Real Estate News – December 2011

Real Estate News - December 2011

In this Issue:*

Step by Step Closing for Buyers and Sellers

Time For a Year-End Tax Review

Don’t Wait For Interest Rates to Bottom Out

(Your comments are welcome at the bottom of our newsletter)

Step by Step Closing for Buyers and Sellers

Step by Step Closing for Buyers and SellersWhen you have found the home of your dreams, or sold your home, you as the buyer or seller will have to appear at a meeting in which all of the final legal details will be handled, this is known as the closing.

Others in attendance are the real estate agent(s), lender and a closing agent. The meeting usually occurs either at an agent’s office, escrow agent’s office, attorney’s office, or at a lending institution such as a bank or mortgage company.

The main emphasis is to review all of the paper work, and to sign the different forms for financing, and to transfer title to the new owner. For the buyer and seller, knowing what to expect can ease concerns on the process of closing.

Typically the buyer will have more of a role to play in the process of closing on a house. However, the seller will have an important role as well. Usually a review of the settlement statement is presented first for both to agree upon and sign. You will need to be sure about the terms and agreements before you sign.

Next the buyer will be required to show proofs of required mortgage related or homeowner insurance, and that all necessary inspections have been completed according to the guidelines of the contract. All parties must be in complete agreement over terms and sign the documents.

Once this phase is completed both parties will present a certified check for the entire amount of the closing costs. The lender will present the funds paid to the closing or escrow agent, also if there are any funds due they will be submitted at that time to the lending agent.

Depending on the requirements you agreed to as a buyer, your bank or mortgage company may have stipulated that you will need to set up an escrow account to pay your property taxes, or may be your designated home insurance provider out of this account, this will be handled at the closing for your new home.

Other issues such as the recording of the deed will be discussed. Don’t be surprised if you are informed that you don’t have legal claim to the property until it is officially recorded at your local courthouse. It is to be understood that you may not move in until you have legal ownership of a clear title, and this process can take from a few days to over a week. This is why disbursement of funds to anyone involved in the transaction will not be paid until the deed recording is completed.

If you’re the buyer you will need to know what forms you will be required to sign. Take a few moments and write down a check list, and bring along copies of any paper work you have been required to sign or review. An important document known as the Truth in Lending statement will contain vast amounts of financial information for the buyer. This statement will contain information such as your interest rate for the mortgage, amount of cash financed, and your monthly payment schedules along with the total amount paid based on the length of your loan.

Detailed information will be found in other paper work for the buyer too. The mortgage note and other assigned specifications will spell out in specifics terms such as how and where the note is to be paid, and the institutions right to reclaim their rights to the property. This legal documentation will also explain that you’re to meet other specific requirements, such as paying any necessary insurances and taxes yearly, that is of course if you are allowed to pay this independently, and is not part of an escrow account.

The value and importance of a good real estate agent or broker is quickly appreciated at the closing. Many of the processes involved are explained by a caring and competent professional before the closing ever takes place. Make sure though that you do your part by taking the time to ask any questions you have with your real estate broker, and studying, if necessary, your part of the process, whether you’re the buyer or seller.

Home buying and selling can be a pleasant experience for all involved without a lot of hassle and grief. Just make sure you approach it with the right attitude and guidance.

 

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Time For a Year-End Tax Review

Time for a Year-End Tax ReviewMany of us experience events throughout the year that might require us to go back and review our current financial plans. Life changing events such as marriage, divorce, new additions to the family, job loss, retirement and death are all perfect examples of situations that will likely require revision, or even radical revamping, of your current plan. When it comes to financial, insurance, estate and tax issues, many of us are procrastinators. However, if you make it a goal to complete a simple year-end checklist now, you could save yourself money and time, and gain the piece of mind that comes from knowing your family is well taken care of.

If you’ve just been tossing your receipts into a shoe box all year long, now would be a good time to sort through them and organize them according to categories such as job-related expenses, education or job-hunting expenses and charitable contributions, just to name a few. If you’re self-employed or own a small business, now might be the time to invest more money into your work by purchasing a new computer system, office furniture or a work vehicle. All of these items can be granted quite an attractive deduction come tax time.

If you’re one of the lucky ones and the stock market was good to you this year and you have some capital gains from your investments that are going to be exposed to taxes, a prudent year-end plan should include taking the time to sort through your accounts, and using a strategy known as tax-loss harvesting. This technique involves selling the losers in your portfolio to offset any realized gains. If you wait 30 days and obey the requirements of the wash-sale rule, you can then buy back the securities, if you wish.

Don’t be afraid to generate large capital losses, because there is no limit to the amount that can be offset against capital gains. You can claim an additional $3,000 loss on your federal taxes, and then carry forward the remaining loss into future tax years.

Giving to Others

If you have children or grandchildren, you may (depending on the state in which you live) also receive a state tax deduction for your contributions to a 529 college savings plan. And, let’s not forget that your charitable contributions are usually, partially, tax deductible. When you give to a charity, make sure you get a receipt you can use come tax time.

If you’re computer savvy, consider buying a tax software program such as TurboTax or TaxCut to play around with just so you can see the various deductions allowed and the potential savings available.

Getting Your Estate In Order

A key part of estate planning that many of us overlook is the matter of beneficiary designations. From time to time it is a good idea to verify that these designations are still as you would like them to be. At a minimum, your estate-planning checklist should include reviewing the beneficiary designations for your IRA accounts and life insurance policies and checking the validity of your will.

