As the economy gradually starts healing, new regulations imposed by Congress may negatively affect credit union members.  Several “good intention” regulations are already harming consumers.  Here are two examples;

The Federal Reserve’s proposal to cut debit interchange fees – the per transaction cost to process plastic card transactions at retailers by nearly 75% - will dramatically damage banks and even credit unions.  So how are consumers harmed?  These so-called price controls will force financial institutions to find other sources of income.  And that means charging consumers for other services.  To make up for the loss in revenue, many banks will be severely reduce free checking account products.  And consumers will likely see minimum service charges on various products particularly checking related accounts.  Some banks are predicting the end to free debit cards, home banking and bill pay services.  Merchants say they will pass the savings to consumers.  Industry experts, however, are skeptical about their claim..  What’s a member to do?  Well, stick with the credit union and tell friends what is coming down the road.  KaiPerm is doing all we can to hold the line on products and services pricing.  Our Direct Advantage (DA) Account is still the best deal you’ll find. 

Fannie Mae and Freddie Mac are headed for oblivion in the next several years.  Fannie and Freddie purchase loans from lenders and are the standard which real estate loans conform. The two entities represent 60% of the mortgage financing market. The problem is that the two mortgage giants have lost $150 billion in three years.  Consumers will see significant reductions in the maximum loan amount, increased fees and larger down payment requirements.  In addition, Fannie and Freddie will charge lenders higher costs to guarantee pools of their mortgages for resale to bond investors.  Lenders will pass on those fees to borrowers. In addition, the government wants to cut FHA’s market share form 30% to 10%. 

So, where will mortgage borrowers go to obtain financing?  Think KaiPerm.  Your credit union offers a 15 year first mortgage loan product and a trusted credit union broker who can obtain 30 year financing for our members.  With all the bad news, it is still a very good time to refinance your existing real estate loan or buy your dream home. 

It's official. President Obama has signed a bill that extends the tax credit for first-time homebuyers (FTHBs) into the first half of 2010. This program had been scheduled to expire on November 30, 2009.

In addition to extending the tax credit of up to $8,000 through June 30, 2010, the extension measure also opens up opportunities for others who are not buying a home for the first time.

So Who Gets What?
The program that has existed for FTHBs remains intact with the one exception that more people are now eligible based on an increase in the amount of income someone may now earn.

Additionally, the program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Deadlines
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

Higher Income Caps in Effect
The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible.

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

Maximum Purchase Price
Qualifying buyers may purchase a property with a maximum sales price of $800,000.

First-Time Homebuyer Tax Credit – Frequently Asked Questions
Here are answers to some commonly asked questions about the tax credit.

What is a tax credit?
A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual's primary residence.

What is the tax credit for first-time homebuyers (FTHBs)?
An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.

Who is eligible for the FTHB tax credit?
Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible. This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.

As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.

How do I claim the credit?
For those taking advantage of the tax credit in 2009, you may choose to either apply for the credit with your 2009 tax return or you may apply for the credit sooner by filing an amended 2008 tax return with Form 5405 (http://www.irs.gov/pub/irs-pdf/f5405.pdf).

Can you claim the tax credit in advance of purchasing a property?
No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.

Can a taxpayer claim a credit if the property is purchased from a seller with seller financing and the seller retains title to the property?
Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Examples of this would include a land contract, contract for deed, etc. According to the IRS, factors that would demonstrate the ownership of the property would include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property.

Are there other restrictions to taking the credit?
Yes. According to the IRS, if any of the following describe your situation, a credit would not be due.

·       You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild.

·       You do not use the home as your principal residence.

·       You sell your home before the end of the year.

·       You are a nonresident alien.

·       You are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)

·       Your home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)

·       You owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2009, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2006, through July 1, 2009.

Can you buy a home from a step-relative and be eligible for the credit?
Yes. Provided the person you are buying a home from is not a direct blood relative, the purchase would be allowed.

Can parent(s) who will not live in the property cosign for a mortgage for their child and the child that is a qualifying FTHB still be eligible for the credit?
Yes.

Can a separated spouse who has not owned a home for four years qualify for the FTHB tax credit if the spouse has owned a property anytime in the last three years?
No. However, the spouse may be eligible for the repeat buyer credit. The best path to take in any situation regarding income taxes is to speak with a professional tax preparer or CPA.

If you have any questions that fall outside the situations here, give me a call and if you do not have an accountant to speak with, I can refer you to one.    

All of the information above I have pulled from sources I deem reliable, but I am not an accountant or an attorney.  As always, you should advise a professional when it comes to your taxes.  I am however here for all your real estate needs.  Keep me in mind if you know anyone looking at either selling or buying real estate in SW Washington.  I greatly appreciate your business and continued referrals! 

Maintaining your good credit rating is hard work. It is especially difficult during the troubling economic times all of us are experiencing.   

 

If you have bad credit, it is challenging, but not impossible, to repair your credit.  You need a plan and lots of discipline.  In time, you can turn your credit rating around.

 

Let’s talk about your credit and credit card debt . . .

 

 

Good credit

 

Having good credit is great.  Contrary to what you read in the papers or hear, credit is available for housing and major purchases such as autos, appliances or electronics for members with good credit.  

 

In today’s economy, however, it is best to payoff debt as fast as your can.  Why?  Well, your credit rating is influenced, in large part, by your credit card loan balances relative to your card limits.  It is OK to have high credit limits; just keep the balances low or better yet payoff your cards monthly.

