Borrower-paid MI premiums are tax-deductible through the year 2011. Below are answers to commonly asked questions regarding the law.

Borrowers should consult their tax advisors regarding MI tax deductibility. See disclaimer note below.

FAQs

Does the bill apply to MGIC mortgage insurance?

Yes, borrower-paid MI provided by MGIC qualifies for the deduction. This includes our Monthly, One-Time MI and Split Premium plans. There are varied opinions on the deductibility of lender-paid MI as the IRS has not yet clarified the deductibility. It is recommended that borrowers consult their tax advisors regarding the amount that is deductible.

What types of mortgage loans qualify for the MI tax deduction?

Loans used for “acquisition indebtedness” — that is, money borrowed to buy, build or substantially improve a residence — are eligible, as long as the debt is secured by the same residence. This includes purchase loans and refinance loans, up to the original acquisition indebtedness. (Money borrowed against the equity in a home or when refinancing a home for any reason other than to buy, build or substantially improve a residence is called “equity indebtedness.”)

When refinancing a piggyback loan originally used to acquire a property, is the original loan amount considered the sum of the two mortgages or only the primary mortgage amount without the second lien included?

The original acquisition indebtedness is considered to be the sum of the two mortgages.

Is deductibility applicable for all loan types?

There is no differentiation among loan types.

What types of properties are eligible for tax deductibility?

The deduction applies to “qualified residences,” as defined in the Internal Revenue Code. Generally, that includes the borrower’s primary residence and a nonrental second home. As with mortgage interest, borrowers can deduct mortgage insurance premiums paid on both their primary residence and one other qualified residence each year. Investor loans are not eligible.

Who qualifies for this itemized deduction?

Households with adjusted gross incomes of $100,000 or less will be able to deduct 100% of their MI premiums. The deduction is reduced by 10% for each additional $1,000 of adjusted gross household income, phasing out after $109,000. (Details below.)

Married individuals filing separate returns who have adjusted gross incomes of $50,000 or less will be able to deduct 50% of their MI premiums. The deduction is reduced by 5% for each additional $500 of adjusted gross income, phasing out after $54,500. (Details below.)

The deduction is not restricted to first-time homebuyers.

Is adjusted gross income calculated before or after deductions?

Adjusted gross income is calculated before itemized deductions, including the MI deduction.

How does the MI tax deduction work?

Borrowers who itemize deductions are able to reduce their overall taxable income in the same manner as mortgage interest.

Are borrower-paid, single premiums, which are paid up front in a lump sum, eligible for the deduction?

Yes, borrower-paid, single-premiums are eligible for the deduction under the new law. Borrowers should consult with a professional tax advisor to determine the amount of the MI premium eligible for the tax deduction.

If the single premium is financed, are both the mortgage insurance premium and the interest tax deductible?

We believe that if the loan is for acquisition indebtedness, both the interest attributable to the entire loan balance as well as the allocated portion of the mortgage insurance premium are tax deductible.

How would a premium refund issued during the tax year affect eligibility and the amount of the MI deduction?

Borrowers are only permitted to deduct that portion of their MI premium attributable to a tax year. If the MI is dropped, and a refund is paid, the amount refunded would reduce the amount of MI premium that could be attributable to that tax year and be deducted.

Note: MGIC cannot provide tax advice. Taxpayers should consult their tax advisor to ascertain if they are eligible to take this deduction. The answers to these questions are based on an interpretation of the language of the statute, the Joint Committee on Taxation’s Technical Explanation of the statutory language, and present law. The Internal Revenue Service (“IRS”) will issue guidance interpreting the new provision, and could reach different conclusions for some of the issues raised.

Excerpts from the article:

By Dr. Steve Sjuggerud
Wednesday, June 1, 2011

Now is literally the best time in recorded history to buy a house in America…

Right now – today – U.S. real estate is the most affordable it’s ever been. Ever.

