A. While homeowners generally need to stop thinking about their home as a piggy bank, those who have substantial equity and legitimate needs can take advantage of the current low rates to access some cash.  Review your total financial picture and eliminate credit card (rates are going up) and installment debt with a cash-out refinance to take advantage of current low rates.  Currently, Fannie Mae and Freddie Mac are allowing cash-outs up to a 90% LTV.   However, the premiums charged if the LTV is over 70% can get quite pricey.

Some equity line lenders are freezing existing credit lines.  The most common reasons given are: lowered home values, excessive lender risk and past late payments.   The issue of late payments can be invoked if you have missed your payment date, but are still within your grace period.

The pendulum has swung to a market place requiring excellent credit, verifiable income, down payments, solid reserves and secure home values.  In more volatile times like this, please rely on your real estate and mortgage professionals at Choice Finance and Choice Real Estate to help guide you through your options.
© 2007, Real Estate Information Services, Capitol Assets, Choice Real Estate, Inc. & Choice Real Estate of VA, Inc., & Choice Finance®

Alex Echeandia, Choice Finance

Q. There are some fabulous bargains in our area and, with low mortgage rates, we are seriously thinking about buying our first home. What are we going to need to do?

A. The days of no money down financing are almost gone for now in many geographical areas labeled as high risk.  There still are low downpayment options available.  FHA financing is one, especially this year, with the new temporary limits in effect.  Another option is a loan that fits within the Fannie Mae and Freddie Mac guidelines.  To qualify for the best deal, you will want to be a “prime” borrower, which these days means having a credit score of 680 or more.  Making sure your credit report is accurate is of paramount importance.
© 2007, Real Estate Information Services, Capitol Assets, Choice Real Estate, Inc. & Choice Real Estate of VA, Inc., & Choice Finance®

Alex Echeandia, Loan Officer

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As soggy as the outlook for home sales is already, might it get even worse if the economy takes a nose dive?  We’d rather not have to find out.  The Federal Reserve is doing what it can to avoid an actual recession with several dramatic reductions in shortterm interest rates. A recession has traditionally been defined as two consecutive quarters of negative economic (GDP) growth.

Economists are still split over whether we will have a recession or simply a slowdown in the rate of positive growth, a more benign outcome.  In mid-February, Fed Chairman Ben Bernanke told Congress that he sees the economy continuing to deteriorate (led by the housing market, big surprise) and hinted that the Fed was prepared to lower short-term rates even further, perhaps dramatically, in March.

Bernanke seems to be very aware of the drag and threat to the total economy posed by a troubled housing market and will be keeping an eye on how home sales respond to the rate moves. 

The reductions in short-term rates is good for those with adjustable rate mortgages indexed to 1-year Treasury bills or LIBOR (the London Interbank Offered Rate) and for home equity line holders with rates tied to the prime rate.  LIBOR had been sticky for a while, but has come down considerably recently.  For those seeking a new mortgage, especially a 30-year fixed-rate mortgage, the linkage is more mixed.  If the financial markets think the rate cuts will fuel inflation even as the economy stagnates (yes, the old stagflation worry is back), that could actually drive long rates, including mortgage rates, higher.In fact, 30-year conforming rates hit lows in late January before rising slightly in February, as Fed efforts and the stimulus plan gave the financial markets a boost of confidence.  The current negatives notwithstanding, there are also positives. 

Homeowners, if you have been thinking about a remodel or substantial renovation, you will find that contractors are uncommonly excited to take your call and give you an estimate.  Many will be happy to have work, so bids should be competitive, even bargain-priced.

An added benefit is that the slow pace of new home construction has sent the price of materials plummeting, so costs will be at their lowest in years.  You should be sure to have your financing arrangements firmly in place, but once you do, you will probably get maximum attention from your contractor, who will want to see the job completed quickly and satisfactorily in order to receive full payment. But just to be sure, see that the contractor is bonded to guard against a job half done.

If your dream is a newly constructed home designed to your specifications, you are also in an unusually favorable position. Architects, like other housingrelated businesses, are feeling the pinch and making themselves more readily available than in recent years, even for some remodeling jobs they would have declined a few years ago.
© 2007, Real Estate Information Services, Capitol Assets, Choice Real Estate, Inc. & Choice Real Estate of VA, Inc., & Choice Finance®

    John Hodges, Choice Finance Corporation

Married filing joint returns and surviving spouses:
If taxable income is: The tax is:
Not over $16,050 ……………………………………………….. 10% of taxable income
Over $16,050 …………………………… $1,605.00 + 15% of excess over $16,050 (but not over $65,100)
Over $65,100 …………………………… $8,962.50 + 25% of excess over $65,100 (but not over $131,450)
Over $131,450 …………………….. $25,550.00 + 28% of excess over $131,450 (but not over $200,300)
Over $200,300 ……………………… $44,828.00 + 33% of excess over $200,300 (but not over $357,700)
Over $357,700 ……………………… $96,770.00 + 35% of excess over $357,700

