Merlot Mortgage News

The First-Time Homebuyer Tax Credit

2009-07-01T18:04:00.000-07:00

A tax credit of up to $8,000 is available for qualified first-time buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009. The tax credit is for first-time home buyers only. For the tax credit program, the IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase.

The tax credit does not have to be repaid.
The tax credit is equal to 10 percent of the home's purchase price up to a maximum of $8,000
Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.

Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on Line 69 of their 1040 income tax return. No other applications or forms are required, and no pre-approval is necessary. However, you should be sure that you qualify for the credit under the income limits and first-time home buyer tests. Note that you cannot claim the credit on Form 5405 for an intended purchase for some future date; it must be a completed purchase.

Is a tax credit the same as a tax deduction?

No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS.

What types of homes will qualify for the tax credit?

Any home that will be used as a principal residence will qualify for the credit. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.

Are there any income limits for claiming the tax credit?

Yes. The income limit for single taxpayers is $75,000; the limit is $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The phase-out range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.

2009-03-15T10:47:00.000-07:00

It appears many people have shifted to a discussion of the bail out to a discussion of what's in the bail out for me. The loss of the big picture is frightening to me. It doesn't matter what's in it for me if this puts our country into bankruptcy. Why do we think bigger debt will solve the problems of current debt and debt mismanagement. It seems to me this is like having a child who got into something that is over their head. When that happens what is the best way to "help" the child? Bail them out? Let them learn their own lesson the hard way? When a child gets bailed out the first time their reaction is telling to whether it was a good idea or not. If the child continues in the same direction the bail out was not a good idea. When they change direction and show responsibility where before there was none it was a good idea. So we did a bail out and now we are on the second bail out with some of the same players. Hmmmmmmmmmmm, I wonder what the lesson was those players learned. It seems to me they learned to stick their hand out. And that lesson is trickling down to the folks who now have their hands out. What kind of a hole are we digging? I know I have said this before but here is my opinion of what we should do and this is all we should do. Everyone else should be on their own.

The Fed and Treasury have the ability to borrow money for 10 years for under 3%. They make loans for 4%. These loans would be for conforming situations only and should be for purchases and refinances. No funky programs all Fannie/Freddie guidelines but at 4% everyone would be refinancing and the lowered interest would be a real stimulus to the folks and this program would really be a loan. In fact to borrow at 3% and loan at 4% the Fed/Treasury could actually pay off some debt. Why on earth would anyone be even considering putting our country into the massive debt that being tossed around currently when there are real options for helping people without killing our capitalist society.

2009-01-11T20:23:00.000-08:00

OK, now it's a bail out. What is up with the Federal Government allowing requests for money from any business out there that is having financial problems? When I read that Larry Flynt was making an appeal for money it really made me go hmmmm. I thought we were a capitalist country which means everyone has the opportunity to make lots of money and the opportunity to lose lots of money. If a company needs a loan they go to a bank; not the government. It is against our basic principles to put our government in the business of business. How did it happen that one day we were talking about finding a way of a mortgage crisis and now we are looking at socializing our entire business community? A person I read a regular newsletter from has a perfect solution for stimulating the economy for the regular folks; main street not wall street as the current speak goes. Here's his idea.

The Fed and Treasury have the ability to borrow money for 10 years for under 3%. They make loans for 4%. These loans would be for conforming situations only and should be for purchases and refinances. No funky programs all Fannie/Freddie guidelines but at 4% everyone would be refinancing and the lowered interest would be a real stimulus to the folks and this program would really be a loan. In fact to borrow at 3% and loan at 4% the Fed/Treasury could actually pay off some debt.

Why on earth would anyone be even considering putting our country into the massive debt that being tossed around currently when there are real options for helping people without killing our capitalist society.

Bail Out and Other Real Estate Issues

2008-09-23T13:05:00.000-07:00

It’s not a bail out. The mortgage system works like this; a person wants to buy a house so they apply for a loan with Merlot Mortgage. Merlot Mortgage goes to a lender who has a warehouse line of credit and they give our borrower the money to buy a house from this line of credit. After a whole bunch of similar borrowers get money the credit line runs out and the lender bundles these mortgages and sells them to free up the credit line and does it all over again. When the credit line runs out and no one will buy the bundled mortgages everything stops. You can’t get a mortgage and the lenders are stuck doing nothing but holding a bunch of mortgages which isn’t really their business. The reason no one wants to buy the bundled mortgages anymore is because they bundled the good with the bad or really the low risk with the high risk. There really isn’t a bad loan there is just a riskier loan which is OK as long as the risk is covered. The riskier the loan the more money to be made on the loan in higher fees and rates so when something goes wrong the risk was covered. But when the low risk and the high risk are mixed up no one wants to buy because you don’t know what they are buying. So now the government is going to buy these assets and free up the credit lines so business can continue. This is really an opportunity for the government to actually make some money if they do it right. They need to make sure the loans are bundled correctly and bought right. For instance they should buy A paper loans (these are the good ones with low risk) at a 20% discount. They should buy the next level of loans at a 40% discount, and the really risky loans at a 60% discount. This will put them in a good position to now go forward and service these loans or sell them again in the future when money is flowing easier and therefore the discount will be less or even go away. If the really risky loans are about at a 60% discount we still come out ahead even if half these loan default which they won’t. Make sense? So it’s not a bail out it’s an investment and possibly a good one.