When I say “affordable,” I’m looking at three things: house prices, mortgage rates, and incomes. With the Affordability Index near 200, the median family has 200% of the income necessary to buy the median home (or more specifically, to qualify for a conventional loan on the median home).

Right now, as you know, house prices are sitting near new lows for this cycle, down by roughly one-third (depending on who’s counting). And right now, mortgage rates – after ticking above 5% earlier this year – are all the way down to 4.5% again, near all-time lows.

So it’s simple: With the worst house-price crash in American history, combined with the lowest mortgage rates in history, you can now afford more home than ever. Meanwhile, hope is gone. Everyone thinks housing is hopeless. That is when a bear market ends and a new bull market begins.

At a conference I attended last month, some speakers spoke woefully of the large supply of houses for sale. That will take care of itself in time. Others bemoaned the certainty of higher interest rates in the future, which would hurt housing. But they shouldn’t be so certain…

Twenty years ago, Japan faced a housing bust similar to ours. Japan’s government has cut interest rates to near zero and printed money. And long-term interest rates in Japan currently sit around 1%. Even rising interest rates won’t kill housing… In the 1970s, interest rates were rising, and house prices outperformed stock prices.

The story is simple: House prices have fallen more than ever… And mortgage rates are lower than ever. If you can buy a house now (and want one), go for it.

Now is the best time in American history to do it.

Good investing,

Steve
http://www.dailywealth.com

Here are some quick excerpts from the article:

The era of get-rich-quick real estate is dead. The era of increasing long-term wealth in your home is back.

Historical data from the National Association of Realtors (and adjusted for inflation by Businessweek.com) show that in 18 of the 25 largest metro areas in the U.S., the value of homes purchased in 1990 had increased by 2010, often by double digits. And this in a year when real estate prices around the country have softened since their peak in 2006. These houses would have been worth even more a few years ago.

While that’s cold comfort for the many Americans whose homes have lost more than $1.7 trillion in value in 2010, according to a new report by Zillow.com, it underscores the fact that homeowners who buy for the long term have historically seen the value of their investment increase over the years. In inflation-adjusted terms, the median U.S. home sale price in the third quarter remains approximately 9.5 percent higher than in 1990, despite falling 26 percent from peak levels, according to calculations based on NAR data.

Says Greg Hebner, chief operating officer at Sorrento Capital, an Irvine (Calif.) asset management firm: “You should at least be looking at housing now,” especially as interest rates are low and homeowners can deduct mortgage interest from their income taxes. “It’s still a good game” if a buyer understands the risks, has consistent income, and purchases a house he can afford, Hebner says.

When Supply Is Limited

Based on data since 1968, nominal U.S. home prices have risen 5.5 percent annually and outpaced inflation by about 1 percent to 2 percent, says Lawrence Yun, NAR’s chief economist. The main reasons housing has grown faster than inflation, he says, are that more people wanted to buy in places with a finite supply of developable land, which drove up prices, and owners increased the value of their properties through home improvements.

Home prices followed this pattern through most the 1990s but started shooting up in the early 2000s. Between 2000 and 2006, nominal prices rose 89 percent, according to data from Moody’s Economy.com and Fiserv (FISV), a financial service company in Brookfield, Wis.

Economists from NAR, Fiserv, and Moody’s Analytics interviewed for this story expect home prices to continue to grow slightly more than inflation in the long term. Still, buyers are not likely to see prices skyrocket the way they did in the early 2000s, at least in the near future.

Up by Half, or More

In an analysis of the country’s 25 largest metro areas, Businessweek.com found that the Portland (Ore.) area had the largest real price gain since 1990, with the median sale price in this year’s third quarter ($242,100) up about 85 percent over 1990, in inflation-adjusted terms. Home prices in the Denver, Baltimore, and Seattle areas also made gains of more than 50 percent in that period.

As a Mortgage Banker/Broker for Pacific Residential Mortgage in Portland, OR I am happy to see a national news outlet confirming what I have been relaying to my clients. The get rich quick scheme for real estate has been dead for sometime and aruably should never have started.