You may also want to look into adding a “transfer-on-death” (TOD) feature to taxable accounts in order to have them avoid probate in the event of your death. While you have these documents out it would be a good idea to check that your current life insurance coverage is adequate for your present circumstances. Are you underinsured? Are you over-insured? If you are attempting to reduce the value of your estate for estate-tax planning purposes, consider using your annual $13,000 tax-free gift per person in 2011.

Other Overlooked Areas

As the year goes by it’s not uncommon to forget to make your retirement plan contributions, or fail to set aside enough money to maximize the contribution. Since the maximum contribution limits have changed over the past couple of years, and will continue to change in the upcoming years, you’ll want to check with your financial planner to make sure you are contributing the correct amounts. If you recently turned 50, you should be eligible for a larger contribution amount, known as a “catch-up” contribution. Also, if you are age 70.5 or older, you need to make sure you’ve taken your required minimum distributions (RMD) from your tax-deferred retirement plans, such as IRAs and 401(k)s.

Finally, depending on your credit history, you might want to check your credit rating and credit report by going to a reputable online site such as myFICO, which offers you your FICO score plus credit reports from all three credit bureaus for a fee.

In Summary

Along with making a year-end financial ‘to-do list,’ to help you stay on top of the matters we’ve covered here, you should also take some time to prepare your new household budget for the year ahead. Once you have a system in place, the process will become easier every year. You may find it hard to get motivated to tackle some of these tasks, especially during the holiday season, but the potential tax savings and other benefits covered here could be history once December 31st has come and gone. So roll up your sleeves and get to work – you’ll be glad you did come April next year.

 

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Don’t Wait For Interest Rates to Bottom Out

Don't try to time the market when getting a new mortgage loanWhether you’re considering buying your first home, or thinking about refinancing a home you already own, the only pressure you should find yourself under now is to find the right interest rate and to close on that rate as soon as you possibly can to take advantage of the record low rates we are seeing right now.

If you’re thinking of refinancing, with rates as they are now, you might be able to lower your interest rate by one full percentage point or more. If that’s the case, and the costs to refinance are low, you can immediately take advantage of that lower rate. Then, if rates go down further, you can always consider refinancing again.

If you’re shopping for a home and will need a new mortgage, there has never been a better time to buy than now. Inventory is plentiful, and mortgage rates have never been so low. As a general rule, you should never try to time the market — that’s how you miss getting a great rate.

To find a great mortgage, you should talk to at least one national mortgage lender, one local lender, a credit union and a mortgage broker. Ask your friends which bankers and brokers they have used; if they had a good experience with that person or company, give them a call as well.

Mortgages Could Be Getting More Expensive

Remember the days when buyers could qualify for a mortgage loan by putting down 3 percent? How about the days when mortgage lenders passed out no-downpayment loans? Mortgage loan financing has changed dramatically since then.

Today, the majority of traditional mortgage lenders are requiring that future homeowners come up with a down payment of 20 percent of their home’s purchase price. That’s a lot of money, especially for the all-important first-time home buyer market. Consider that 20 percent down on a home valued at $200,000 would be a whopping $40,000.

A new proposal, though, could make the 20 percent down payment the new official standard for what are being termed “qualified residential mortgage” loans.

According to a recent report from CNBC, the federal Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. have both agreed on a new rule stating that a 20 percent down payment is the minimum required to have a “qualified” residential mortgage loan.

Banks and lenders that give out loans without requiring a down payment of 20 percent would have to retain 5 percent ownership in the loan if they sell it to investors. The goal is to make banks more accountable for the mortgage loans they pass out.

Of course, the new rule, if it ever becomes federal law, could also make life more difficult for those homeowners who can’t come up with a down payment of 20 percent.

Some lenders might simply reject these homeowners, refusing to do business with anyone who can’t come up with the magical 20 percent down payment. Others might charge higher interest rates and fees to homeowners who lack enough funds for a 20 percent down payment.

One thing is clear; the days of easy mortgage financing are long gone. Today, lenders are more skittish than ever. They want to make sure potential homeowners can afford to make their mortgage payments on time. Part of that is making sure these possible buyers have enough financial stability to come up with a solid mortgage down payment.

What do you think of this new proposal? Would a law requiring 20% down on a home prevent you from buying? Give us your thoughts by clicking the comment link below…

Have Interest Rates on Mortgages Hit Rock Bottom?

The interest rates on mortgage loans have been moving in a downward direction for the past few years. Recently, the rates even fell below the five percent mark, coming in at about 4.92 percent on average for a 30-year fixed rate loan. This leaves many financial experts and consumers alike wondering if the interest rates on mortgages have finally reached rock bottom. Unfortunately, there is no crystal ball revealing this information, but you can take a look back on the behavior of interest rates to come to your own conclusion as to what rates will do during 2011.

The lowest point for the interest rates on mortgage loans was in the middle of November in 2010. After reaching the lowest point for the year, interest rates continued to go back up for the remainder of the year. According to HSH Associates, which publishes information on mortgage loans and other consumer loans, “There is a good chance we have peaked, give or take a few basis points” when speaking about interest rates.

The Mortgage Bankers Association predicts that the average 30-year fixed rate on mortgage loans will reach 5.1 percent by the end of 2011. The organization’s predictions also reach into 2012, when it predicts that the 30-year fixed rate will increase again up to 5.7 percent. According to the chiefe economist of Freddie Mac, Frank E. Nothaft, “While some rise in fixed-rates is expected, 30-year fixed-rate loans are likely to remain below 5 percent” throughout 2011.