The book lay under several layers of long forgotten personal items in the trunk of her car. Its binding showed evidence of neglect, yet it protected the unread handwritten pages. For more than a year the bound pages remained a part the items hoarded by the girl as she tried desperately to hold tightly to her fast fading youth.
Her senior year of High School became a distant memory in the rush of the fall semester of her College sophomore year. She was growing up; at least in many areas of her life. The discipline of regular class schedules and deadlines for papers and projects was reshaping her priorities. Values change. So do priorities. And so do friends. The old things pass away so that new things can come. In many ways, the girl was becoming a young woman. But still the book still lay under the growing pile of discarded items in the young woman’s crypt of her past.
For 263 days of her High School senior year, he sat at the coffee shop table sipping a mixture of coffee, cream and sweetener. And every day the unlined pages of a black bound journal were slowly and thoughtfully filled with the love he poured out for his daughter. He was a father and he loved his girl. He provided for her needs. He protected her from the encroachments of the world as best he could. And now in the pages of this book, he wrote the words of his life experience, dipping each thought into the ink well of his heart. His hope was that somehow this labor of love would help preserve his precious girl.
“My dear daughter”, headlined the top of each page. What followed was a different story every day; a new insight into life. A sliver of wisdom, a drop of knowledge, a pinch of experience, a glimmer of insight.
“When Niagara Falls was first discovered the flow of water over the falls was much greater than it is today. Then the amount of water going over the falls caused considerable erosion moving the lip of the falls backward up to 3 feet per year. But man’s need for electricity led to the construction of several dams upstream from the falls so that water could be redirected through turbines creating electricity. Now the volume of water passing over the falls is greatly reduced and the erosion caused by the water has slowed to about 1 foot per year. The Niagara Falls are one of many natural wonders that display God’s handiwork. And so your life was created as a wonderful miracle whose purpose is to demonstrate the magnificence of God. Construction of man-made structures, no matter how noble, has interfered with the natural flow of God’s wonder at Niagara. The same will be true should you allow the trappings of this world to impede the display of God’s wonder in your life. Not only will these impede the flow of His life through yours, it will greatly reduce His plans to reshaping and direct the flow of your life. Choose wisely those things you build into your life.”
The girl came home from college one day and her dad decided to clean out her car. In the trunk he found the black bound journal. Retrieving it, he placed it on the bookshelf of his office. Within a few days she returned to college and the book was never mentioned.
Two years past. On another visit home, she was talking with her father in his office when she noticed the journal on his shelf. “There’s my book,” she said. “Where did you find it?”
“Beneath piles of things in the trunk of your car” was all he said.
“Can I have it back” she asked?
“Sure” and he handed her the book.
Another two years passed and the girl was preparing to enter Medical School. The father was so proud. His little girl was growing up to be a beautiful productive woman. And he loved her.
Six months ago his phone rang. “Hello?”
Only sobs on the other end of the line. He knew the sound of her crying. “Sweetheart, what’s the matter?” The only response was, “Daddy” followed by more sobs. In a moment she regained her composure.
“Are you alright?” It was his only thought.
“Daddy, I’ve been up all night reading the book you wrote for me. It’s the first time I’ve read it. You put so much work into writing it for me, and I never appreciated it until now.”
“Writing it wasn’t work to me; and I knew you would read it when the time was right.”
Silence for a long moment. Then a sniffle on the other end of the line.
“Daddy, I never knew how much I was loved. Thank you.”
Then they both cried.
Who has shown you how much you are loved? Take a moment this Thanksgiving to say two simple words to them. “Thank You”. Happy Thanksgiving to all!
Tuesday, November 24, 2009
Friday, November 20, 2009
Six Killers of Home Mortgage Financing
The recent extension of the $8,000 tax credit for first time home buyers and the $6,500 tax credit for home buyers who currently own a home holds promise for a more robust winter housing market than usual. Because more buyers will be entering the market for home financing I thought it beneficial to offer insight into six common pitfalls to securing home financing.
Low Appraisal Value: You’ve found a home you like and your offer has been accepted. The appraisal was done a couple of days ago but the value came in under the contracted sales price. This scenario is not as uncommon as you might think in our topsy-turvy real estate world. If this happens to you, you’ve reached a point where the lender will most likely decline the financing until the purchase price is lowered to meet the appraised value.