Traditionally, spring is the hottest season for real estate. Sales peak in April and May and stay strong in June and July. It’s a good season for families to move, between school terms and while the weather is warm. People have just received their tax refunds, which they can use to help finance a down payment. And the nice weather and beautiful flowers in spring and early summer make it a great time to show your home.

In fact, a full 60 percent of America’s moves take place in the summer. But closing a sale can take weeks, so it’s a good idea to list your home early in the season.

Traditionally, August brings a lag in sales, as people go away on vacation and start to think about the new school year. Then sales surge briefly in the fall before dropping in winter as buyers and sellers focus on the holidays. But by January, buyers are out again, and sales steadily increase into spring.

If you can’t sell in the peak season, consider listing your house in winter. It may sound counterintuitive, but you probably already have the house decorated and cleaned for holiday entertaining, so it shouldn’t be hard to get it in shape for showing. Moreover, you will have less competition and may get a better price. Another plus: buyers in winter are less likely to waste your time or draw out the closing. They may want to close before the New Year so they can claim the mortgage deduction on their tax return, which you could turn to your advantage in pressing for a quick deal.

But seasonal ups and downs of the market aren’t absolutes. They don’t affect home sales as much in temperate climates, like California and Florida, where people house-hunt year-round. And warmer weather in the Northeast and Midwest in November and early December can prolong real-estate seasons there. Where I am, here in the Northwest, it’s pretty moderate and runs with the Nation’s norm.

Of course, selling in the hot season isn’t the whole story. You should pay attention to your local housing market and try to list during a seller’s market, when there will be more competition among buyers for your home – which could mean a better price, a quicker closing and fewer conditions on the offer. There aren’t too many places in the country right now where it’s a sellers market. There is lots and lots of inventory and not a lot buyers. There is also talk of another dip in Real Estate values. Your local real estate agent will be able to tell you what the local housing market is like. Take a look at the chart below, if you need to sell, now may be the time to get ahead of any further corrections. This just happens to be on Portland, OR. Follow this link to find more cities. http://www.macromarkets.com/real-estate/sp_caseshiller.shtml

Be aware of the underlying factors that influence the local market. Recent layoffs could mean a glut of desperate sellers, possibly driving down the market price of your house. Alternatively, you may be in an area of the country where housing prices are going through the roof. You may not be in one of those areas, but if prices in your area are on the rise, it can create a rush of buyers who want to close a deal before the prices go higher. Anticipation of an increase in interest rates can have a similar impact on the urgency of buyers. The later is actually more likely to happen. Rates it appears, have bottomed out and we are likely NOT to see 4.0% on a 30 year fixed again. If they keep creeping up, look for these fence sitters to get off and get moving.

In Summary, consult with your local real esate professionals. They are going to know the trends of  your local market better than anyone. Besides, it doesn’t really matter what’s happening in Nevada, Florida, California or Michigan… what really matters is what’s happening right in your own neighborhood. Good luck and happy selling!

Ignore your listing agent’s advice by “testing the market” with a too-high asking price. Home almost always sell faster and for more money if they’re correctly from the outset.

Let your emotional investment in the home dictate a pricing strategy. Instead, stay objective by focusing on data contained in your agent’s comparative market analysis.

Try to “recoup” the agent’s commission by overpricing property. Like testing the market with an inflated value, this approach usually forces a seller to slash the price after the home sits on the market too long.

Chase the market with stingy price cuts. If you’ve priced your home fairly and still haven’t gotten any offers, don’t hesitate to lower the price.  But make it worthwhile.  Small reductions simply keep your home “stuck” behind more competitively priced properties.

Hope this sheds some light for you on pricing blunders and how to avoid them.  I also have a free report titled “10 Steps To Sell Your Home in a Slow Market” you can have just by clicking the title. Happy selling!