Now for the Real Estate Side.....

I am so sick of talking about how bad the real estate market is or trying to create a false feeling of hope that things are just about to turn around. So instead I think I will talk about a new concept Jeff and I are learning about that will create wealth for an individual and includes the mortgage and real estate business. We have been to a couple of presentations put on by our friend Guinevere Johnson through her business, True Wealth Advisory. The idea is to take equity wherever you can find it which may include buying another house or refinancing your current home and putting that equity into a safe, liquid investment which will most likely be a life insurance contract, but could also be an annuity. This concept takes some education to get your mind wrapped around it but each time we hear the drill we think it might be the right idea for many investors. The strategy includes several aspects and is too involved to fully explain it here but it is definitely worth learning about to decide if it might be right for your investment goals. Even during this difficult time there are ways to make money and especially important there are ways to keep the money or equity you have safe. If you want to learn more call Jeff and let him introduce you to this concept.

2008-07-01T18:44:00.000-07:00

Do you have any idea how many homes for sale in Bend are “short sales” right now? Well, the answer may surprise you and it’s somewhere in this newsletter, and the first one to email me the (our) answer gets a gift certificate to the restaurant at the Bend Airport. Well, it seems like a trend recently, and I want to point out that if you have an adjustable rate mortgage loan (ARM), it may be worth your time to analyze your existing loan and look at some options. If inflation becomes an issue, those low adjustable rates will start to rise. I’m only a phone call or email away. It’s a good idea to be proactive with all your investments, including your home. Also, be sure and take advantage of our “package plan” when you are thinking about purchasing your next home. Hire Marcy as your Realtor and me as your lender and we’ll contribute a sizeable part of our fee to your costs. It makes sense to us from a marketing standpoint and it’s definitely a win-win situation. We are still in a buyer’s market in this area, so if you’re thinking about making an investment in real estate, now may be a good time with prices where they are. One thing I definitely suggest is to take a little time to meet with us to get totally “credit approved” for your next purchase prior to even finding your property. This costs you nothing but an hour of your time, makes you equivalent to a “cash” buyer, and makes your offer much stronger as the seller knows you are actually approved. We’re still in a “tight” lending market so being pro-active here is a huge benefit. Lastly, don’t even think about applying for a loan online or calling 1-800- getmealoan. Deal locally with someone you can trust and who wants to build a long term relationship.

And in the Real Estate World

I don’t know what to think about my Real Estate career. After working two months at NorthWest Crossing Realty they decided to close the office. Uh, what’s up with that? This was the type of job that had a long term plan, not a job for a couple of months!! Don’t they know I was just getting comfortable with the project? We were just developing into a team and working on getting a rhythm established in the office. Anyway I now have to find a new home for my Real Estate license and find a new job all at the same time. The question is will my new job be in Real Estate? Real Estate and Mortgage Lending seem to go hand in hand and the idea seems to be a good synergy we just haven’t been able to make that work yet. But I am tapping into my positive intention and good vibrations and everything else that makes things work in the universe so I am sure the path is right here and I am just taking the first steps to a fabulous, abundant future. So all you people out there who have forgotten that Jeff does loans and I sell Real Estate you need to think Merlot Mortgage and Jeff & Marcy. Yes, we can compete with the banks (as we always have). Yes we can do VA loans. Yes we still have a variety of loan programs. Yes it is still possible to do a loan, even on an investment property. Yes we would still like to hear from you. Now, who wants to buy or sell some Real Estate? Call us. And yes my license is active and now hung with Brooks Resources Realty. I am involved in trying to develop a team within that company. More to come....