 

Keep your revolving accounts or credit card balances less than one-third of your credit limit.   Low balances indicate that you have plenty of room to borrow if you need. It also validates that you manage you credit appropriately.  There is nothing wrong with having two or three active credit cards.  Keeping your older “seasoned” cards open is a good idea, too. It indicates stability and credit depth.   Remember to keep your balance under control and always pay off higher interest rate cards first. 

 

Thinking about a debt consolidation loan?  Be careful, it takes discipline not to go back to the convenience of using your credit cards.  Get rid of unnecessary credit cards; cut up unused cards and notify the card company in writing to close out your account. A second debt consolidation loan is frowned on by creditors and you will probably be turned down. 

 

It is estimated that 30% of your credit score is based on how you well you manage your “plastic”. 

 

 

Bad credit

 

Members with bad credit are easy prey for credit card companies.  Card companies take liberties with members having credit difficulties.  When you have poor credit, the card companies can cut off your credit lines or increase your interest rate with very little, or any notice!

 

So what can you do when you have poor credit and plenty of credit card debt?

 

Your first priority is to make sure you and your spouse are on the same page. Talk to ymoney.tner or close friends about your finances. While it may seem You will need to sit down and discuss what is important to each of you; your priorities and the sacrifices you need to make to improve your credit.    If you are single, write down what you intend to do to pay on all debt, particularly your credit card debt.  You might want to talk with a close friend, too.  No one wins when you won’t talk about money challenges.  Establish a budget and timeframe to payoff your plastic cards. Prioritize your debts and payoff the highest interest rate card first.

 

If you are have difficulty making monthly payments or don’t have enough money to make full payments on your credit cards, there is still hope to turn your credit around.   First, stay in continuous contact with each creditor.  Tell them that you want to make regular and timely payments but that the payments will be smaller.  The credit union can help by establishing an electronic payment system for you.  Card companies like knowing that you have a plan and that the credit union is helping you.  Your action gives the impression to creditors that you are serious about resolving past due payments and that you have a plan.  Keep you account current and over time your credit rating will improve.

 

Dealing with bill collectors;

 

Typically, when a merchant has an account that is more than 60-90 days past due, it is assigned to a collection agency.  Collection agencies are in business to collect money. Agencies are paid on commission so they are less apt to want to work with you but if they believe you are trying to pay you obligation, the agency will do a workout plan with you. 

 

Your first step is to develop a plan and present it to the collection agency.

 

Request that the collector agree to remove the collection notice from your credit report after the bill is paid.  Make sure the agreement is in writing.

 

Avoid debt schemes or “out of debt quick” programs or so-called debt relief programs

 

Ask the collector if he will accept a settlement for less than you actually owe.  No money?  Perhaps a family member can help out.  It could save you big dollars.

 

Your best advice . .  . talk with the credit union. 

 

KaiPerm loan officers are experienced at helping members with credit problems.  We help members every day with the challenges of staying afloat during these turbulent economic times.

GOOD GRIEF! Could anyone have even guessed how fast the economy has slipped in the past few months? The country is witnessing a meltdown of gigantic proportions; a once in a life time phenomena.

With all the uncertainty, what action should credit union members take? First, closely scrutinize your budget and treat your money like it is a business. No one knows how long the recession is going to last. One thing's for sure; you'll need to tighten your belt. Start by reviewing your spending habits with your spouse. Make sure both of you are on the same page financially.

If you are single or a single parent, there should not be any sacred cows as you go through your budget. You are the only source of income for your kids. Let them know if you have to cut back on spending.

You can also search KaiPerm's website for helpful and trusted resources that can help you improve your planning and show you how to save money.

 

Cash is King! So take a look at your current debt. You may have an opportunity to reduce interest rates on your loans. Check your loan paperwork and check the interest rates on your auto, credit cards and even your residence. Some experts are expecting that 30 year mortgage loans may drop another full percentage point.

KaiPerm's 15 year home equity loan rate is a fixed 4.50% (as of January 6). Also consider a US Department of Agriculture loan. The agency has money available for low/no down payment loans for home purchases outside the designated urban growth boundaries. It's a great way to buy your first home. There are some income restrictions. FHA is also making 95% loan to value loans.

 

Keep your credit rating up. Many credit cards accounts can (and do) increase your interest rate if you miss even one payment on other loans you have. If you have a few extra dollars, make sure you payoff your high interest rate debt first. You will save money and avoid the expensive of high over limit fees and exorbitant late charges.

Do you have student loans? Make sure you know when interest is going to start up. Defaults on student loans can harm your credit rating.

Check out our website; go to Financial Resources then click Identity Theft, a webinar that will help you further protect your money from fraudsters.

 

Do your borrowing, saving or purchasing needs with reputable and well established businesses. Be cautious for getting "a steal" from a new or unproven business.

Buying opportunities are out there. It is a very good time to be buying from retailers such as electronics firms or a new/used car dealers. Retailers are ready and willing to "make a deal".

But don't expect a dealer to take your existing car in trade or even give you anything remotely close to its value. The new/used car market is devastated. You'll be lucky to even get an offer to buy it from the dealer. Many new car dealers have lost their reputable financing outlets. If your credit score is less than 700, you may not be able to go through a financing outlet.

KaiPerm has plenty of money to lend - get pre-approved before buying an auto. We lend money to fellow members and place more emphasis on character than credit scoring. And think about selling your car privately or donating it.

 

Last, don't give up hope. Will the economy get better? Sure, it will, but some experts think the economy will be depressed for at least one year and probably longer. That's why you need to talk with us to help you through the difficult times. KaiPerm is here, we have great savings rates, low borrowing rates and a strong desire to be the most trusted financial resource you have.

Do you need financial counseling? Give KaiPerm a call. We can and want to help you. My direct number is 503-813-3258.

Happy New Year