Existing-home sales fell in January but are above year-ago levels, according to the National Association of Realtors®

Existing-home sales – including single-family, townhomes, condominiums and co-ops – dropped 7.2 percent to a seasonally adjusted annual rate  of 5.05 million units in January from a revised 5.44 million in December, but remain 11.5 percent above the 4.53 million-unit level in January 2009.

In looking at the annualized, adjusted Existing Home Sales data, we find:

1. Sales volume is at its lowest levels since June 2009
2. Sales volume fell below its 12-month rolling average
3. Home supplies are at a 5-month high

I wouldn’t read too much into these number though. The market is cyclical and the weather this winter definitely impeded activity. Plus, we are still adjusting from last November’s flurry of activity after the first First Time Home Buyer Tax Credit. By the way, the extension of the credit is running out soon, make sure you are in contract to buy by April 30th of this year and complete the transaction by June 30th of this year to qualify.

It would appear that we are set for a good February and March and numbers are in line with expectations. The Good news from all this is buyers are finding better deals and sellers are more willing to negotiate!

As always of if need some help getting financing together for you next home purchase or refinance, give me a call or shoot me an email.

Enjoy your day!

According to the National Association of Realtors (NAR), existing-home sales fell in January but are above year-ago levels.  Economists polled by Thomson Reuters had forecast that completed sales last month rose almost 1% to a seasonally adjusted annual rate of 5.5 million, up from 5.45 million in December.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – dropped 7.2% to a seasonally adjusted annual rate1 of 5.05 million units in January from a revised 5.44 million in December, but remain 11.5% above the 4.53 million-unit level in January 2009.  Total housing inventory at the end of January fell 0.5% to 3.27 million existing homes available for sale, which represents a 7.8-month supply at the current sales pace, up from a 7.2-month supply in December. Raw unsold inventory is 9.6% below a year ago, and is at the lowest level since March 2006.

The national median existing-home price for all housing types was $164,700 in January, unchange  d from a year earlier. Distressed homes, which accounted for 38% of sales last month, continue to downwardly distort the median price because they typically are discounted in comparison with traditional homes in the same area.  A parallel NAR practitioner survey4 shows first-time buyers purchased 40% of homes in January, down from 43% in December.

Investors accounted for 17% of transactions in January, up from 15% in December; the remaining sales were to repeat buyers. The survey also shows that buyer traffic increased 9.4% in January.

Last Week; interest rates spiked on continued better economic data and an increase in the producer price index. Therewere four data points on the manufacturing and business sectors, all of which were improvements from Dec. The NYEmpire State manufacturing index jumped, the Philadelphia Fed business index also stronger. Jan industrial productionup 0.9% and Jan factory usage at 72.6%, the best since Dec 2008; within the factory use data the manufacturingpercentage increased to 69.2% up from 68.4% in Dec. While we continue to believe inflation will not be a serious factorfor the rest of the year, the January producer price index surprised with a gain of 1.4% double what analysts wereexpecting. As noted many times here, although the immediate outlook on inflation is subdued, anytime an inflationreading is stronger than markets expect it sends chills through the spines of fixed income investors and traders. Not allthe selling in the bond market was attributable to better economic data; after months of preparing the bond market for theend of monetary easing, the Fed increased the discount rate to 0.75% frm 0.50%. It in itself is not going to increaselending rates, but it once and for all signals the Fed is finished supporting banks and other recipients of governmentlargesse.

This Week; Treasury will be back to the table to borrow another $118B of notes; $44B of 2s, $42B of 5s, and $32B of 7yr notes. On top of that Treasury will auction $8B of 30 yr inflation indexed bonds on Monday. Jan housing statistics thisweek with new and existing home sales, both expected to have increased from Dec. The Dec Case/Shiller home priceindex also out, it attracts attention from a wider national perspective but home price levels are indigenous to each marketarea so other than a indication it has little relevance unless you live in one of the 20 large market areas it specificallydetails. And there is more; two consumer sentiment indexes (the Conference Board’s consumer confidence index and theU. of Michigan consumer sentiment index). Rounding out the week, the Feb Chicago purchasing mgrs index and thesecond look at Q4 GDP, the preliminary read is expected to be unchanged at +5.7%. Interest rates are headed higher, ina choppy pattern but up. The path won’t be straight up and we do not expect rates to increase more than another 50basis points for mortgages or the 10 yr note through the rest of the year. As for any potential for a sizeable decline inrates; it will take a solid break in the equity markets which at this point doesn’t seem likely.