Too High Debt to income ratio: All lenders use a “debt to income” calculation to qualify borrowers for home loans. This threshold is different for different lenders but should be a point of interest for anyone seeking home financing. The ratio appears as a “percent” and is derived by adding the monthly payments appearing on the borrower’s credit report including the new house payment (principal, interest taxes, insurance, and private mortgage insurance) and dividing this amount by the total monthly gross income being used to qualify for the loan. If this number exceeds the lender’s threshold (usually between 36% and 45%) the loan will likely be declined.
Change in employment status: Perhaps you have recently changed jobs. It is the same line of work but your new employer now considers you a W-2 employee whereas before you reported your income on a 1099. Or you were a W-2 employee and you now own your own business. In either of these instances most underwriters will require you to provide your most recent two years tax returns demonstrating this type of income in order to qualify for a home loan.
Too many repairs: In today’s housing market a larger number of homes on the market are foreclosure homes and may be in great need of repairs. It the home is in particularly poor condition it may be difficult to find a lender willing to make the purchase loan.
After the appraiser examines the home and prepares the report, many of these deals simply fall apart because of leaky roofs, other water damage, broken windows, faulty HVAC, electrical or plumbing issues. Some of these homes are listed as “cash only” sales. In other words the seller has had other buyers who were refused financing and will not only entertain cash buyers.
Tax Trouble: You work hard every day but when you file your taxes you report a large amount of unreimbursed employee expenses. Any amount you deduct for expenses like these, must be deducted from the income used to qualify you for the loan. I recently had a customer who claimed over $10,000 in unreimbursed auto expenses. She had over $50,000 in total income, but subtracting the unreimbursed expenses left her with too little income to qualify for the loan she wanted.
Several years ago, you had a tax lien, but have since paid that lien. Everything is alright now, right? Not so fast. It is not uncommon for a paid tax lien to still show on your credit report as not paid and unreleased. Because getting this release can take some time, if you’ve had a previous tax lien filed on your home, check now to make sure that it shows as being released on your credit report.
Unclear CAIVRS: Credit Alert Interactive Voice Response System. This system is only used when processing FHA and VA loans, but because more strict conforming guidelines are being enforced requiring larger down payments and more reserves, these types of loans have increased in popularity.
CAIVRS is a government database that has delinquent borrower records from the Department of Housing and Urban Development (HUD), the Department of Veterans Affairs (VA), the Department of Education (DOE), the Department of Agriculture (USDA), the Small Business Administration (SBA), the Federal Deposit Insurance Corporation (FDIC), and the Department of Justice (DOJ). Your lender enters information into the CAIVRS system about everyone involved in the real estate transaction; buyer, seller, (or owner if it is a refinance), realtor, appraiser, inspector, etc. Any of these names show up on the CAIVRS list can cause a setback in the progress of your government back loan.
Low Appraisal Value: You’ve found a home you like and your offer has been accepted. The appraisal was done a couple of days ago but the value came in under the contracted sales price. This scenario is not as uncommon as you might think in our topsy-turvy real estate world. If this happens to you, you’ve reached a point where the lender will most likely decline the financing until the purchase price is lowered to meet the appraised value.
Too High Debt to income ratio: All lenders use a “debt to income” calculation to qualify borrowers for home loans. This threshold is different for different lenders but should be a point of interest for anyone seeking home financing. The ratio appears as a “percent” and is derived by adding the monthly payments appearing on the borrower’s credit report including the new house payment (principal, interest taxes, insurance, and private mortgage insurance) and dividing this amount by the total monthly gross income being used to qualify for the loan. If this number exceeds the lender’s threshold (usually between 36% and 45%) the loan will likely be declined.
Change in employment status: Perhaps you have recently changed jobs. It is the same line of work but your new employer now considers you a W-2 employee whereas before you reported your income on a 1099. Or you were a W-2 employee and you now own your own business. In either of these instances most underwriters will require you to provide your most recent two years tax returns demonstrating this type of income in order to qualify for a home loan.
Too many repairs: In today’s housing market a larger number of homes on the market are foreclosure homes and may be in great need of repairs. It the home is in particularly poor condition it may be difficult to find a lender willing to make the purchase loan.
After the appraiser examines the home and prepares the report, many of these deals simply fall apart because of leaky roofs, other water damage, broken windows, faulty HVAC, electrical or plumbing issues. Some of these homes are listed as “cash only” sales. In other words the seller has had other buyers who were refused financing and will not only entertain cash buyers.