2008-05-28T19:57:00.000-07:00

The guy at the mortgage desk is waiting for your call. Business is still in the slow lane, but busier than a couple months ago. Rates are in the low 6% range and we’re all rested up and ready for the onslaught. Do not make the mistake of calling 1-800- getmealoan, or ww.we’llsay anything to get your loan business. Call someone local who will take care of you and your needs. This market reminds me of the way things were back in ’92. The criteria for loan approval is based on reality instead of simply having a heart beat. What a concept! And talk about “values” coming in. Now that’s a real challenge. Here’s a little look-back analysis for you to get an idea of where we’ve come from since the Summer of ’05. In June of ’05 the median home price in Bend was $269k. By May of ’07, it was $396k. That’s a 47% increase in a 24 month period. We were happy with that. OK, we were drunk with irrational exuberance and unrealistic optimism. Buy before it’s too late was my thinking. And to think I lived through the recession of the early ‘80s. Well, by April ’08 the median price was down to $270k. That’s a 32% decrease in a 12 month period, and put us back even with June ’05 practically. What a wonderful world we’re in. So, if you purchased since June ’05, you should hang on to it and ride out this housing slump. How long before our market comes back you may ask. Great question, and here’s my take on it, quoting Warren Buffet. “We don’t try to time anything or predict,” he says. “We just look for where there’s good values and if we find them, we buy them. Nobody knows what the economy is going to look like a year or two years from now.” Current conditions may lead to something more severe, he says, or if we’re lucky, it won’t. “I’ve never made any money on economic forecasting,” says Buffett. “I made money by staying out of trouble.”

and on the real estate front...

We are definitely still in a struggle in the real estate world in Bend, Oregon and all over the country. There are a few specific issues in play but one that is on my mind today is determining the value of a property. Isn’t the definition of the value of a property the amount of money a willing buyer will pay at that specific time? Then how can an appraisal come in under the sales price agreed to on a fully executed earnest money agreement? This subject is really frustrating right now for buyers, seller, and realtors. The seller wants to get a fair price for his home and many have a bottom line they must get for the property because of the underlying debt that must be paid. The buyer doesn’t want to pay too much and in many situations cannot pay over the appraised value. Realtors want to give good advice on where to price the property so people will look at it and make an offer. Then add in the phenomenon of buyers right now feeling like they are in charge and they must offer substantially less than the list price for the property or they are not savvy buyers. I hate the game of pricing a property substantially over the expected sale price but at the same time if that’s the game everyone is playing do you have to play to be in the game? To all that we factor in the short sales and foreclosures and we really have a mess trying to come up with a value or price for a property. I think until all those hundreds of foreclosure notices get resolved we are going to have value problems which means sale and mortgage problems. Darn it!!

Mortgages & Real Estate

2008-04-29T14:02:00.000-07:00

Well there’s not a lot of new stuff to talk about in the mortgage business. “Things” are about the same as the last few months (actually since July 30, 2007) If you have an adjustable rate mortgage, you might consider talking to me about whether it’s still a good loan for you. With the Fed lowering their funds rate, your adjustable rate should be going down pretty substantially, so it may still be a good loan for you. On the other hand, if you are thinking of keeping your property, you may want to look at getting into a longer term fixed rate while rates are still below 6%. Lot’s of people took advantage of the Option ARM the past few years for a fantastically low monthly payment. That particular loan has a “trigger” which is around 3 to 5 years. If you have this type loan, it might be a good time to call me to discuss the future of your mortgage. It’s better to know what you want to do then to react to something that is happening TO you. I always enjoy discussing loan scenarios with my past clients (and their friends). Now-a-days your mortgage is a financial tool like any other investment vehicle you have. Assessing where you are and planning for where you want to go is free, fun, and could be lucrative. I’m here for ya. Let’s talk soon. And remember, it is up to you if it……. “looks like a good year”

And on the Real Estate Front

I have made a change with my Real Estate license and now have it with NorthWest Crossing Realty and one of my best friends David Quiros as the principal broker. I am very excited about the change and will spend 5 days a week in that office. Of course there is a lot to learn about the NorthWest Crossing project and I am still learning everyday but here is what I know so far. NorthWest Crossing is made up of 486 acres of mixed use land including residential, commercial, light industrial, schools, parks, and open space. It has a new urbanism feel with a focus on green building and connectivity for its residents. The idea is to have a community where people can work, live, and socialize without needing to drive a car. You can easily walk or bike all around the neighborhood. There is no one builder so the homes are very diverse in both size and outward appearance. The project I am the most interested in, although we still don’t have a complete unit to view, is the Fremont Place Live/Work Townhomes. These are zoned and designed for about 600 square feet of retail space on the bottom and 1500 to 1800 square feet of living space on top. These units are being built by Renaissance Homes and are definitely a trend for the future. As someone who has been working out of the home I know it is a cool concept and this takes is one step better than just turning some space inside your home into work space; this is dedicated retail / office space with an outside entrance so your personal space is not impacted by your work space. Call me if you want to move into your own live/work unit in NorthWest Crossing or for any other property in the neighborhood!