Danette O'Neal

The Federal Emergency Management Agency on Wednesday stepped up pressure on Congress to reauthorize the National Flood Insurance Program. The program is set to expire at the end of May, and FEMA warned that after that time NFIP won’t be able to issue new policies. The program is seen as key for limiting the costs of natural disasters. The House and Senate were unable to agree on a NFIP reauthorization last year, and extended the program without changes until May 31. (Houselogic 5/3/12)

Low interest rates and new loan programs abound this spring, so if you assumed your refinancing and mortgage options were dismal, you’ll be surprised by these three offerings.

1. Refinance with new FHA fees : FHA raised insurance premiums for new borrowers, while lowering fees for some existing customers who refinance, making comparison shopping with private mortgage insurance worthwhile.

The details: FHA’s new insurance premium rates include a great deal for existing FHA borrowers — you can refinance by paying a miniscule .01% upfront fee and an annual premium of just .55% starting June 11.  The catch: The deal is only for home owners who got their FHA mortgage on or before May 31, 2009. The latest FHA deal for new FHA customers buying homes isn’t nearly as sweet. You’ll pay a whopping 1.75% upfront fee and an annual premium of 1.25%. For a $200,000 loan, that’s $3,500 for the upfront premium payment and $2,500 for the annual premium.

2. Refinance underwater mortgage: If you owe more than your home is worth, you may finally be able to refinance into a lower rate thanks to the government’s HARP refinancing program. You can take advantage of historically low interest rates by using the latest version of the Home Affordable Refinance Program. The HARP program even works if you’ve been hit by the economic double-whammy of a falling family income and a falling home price. You qualify for a HARP refinance if you have income coming in and you’ve made your mortgage payments on time every month for the past six months and have no more than one late payment in the past year. Caution…Banks can layer their own tougher rules on top of the HARP requirements, and they’re not obligated to let you use the program to refinance your existing loan.

3. Refinance rental properties: Some real estate investors have new loan options for the first time in years. In recent years, small landlords like me have had a tough time finding a bank to finance more rental property purchases. Once you had more than four rental property loans, Fannie Mae and Freddie Mac were no longer willing to guarantee your loans, even when your credit scores were top-notch and the property was able to turn a profit from day one of ownership. Only Fannie Mae has made this change. (It’ll purchase up to 10 loans from any one investor.) Freddie Mac is still limiting single-family landlords to four loans. Most banks discount your rental income by 25% when making investor loans, which adds up when you have multiple properties. (Houselogic 4/25/12).

Recent and pending changes to FHA-backed loans may increase barriers to home ownership and hamper the housing market recovery. Right now, sellers can pay 6% of the buyers’ closing costs.  Sellers use closing costs as a way to get buyers to buy their home. FHA is asking home owners and those in the housing industry what they think about limiting closing cost help to 3% or $6,000, whichever is greater. FHA thinks having buyers put up more cash at closing will make them less likely to default later on their mortgages. The problem is that making home buyers pay more at closing could slow down the real estate market recovery.  Seller concessions are critical in these and other areas to allowing the borrowers to buy a home without depleting all of their savings.

If you’re house-hunting with a loan backed by the Federal Housing Administration (FHA), you may be on the hook for higher costs.

Right now, sellers can pay 6% of the buyers’ closing costs. That helps first-time home buyers who often struggle to come up with enough cash for a down payment plus closing costs. Sellers use closing costs as a way to get buyers to buy their home. FHA is proposing 3% or $6,000, whichever is greater. FHA thinks having buyers put up more cash at closing will make them less likely to default later on their mortgages. The problem is that making home buyers pay more at closing could slow down the real estate market recovery.

The closing cost proposal comes on the heels of an increase in FHA mortgage insurance premiums that took effect April 9: The up-front mortgage insurance premium for most FHA borrowers increased to 1.75% of the loan from 1%. FHA also raised its annual mortgage insurance premium for loans under $625,000 to 1.25% from 1.15%. Home owners with FHA loans exceeding $625,000 will see their mortgage insurance premiums rise to 1.5%. Approximately 40% of all new mortgages for home purchases in 2011 were backed by the FHA.  The long and short of it is….it is becoming more expensive for consumers to buy homes. And as the last few years have shown, when home prices fall, the private sector money flees the mortgage market. (Houselogic 4/16/12)

For the 2012 tax year, you can take a tax deduction on medically necessary home improvements — like installing a wheelchair ramp and other projects that make life easier for an ill or injured family member — if you: Itemize deductions, Spend more than 7.5% of your adjusted gross income on the upgrades (10% of AGI if you’re subject to alternative minimum tax).

Starting in 2013, if you’re under age 65, you can’t take the tax deduction on medical expenses until you spend 10% of your AGI. But if you’re 65 or older in 2013, you can stick with the 7.5% AGI tax deduction threshold through the end of 2016. The rules for tax deductions on medical home improvements are tricky: 1.) Start with what it costs to modify your home. 2.) Subtract the value the upgrades add to your home. 3.) What’s leftover is your tax deduction — if you meet your AGI threshold. How it works: Say you’re 45 years old and spend $20,000 to put a bathroom on the first floor of your home because your husband can’t climb stairs anymore. Your AGI is $100,000 and the bathroom adds $10,000 to the value of your house. 1.) Start with the cost of the improvements: $20,000 2.) Subtract your added home value: $10,000 3.) Of that $10,000 difference, you can only take a deduction for expenses that exceed 7.5% of your AGI or $7,500.

So if you itemize, you can take a $2,500 deduction for the 2012 tax year. Wait until 2013 and you get no deduction because your threshold rises to 10%. If you’re over age 65, though, you can claim a $2,500 deduction. Some of the improvements that you can claim a tax deduction for, according to IRS Publication 502, “Medical and Dental Expenses”: Entrance ramps for your home; Grading the yard before building a ramp, or to make it easier to get in your home; Widening exterior or interior doorways; Widening or removing hallways; Installing railings, support bars, or other bathroom improvements, Lowering or modifying kitchen cabinets and equipment; Moving or modifying electrical outlets and fixtures;  Installing porch lifts and other forms of lifts (but elevators generally add value to the house); Modifying fire alarms, smoke detectors, and other warning systems, Modifying stairways, Lead-based paint removal, Adding handrails, Changing door knobs; upkeep of medically necessary upgrades, like elevators, and operating costs; Lead-based paint removal if your child has lead poisoning; and renovating an existing bathroom to make it handicap accessible or adding a new accessible bath. (Houselogic 4/10/12).