and Owning Narrows...
The cost difference between buying and renting is as narrow as it has been since 1993, according to a study on homeownership by Marcus & Millichap Real Estate Investment Services for the Associated Press.
The study examined rent and home prices in 45 metropolitan areas and concluded that gap between a payment on a median-priced home and median rent on a similar property is on average only $256.
Marcus & Millichap calculated the number using median home prices for the last three months of 2009, assuming a 10 percent down payment on a 30-year fixed-rate loan at 5.07 percent. It factored in mortgage insurance, but didn’t include either repair costs or tax benefits.
The difference is narrowest in such hard-hit markets as Detroit, Las Vegas, Atlanta, Cleveland, Indianapolis, and Orlando.
Renting remains significantly cheaper in New York, Los Angeles, Seattle, San Diego, San Francisco, and San Jose, Calif.
Source: Associated Press (04/19/2010)

IRS Clarifies What's Needed to Claim Tax Credit...
The Internal Revenue Service has clarified which documentation taxpayers need to submit to claim the first-time and move-up homebuyer tax credit.
While the IRS is still requiring the filing of Form 5405, it is not demanding that all parties’ signatures be on the HUD-1 settlement document in areas where requiring both the buyer and the seller to sign the document isn’t common.
The IRS clarification says: "In areas where signatures are not required on the settlement document, the IRS has clarified that it will accept a settlement statement if it is completed and valid according to local law. … The IRS encourages those buyers to sign the settlement statement prior to attaching it to the tax return.”
For repeat buyers, the IRS is seeking documentation that home buyers have lived in the previous property for a consecutive five of the past eight years. Proof can include property tax records, home owner insurance records, or mortgage interest statements.

Fourth Quarter Home Sales Surge 13.9% ...
Strong gains in existing-home sales were the predominant pattern in most states during the fourth quarter, with many more metro areas seeing prices rise from a year earlier, according to the latest survey by the NATIONAL ASSOCIATION of REALTORS®.
Sales increased from the third quarter in 48 states and the District of Columbia; 32 states saw double-digit gains. Year-over-year sales were higher in 49 states and D.C.; all but three states had double-digit annual increases.
Total state existing-home sales, including single-family and condo, jumped 13.9 percent to a seasonally adjusted annual rate of 6.03 million in the fourth quarter from 5.29 million in the third quarter, and are 27.2 percent above the 4.74 million-unit level in the fourth quarter of 2008.
Distressed property accounted for 32 percent of fourth quarter transactions, down from 37 percent a year earlier.
Lawrence Yun, NAR chief economist, said the first-time home buyer tax credit was the dominant factor. “The surge in home sales was driven by buyers responding strongly to the tax credit combined with record low mortgage interest rates,” he said. “With inventory levels trending down over the past 18 months, we expect broadly balanced housing market conditions in much of the country by late spring with more areas showing higher prices.”
According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage fell to a record low 4.92 percent in the fourth quarter from 5.16 percent in the third quarter; it was 5.86 percent in the fourth quarter of 2008.
In the fourth quarter, 67 out of 151 metropolitan statistical areas reported higher median existing single-family home prices in comparison with the fourth quarter of 2008, including 16 with double-digit increases; one was unchanged and 84 metros had price declines. In the third quarter, only 30 MSAs showed annual price increases and 123 areas were down.
The national median existing single-family price was $172,900, which is 4.1 percent below the fourth quarter of 2008; the median is where half sold for more and half sold for less. “This is the smallest price decline in over two years, with the most recent monthly data showing a broad stabilization in home prices,” Yun said. “Because buyers are taking on long-term fixed rate mortgages, avoiding adjustable-rate products, and trying to stay well within their budgets, the price recovery process appears durable."
NAR President Vicki Cox Golder said near-term market conditions will remain favorable. “Mortgage interest rates are expected to trend up later this year, but right now we have very good conditions with steadying home prices and favorable inventory in most areas, especially in the higher price ranges,” she said.
Golder said one of the biggest issues now is for repeat buyer who will have to accelerate their buying plans if they want the expanded tax credit. They have to have a contract by the end of April.
Repeat buyers do not have to sell their existing home, but all buyers must occupy the property they purchase as a primary residence to qualify for the tax credit. Buyers who have a contract in place by April 30, 2010, have until June 30, 2010, to finalize the transaction to get a credit of up to $8,000 for first-time buyers and $6,500 for repeat buyers.
Markets by Region
South: In the South, existing-home sales rose 13.8 percent in the fourth quarter to an annual rate of 2.23 million and are 28.2 percent higher than the fourth quarter of 2008. The median existing single-family home price in the South was $153,000 in the fourth quarter, down 2.4 percent from a year earlier.
“Affordable markets in the South that have relatively better local economies are seeing healthy price gains, such as Houston, Oklahoma City and Shreveport, La.,” Yun said.
A Closer Look at the Condo Market
Metro area condominium and cooperative prices – covering changes in 54 metro areas – showed the national median existing-condo price was $177,300 in the fourth quarter, down 4.8 percent from the fourth quarter of 2008. Eleven metros showed increases in the median condo price from a year earlier and 43 areas had declines; in the third quarter only four metros experienced annual price gains.
Source: NAR