Tax Trouble: You work hard every day but when you file your taxes you report a large amount of unreimbursed employee expenses. Any amount you deduct for expenses like these, must be deducted from the income used to qualify you for the loan. I recently had a customer who claimed over $10,000 in unreimbursed auto expenses. She had over $50,000 in total income, but subtracting the unreimbursed expenses left her with too little income to qualify for the loan she wanted.
Several years ago, you had a tax lien, but have since paid that lien. Everything is alright now, right? Not so fast. It is not uncommon for a paid tax lien to still show on your credit report as not paid and unreleased. Because getting this release can take some time, if you’ve had a previous tax lien filed on your home, check now to make sure that it shows as being released on your credit report.
Unclear CAIVRS: Credit Alert Interactive Voice Response System. This system is only used when processing FHA and VA loans, but because more strict conforming guidelines are being enforced requiring larger down payments and more reserves, these types of loans have increased in popularity.
CAIVRS is a government database that has delinquent borrower records from the Department of Housing and Urban Development (HUD), the Department of Veterans Affairs (VA), the Department of Education (DOE), the Department of Agriculture (USDA), the Small Business Administration (SBA), the Federal Deposit Insurance Corporation (FDIC), and the Department of Justice (DOJ). Your lender enters information into the CAIVRS system about everyone involved in the real estate transaction; buyer, seller, (or owner if it is a refinance), realtor, appraiser, inspector, etc. Any of these names show up on the CAIVRS list can cause a setback in the progress of your government back loan.
Friday, November 13, 2009
7 Deadly Home Buying Mistakes
It’s official; President Obama has extended the home buyer tax credit through April 30, 2010. This legislation translates into an $8,000 tax credit for first time home buyers and $6,500 for subsequent home buyers. It also means an increase in activity on real estate transactions.
Because of the deadline, everyone should anticipate that the market will be a bit more crowded than it has been of late. The more crowded the market gets, the easier it becomes for home buyers to commit one of the 7 deadly home buying mistakes.
Demand Advocate Accountability: Every home purchase involves several key players. These participants include the realtor, the home inspector, the pest inspection, the appraiser, and the lender. Because most of us don’t buy a home every year, it’s easy to get lost in industry specific speech shuffle. Words and terms that the average consumer doesn’t understand can easily lead the buyers to unnecessary confusion. Here’s the bottom line. Everyone involved in your home transaction works for you. They are providing a service you need to purchase a home. They are spending your money. That makes you the boss. If something isn’t clear, call a time-out and demand a clear definition. In short, question without fear.
Don’t be a house hog: This is a very simply mistake that many home buyers make; buying more house than they need or buying a home that they are barely able to afford. Life has a funny way of handing surprises to us. If you buy a home you are barely able to afford, you are setting yourself up for trouble the next time life surprises you with an unexpected change.
Flatten Financing Fees: When signing the paperwork for a new mortgage, always remember that you are actually purchasing financing. There will always be some fees associated with all financing; and this is not the concern. It is the excessive charges that cause home buyers to pay too much to get into a home. When it comes to financing, be smart and ask questions about the fees you are being charged. It’s your money, make it work for you.
Credit Roulette: Once you’ve been approved for financing, don’t do anything that could negatively impact your credit report and scores. One home buyer I know didn’t think that quitting his job three days prior to closing would impact his ability to buy a home. He was in for a surprise when the underwriter called his workplace to verify employment the day before closing. He lost his financing and the house. Another home buyer decided that their new home required a house full of new furniture. So right after being approved for financing; they opened a large account at a local furniture store and maxed it out. Their credit scores took a dive and when the underwriter pulled their credit just before signing off on their loan, she discovered that their new scores fell below the minimum approvable scores for home financing. They too lost their financing and couldn’t buy the house.
Know the Neighborhood: Simply because you like a house and the neighborhood, remember that the wise home buyer takes the time to get to know the area just a bit better. Drive through the sub-division at various times of the day. What is traffic like entering and exiting the neighborhood? Are there a lot of cars parked on the street at night? Stop and ask some of your potential new neighbors the things they like and dislike about living in the sub-division. If the neighborhood has a pool, give it a quick look. And don’t forget to read the neighborhood association by-laws. Make sure you can live with these guidelines.
Ready, Set, Think: You’re ready to buy a home. You have the down payment and closing costs and you have your financing arranged. Before signing the contract take a step back and think. Does this home do more than meet our present needs? Will it meet our needs for the foreseeable future? What are the projected values of this home for the next 5, 10 and 15 year? If we have to stay her longer than we anticipate, will we be happy here? Buying a home involves emotions, but don’t let the emotions rule the decision.