Summary: This week, there’s a lot of economic data set for release.

• Tuesday : Case-Shiller Home Price Index, Consumer Confidence
• Wednesday : New Home Sales
• Thursday : FHFA Home Price Index, Initial Jobless Claims
• Friday : Existing Home Sales, Personal Consumption Expenditures

Any better than expected news on any of headlines above will be bad news for mortgage rates. If you were waiting for the right time to lock, it might have been 2 weeks ago.  We lost all of January’s gains.  If you are in the market for a home loan, consider locking in to protect against futher deterioration.  Need help, give me a call or email.

The Pending Home Sales Index rose slightly in December, climbing 1 percent from November.

A Pending Home Sale is a home that is under contract to sell, but not yet sold. It’s a figure compiled by the National Association of Realtors® using sales data from over 100 regional listing services and more than 60 large brokerages around the country.

Because each pending sale is a true measure of sales activity, the Pending Home Sales Index is purported to be the most reliable forward-looking indicator for housing. 

Recent data supports this hypothesis.

After Pending Home Sales plunged 16 percent in November, Existing Home Sales fell by 17 percent in December.  Based on the most recent Pending Sales Index, therefore, we can expect January’s closed sales to be similarly level.

For home buyers , this is all a bit of good news. Home prices are based on the supply-and-demand balance that exists between buyers and sellers.  When buyers outnumber sellers, like they did through most of 2009, home supplies dip and, in fact, the national home inventory nearly halved during the 12 months ending November 2009.

With fewer homes for sale, multiple-offer situations were almost commonplace and home values rose as result.

Activity has since slowed, however, and fewer buyers are in today’s market. The supply-and-demand equation has shifted back some. In December, home supplies rose for the first time in 7 months and January will likely show the same.

The net result: Home buyers have more homes from which to choose and that can create negotiation leverage for better prices and better concessions.

With mortgage rates still low and a looming deadline on the homebuyer’s tax credit, market activity should be strong between now and April.   Take your time and bid right. And when you’re ready, be ready. The best deals likely won’t last.

Just one month after from blowing away Wall Street, December’s Existing Home Sales hit the skids, shedding nearly 17 percent and falling to a 4-month low.

Don’t be alarmed, though. The plunge was expected. And not just because Pending Home Sales cratered last month.

When November’s Existing Home Sales surged, it was clear to observers that an expiring $8,000 federal tax credit was the catalyst. At the time, the tax program was slated to expire November 30 and the looming deadline pushed a lot of would-be buyers in Beaverton from a December time frame into November.

The expiration date has a cannibalizing effect on December’s sales figures. It was only later that Congress extended the tax credit to June 30, 2010.

So, with home sales plunging in December, it’s no surprise that home supplies rose for the first time in 9 months.  Home Supply is calculating by dividing the number of homes for sale by the current sales pace.

The national housing supply now rests at 7.2 months.

Despite December’s Existing Home Sales report appearing shaky, it’s actually terrific new for home buyers.

See, for the past few months, as housing has been improving, sellers nationwide have been bombarded by messages of “hot markets” and rising home prices by the media.  Psychologically, a seller is more likely to hold firm on price if he believes the housing market is improving and now December’s data is deflating that argument.

This is why we say there’s always two sides to a housing story — the buyers’ side and the sellers’ side. And, usually, what’s good for one party is bad for the other. It’s what we’re seeing now.

Because of soft data like December’s Existing Home Sales, buyers may retake some negotiation leverage that’s been lost since Spring 2009, helping to improve home affordability and, perhaps, spur more sales.