Danette O'Neal

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).

April 17, Tax Day, is fast approaching. So, if you itemize, remember to take advantage of the mortgage interest deduction, one of the many benefits of home ownership. The MID saves the average home owner about $3,000 per year. In addition, as mortgage rates bottom out and the rental costs exceed those of home ownership, this spring may be the most vibrant for real estate in years. Climbing rents for apartments are combining with a continued decline in home prices to push once-reluctant home buyers into finally taking the plunge.

Home owners and home buyers still waiting for mortgage rates to reach bottom may have already missed it. The average rate for 30-year mortgages, which hit record lows in February, briefly rose above 4% last month. Many economists predict rates will continue to rise gradually as the economy and housing market recover. Freddie Mac, the government-backed mortgage company, forecasts 30-year rates will hit 4.5% by the end of 2012 and 5% by late next year, up from an average of just under 4% last week. What are you waiting for.
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Here are six ways to tornado-proof your home. Warning: These aren’t cheap — nor foolproof — methods. But there are other measures you can take to strengthen your house and prevent costly damage. Here are 6 tornado-proofing ideas suggested by our friends at Safer, Stronger Homes.

1. Extra fasteners for roof sheathing: The risk: Winds tear off roof sheathing, exposing the interior of the house to damaging rain and debris.

Fix: Use ring-shank nails or screws to fasten plywood sheathing to roof rafters. Use tighter nail spacing than required by code (typically 6 inches apart). Careful nailing is a must, especially at the edges of sheathing panels. Cost: $450 (average)

2. Seal roof sheathing seams: The risk: Winds lift off underlayment (the protective layer directly below shingles), exposing joints in the roof sheathing. Fix: Seal sheathing joints with bituminous peel-and-stick flashing tape. Cover sheathing with self-adhering membrane roofing underlayment (as opposed to traditional roofing felt). Cost: $800-$1,200 (average)

3. Install wind-resistant roofing- The risk: Winds destroy roofing, your house’s primary defense against water damage. Fix: Install a roofing type that exceeds wind ratings for your region: standing seam metal roofing, heavy clay or concrete tiles, asphalt/composition shingles rate either Class G (120 mph winds) or Class H (150 mph winds). Cost: $1,000-$3,000 (average)

4. Use wind-resistant siding- The risk: Even minor damage to siding can let moisture inside walls, where it can lead to mold and rot. Fix: Use wind-resistant siding products that are nailed directly into wall studs, not simply into the wall sheathing: vinyl siding should be rated to withstand 150 mph winds and feature a double nailing hem, fiber-cement siding is extremely heavy and wind-proof. Cost: $1,000 (upgrade vinyl) to $15,000 (all-new fiber-cement siding)

5. Add impact-resistant windows and doors- The risk: Windows and doors break or blow open, letting in rain and destructive winds that can lift off roofs. Fix: Install impact-resistant windows and doors rated for winds at least 30% stronger than demanded by local building codes. Install out-swinging windows (casements) and exterior doors so that wind pressure tends to compress seals. Avoid double-swinging windows, doors, and sliders unless they are rated for high wind resistance. Cost: 2-3 times more expensive per unit than comparable conventional windows and doors

6. Install wind- and rain-resistant roof vents- The risk: Roof vents are designed to exhaust hot, humid air from attic spaces, but they are weak points during storms with high winds, letting rain water inside your house. Fix: Replace vents with wind- and rain-resistant models. Cost: $1,000 replacement cost (average). (HOUSELOGIC 4/10/12)

The Mortgagee Letter changes requirements for borrowers with individual or multiple disputed credit collections. Borrowers with a singular or cumulative balance over $1,000 must resolve the accounts prior to or at the time of closing. Resolution can be paying of the debt or establishing payment arrangements with a minimum of three months of verified payments made. The letter also makes changes to 1) year-to-date profit & loss statements and balance sheet requirements, and 2) the definition of family members. This guidance goes into effect on April 1, 2012, and REALTORS should work with clients early to ensure this issue is addressed prior to closing.

In New Orleans, the average listed lease rate is $13.98/sf but actual lease rate was $12.18/sf. That’s a discount of 13% from the list price. Sale prices were discounted 24% however, with the average list price of $85.60/sf but actual sale price of $56.60/sf. (Reprinted from LinkedIn, Robert Hand)

Your neighborhood watch program isn’t guaranteed to cut crime in your community, but if it does, that can lower insurance costs and raise property values.  Some studies report a reduction in crime after a watch starts, while others found an increase, according to a study by the U.S. Department of Justice.

If your program does reduce crime, you’ll win in two ways: 1.) Your insurance rates could go down. Property insurance is all about risk. The higher the risk, the more you pay for insurance. Crime isn’t the only factor affecting your rates, but it plays a role. The more claims insurance companies have to pay crime victims in your neighborhood, the more they charge you for insurance premiums. 2.) Your property values could rise. Who doesn’t want to live in a safe neighborhood? Like insurance rates, home values are affected by more than just crime. But having a neighborhood watch certainly won’t hurt your values.A strong-knit community means people care, and that improves a neighborhood’s atmosphere, which can increase property values. (Houselogic 11/10/10).

Congress was so busy bickering at the end of 2011 that it allowed two important tax breaks for home owners to expire. Beginning with the 2012 tax year: 1.) You can no longer deduct the cost of private mortgage insurance premiums. 2.) You aren’t getting a tax credit for some of your home energy improvements. You can take advantage of these provisions when you file your 2011 tax return — but beyond that, who knows. Up until the end of last year, you could deduct your private mortgage insurance premium (PMI) when calculating your income taxes. It was a benefit targeted to lower- and middle-income home owners. Once you made $100,000 or more, it started disappearing and anyone who had more than $110,000 of adjusted gross income couldn’t use it.

The tax credit for energy efficiency upgrades wasn’t enormous — it was capped at $500 or 10% of the cost for some projects; less for others. But it was a nice incentive to add insulation, new windows, or to upgrade your HVAC system with a more efficient unit — exactly the kind of actions that help decrease our dependence on fossil fuels, leading to a cleaner environment and less outflow of U.S. income to foreign countries. Not to mention, hopefully, smaller utility bills. In 2012, home ownership and energy independence advocates will fight to get those expired tax rules back on the books and to have them apply retroactively. It’s a familiar fight — they had to do the same thing at the end of 2010. (Houselogic, 2/3/12).