Paralysis of Analysis: On the other side of the spectrum is the tendency of some home buyers to delay making a decision because they are still thinking about it. Great home buys have been lost by home buyers who sit on the fence too long after gathering all the necessary data. Every real estate transaction has a point when it’s yes or no. When it’s time to paint, get out your brush, or get off the ladder.
Because of the deadline, everyone should anticipate that the market will be a bit more crowded than it has been of late. The more crowded the market gets, the easier it becomes for home buyers to commit one of the 7 deadly home buying mistakes.
Demand Advocate Accountability: Every home purchase involves several key players. These participants include the realtor, the home inspector, the pest inspection, the appraiser, and the lender. Because most of us don’t buy a home every year, it’s easy to get lost in industry specific speech shuffle. Words and terms that the average consumer doesn’t understand can easily lead the buyers to unnecessary confusion. Here’s the bottom line. Everyone involved in your home transaction works for you. They are providing a service you need to purchase a home. They are spending your money. That makes you the boss. If something isn’t clear, call a time-out and demand a clear definition. In short, question without fear.
Don’t be a house hog: This is a very simply mistake that many home buyers make; buying more house than they need or buying a home that they are barely able to afford. Life has a funny way of handing surprises to us. If you buy a home you are barely able to afford, you are setting yourself up for trouble the next time life surprises you with an unexpected change.
Flatten Financing Fees: When signing the paperwork for a new mortgage, always remember that you are actually purchasing financing. There will always be some fees associated with all financing; and this is not the concern. It is the excessive charges that cause home buyers to pay too much to get into a home. When it comes to financing, be smart and ask questions about the fees you are being charged. It’s your money, make it work for you.
Credit Roulette: Once you’ve been approved for financing, don’t do anything that could negatively impact your credit report and scores. One home buyer I know didn’t think that quitting his job three days prior to closing would impact his ability to buy a home. He was in for a surprise when the underwriter called his workplace to verify employment the day before closing. He lost his financing and the house. Another home buyer decided that their new home required a house full of new furniture. So right after being approved for financing; they opened a large account at a local furniture store and maxed it out. Their credit scores took a dive and when the underwriter pulled their credit just before signing off on their loan, she discovered that their new scores fell below the minimum approvable scores for home financing. They too lost their financing and couldn’t buy the house.
Know the Neighborhood: Simply because you like a house and the neighborhood, remember that the wise home buyer takes the time to get to know the area just a bit better. Drive through the sub-division at various times of the day. What is traffic like entering and exiting the neighborhood? Are there a lot of cars parked on the street at night? Stop and ask some of your potential new neighbors the things they like and dislike about living in the sub-division. If the neighborhood has a pool, give it a quick look. And don’t forget to read the neighborhood association by-laws. Make sure you can live with these guidelines.
Ready, Set, Think: You’re ready to buy a home. You have the down payment and closing costs and you have your financing arranged. Before signing the contract take a step back and think. Does this home do more than meet our present needs? Will it meet our needs for the foreseeable future? What are the projected values of this home for the next 5, 10 and 15 year? If we have to stay her longer than we anticipate, will we be happy here? Buying a home involves emotions, but don’t let the emotions rule the decision.
Paralysis of Analysis: On the other side of the spectrum is the tendency of some home buyers to delay making a decision because they are still thinking about it. Great home buys have been lost by home buyers who sit on the fence too long after gathering all the necessary data. Every real estate transaction has a point when it’s yes or no. When it’s time to paint, get out your brush, or get off the ladder.
Friday, November 6, 2009
Something Old, Something New in Tax Credits
I’m writing this post on Friday morning, anticipating that President Obama will sign into law the extension of the $8,000 first time home buyer credit. This new legislation is really not new, but a modification and extension of the tax credit set to expire November 30, 2009. A new feature added to this bill that provides a $6,500 tax credit for current home owners who sell their home and purchase a new home.
Here are the details. (Please remember, as of this writing, the President has yet to sign the legislation into law.)
Continuation of $8,000 first-time home buyer credit. With a few distinctions, the old tax credit becomes the new tax credit. What is the same is the definition of First-time home buyer: not having owned in a home for the previous 36 months. What is different is that the contract for the home purchase must be signed on or before April 30, 2010 and closing must take place on or before June 30, 2010.