6 Surprising Facts About the Buyer Tax Credit...
The homebuyer tax credit is not as simple or straightforward as you might think. Here are some nuances that will affect homebuyers who plan to use it.
To qualify for the move-up tax credit, a home owner must have occupied the same principal residence for five of the last eight years consecutively.
Buyers can elect to claim the credit on either their 2009 or their 2010 tax return, whichever is best for them.
Buyers who claim the credit in 2009 can’t file electronically because the Internal Revenue Service hasn’t put the required forms on line. The wait for a refund is three or four months.
The home can be a mobile home or travel trailer that is fixed to land owned or leased by the home owner. A mobile home or travel trailer that is actually mobile doesn’t qualify.
The home can’t be purchased from a close relative, including a parent, spouse, child, grandparent or grandchild.
A buyer who earns no taxable income or doesn’t owe any federal income tax can qualify for the tax credit and file a tax return just to claim it.
Source: Bankrate.com, Marcie Geffner (01/21/2010)

IRS Deductions for Georgia Storm and Flood Victims...
Georgians impacted by recent severe storms may be able to increase their standard deduction by claiming their net disaster losses suffered from the federally declared disaster. Provisions of the National Disaster Relief Act allow all taxpayers to claim the casualty loss deduction regardless of their income level. In addition, the law waives a requirement limiting casualty losses to those that exceeded 10% of the taxpayer’s adjusted gross income.
"Eligible taxpayers may be able to deduct disaster losses, even if they don’t itemize, through an increased standard deduction,” said IRS Spokesman Mark S. Green. "This increased deduction is limited to unreimbursed losses. You cannot claim losses that were covered by insurance.”
The standard deduction is a dollar amount that reduces the amount of income on which you are taxed. It is a benefit that eliminates the need for many taxpayers to itemize actual deductions, such as medical expenses, charitable contributions, and taxes, on Schedule A of Form 1040.
The increased standard deduction for disaster losses is a benefit that could help many Georgia residents. More than two-thirds of the returns filed by taxpayers each year claim the standard deduction instead of itemizing deductions.
"It’s also important for taxpayers impacted by this federally-declared disaster to note this on their tax returns,” said Green. "They should write "Georgia/Severe Storms and Flooding” at the top of their tax returns and any other documents filed with the IRS to identify themselves as storm victims eligible for disaster relief.”
For more information on figuring a casualty loss deduction, see IRS Publication 547, Casualties, Disasters and Thefts, and Form 4684 , Casualties and Thefts. Also, the IRS offers Publication 584, a workbook you can use to calculate personal property losses. These helpful forms and publications can be found on the IRS Web site at IRS. gov.
For disaster information call IRS Disaster Hotline at 1-866-562-5227 or call the IRS toll-free number for general tax questions at 1-800-829-1040.
Decatur Dispatch, January 2010