Current legislation requires that closing on the property take place on or before November 30, 2009. This has created a rush to close some transactions in an unreasonably short time frame. The new legislation provides a pressure release allowing them to close after the end of November deadline and still claim the tax credit.
The new April 30, 2010 deadline for signed contracts and the extended June 30, 2010 deadline for closing provides a more flexible window for home buyers to find the right home, agree to a purchase price all the way up to the end of next April and still have 60 days to close and claim the tax credit.
Clarification of Tax Credit. Current legislation requires the use of IRS form 5405 (found at http://www.irs.gov/pub/irs-pdf/f5405.pdf). This is the only form available at this time, but it is certain that a new/amended form will be released to include new tax credit guidelines. If you have already purchased a home or are planning to take advantage of this tax credit, make certain to use the correct form.
Existing Home Owners are Now Included. Under the new legislation current home owners are eligible for a $6,500 tax credit when selling their home and purchasing a new home. The catch is the tax credit is available only to those homeowners who have lived in their current home for at least five years. The home must be sold and a new contract must be signed on or before April 30, 2010 and closing must transpire on or before June 30, 2010.
New Income Limitation for Qualifying Home Buyers. Under the legislation set to expire November 30, 2009, maximum adjusted gross income limits are $75,000 for singles and $150,000 for those married filing jointly. The new legislation increases these limits to $125,000 single and $250,000 married filing jointly. This increase should make the tax credit available to more middle class Americans.
Something for Nothing? The recent “Cash for Clunker’s” tax credit program was touted a success because over 600,000 new vehicles were purchased under the program. The surprise for many of these new car owners is that they will be required to count the $4,500 tax credit as income on subsequent tax years. If you are in the 33% tax bracket, this would mean a sizeable increase in your tax liability.
It has yet to be finally determined if those who have taken advantage of the existing $8,000 tax credit or those who will take advantage of the new legislation will be required to claim the amount of their tax credit as income in subsequent years tax returns. It would be wise to consult your CPA and get all the information before making your final decision regarding the existing and the new home buyer stimulus tax credit.
Here are the details. (Please remember, as of this writing, the President has yet to sign the legislation into law.)
Continuation of $8,000 first-time home buyer credit. With a few distinctions, the old tax credit becomes the new tax credit. What is the same is the definition of First-time home buyer: not having owned in a home for the previous 36 months. What is different is that the contract for the home purchase must be signed on or before April 30, 2010 and closing must take place on or before June 30, 2010.
Current legislation requires that closing on the property take place on or before November 30, 2009. This has created a rush to close some transactions in an unreasonably short time frame. The new legislation provides a pressure release allowing them to close after the end of November deadline and still claim the tax credit.
The new April 30, 2010 deadline for signed contracts and the extended June 30, 2010 deadline for closing provides a more flexible window for home buyers to find the right home, agree to a purchase price all the way up to the end of next April and still have 60 days to close and claim the tax credit.
Clarification of Tax Credit. Current legislation requires the use of IRS form 5405 (found at http://www.irs.gov/pub/irs-pdf/f5405.pdf). This is the only form available at this time, but it is certain that a new/amended form will be released to include new tax credit guidelines. If you have already purchased a home or are planning to take advantage of this tax credit, make certain to use the correct form.
Existing Home Owners are Now Included. Under the new legislation current home owners are eligible for a $6,500 tax credit when selling their home and purchasing a new home. The catch is the tax credit is available only to those homeowners who have lived in their current home for at least five years. The home must be sold and a new contract must be signed on or before April 30, 2010 and closing must transpire on or before June 30, 2010.
New Income Limitation for Qualifying Home Buyers. Under the legislation set to expire November 30, 2009, maximum adjusted gross income limits are $75,000 for singles and $150,000 for those married filing jointly. The new legislation increases these limits to $125,000 single and $250,000 married filing jointly. This increase should make the tax credit available to more middle class Americans.
Something for Nothing? The recent “Cash for Clunker’s” tax credit program was touted a success because over 600,000 new vehicles were purchased under the program. The surprise for many of these new car owners is that they will be required to count the $4,500 tax credit as income on subsequent tax years. If you are in the 33% tax bracket, this would mean a sizeable increase in your tax liability.
It has yet to be finally determined if those who have taken advantage of the existing $8,000 tax credit or those who will take advantage of the new legislation will be required to claim the amount of their tax credit as income in subsequent years tax returns. It would be wise to consult your CPA and get all the information before making your final decision regarding the existing and the new home buyer stimulus tax credit.
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