Heads of household:
If taxable income is: The tax is:
Not over $11,450 ……………………………………………….. 10% of taxable income
Over $11,450 …………………………… $1,145.00 + 15% of excess over $11,450 (but not over $43,650)
Over $43,650 …………………………… $5,975.00 + 25% of excess over $43,650 (but not over $112,650)
Over $112,650 …………………….. $23,225.00 + 28% of excess over $112,650 (but not over $182,400)
Over $182,400 ……………………… $42,755.00 + 33% of excess over $182,400 (but not over $357,700)
Over $357,700 ……………………. $100,604.00 + 35% of excess over $357,700

*These tables are for 2008 taxes and are provided to assist you in tax planning (such as figuring estimated tax) for the current year. For 2007 tax tables, refer to your 1040 Forms and Instruction booklet, Package 1040-3, or other Official IRS publication.
© 2007, Real Estate Information Services, Capitol Assets, Choice Real Estate, Inc. & Choice Real Estate of VA, Inc., & Choice Finance®

For the most thorough job of tax planning possible, consult a tax professional.  
Tips for filing your 2007 return
Key provisions in doubt for ‘08

    
Mark Zaidan, Choice Finance Corporation

Tips for filing your return
The key to maintaining your sanity through tax season is organization. This is especially important if you are preparing your own tax returns. While tax filing software has made the job much easier, it will still require you to input the appropriate information, so start early to assemble it. Think about using personal finance software if you are not already doing so. 

Even if you use a tax professional to do the job, they can do the most thorough and complete job only if you present them with all the information they need from the start. This is the best way to maximize your chances of minimizing your tax tab.   Self-filers will find attacking the task in bite-size pieces can help make the whole more digestible. The IRS points out that rushing leads to mistakes, such as math errors and incorrect entry of social security numbers, which can delay refunds.  Here are the basic documents and forms you will need.

Documents:
The essentials are W-2 forms from your employer(s) and 1099 forms from organizations from which you have reportable income. These must be mailed by February 1.  If you are a subchapter S corp shareholder, you will get a K-1, which must be mailed by March 1. You’ll also need the 1098 form from your mortgage lender reporting home mortgage interest and property taxes paid (if you do not pay them directly).  When mutual fund sales are reported to you, your average cost basis of the shares is usually included.  Sales of stocks and bonds will probably require you to refer to your own records to determine whether you had gains or losses.  Be sure to find the purchase dates and cost basis for the investments sold, which will be information necessary to fill out your Schedule D (Capital Gains and Losses).  Did you add a dependent in 2007?  You need taxpayer identification numbers (for a new baby, that will be a Social Security number) for family members to claim them as a dependent.  If you claim tax benefits for a resident or nonresident alien who is not eligible for an SSN, you should file an IRS Form W-7, Application for IRS Individual Taxpayer Identification Number.  For cash charitable contributions, you now need either a bank record (a cancelled check or a bank or credit card statement) or a written communication from the charity showing the amount and date of the contribution.

Cash contributions of more than $250 require an acknowledgment from the charity.  Non-cash contributions of less than $250, more than $250 but less than $500, and more than $500 each have specific recordkeeping requirements that must be met. Further, no deduction is now allowed for contributions of used clothing or household items unless they are in at least “good”condition. An exception to the general rules is made for property worth more than $500 for which you have an appraisal.  For donations of vehicles, if the claimed value is more than $500, you must have a written acknowledgment from the charity and you must attach it to your return. The acknowledgment must include your taxpayer identification number, vehicle identification number and date of the contribution.  If the vehicle was sold, the charity also must include the price at which it was sold and certify that the sale was an arm’s-length transaction. If the charity made significant use of or fixed up the vehicle, then a deduction can be taken for the fair market value, subject to additional certifications. 

Forms:
If you are filing the same forms this year as last, the IRS has probably already sent you the appropriate package. However, if you moved, are itemizing for the first time (especially anyone who bought their first home in 2007), or started a business, for example, you will need additional forms.  You can download forms from the IRS at www.irs.gov.   You can also use a fax machine to request items. Call 703-368-9694 (not a toll-free call) from your fax machine.  Got all the documents and forms you need?

Consider these items:
Valuing deductions for aluing contributions of items to charity.
Estimating the value of household items such as old clothes, toys, appliances, etc. that you donated to charity is troublesome for most taxpayers. You can deduct the “fair market value” of these items, but how do you know what that is?  The Salvation Army (www.satruck.org/valueguide.aspx) and Goodwill Industries(www.goodwillpromo.org) both maintain sites that contain ranges of values for common clothing and household items.  If you use TurboTax to prepare your return, it has software that values and manages your charitable donations.

Make a retirement contribution.
One thing that you can still do this year to reduce 2007’s tax liability is make a deductible contribution to a retirement account.  Contributions to traditional IRAs and certain accounts for the self-employed can be made until the due date for your return (without extensions). The annual contribution limit for regular and spousal IRAs is $4,000 for 2007, $5,000 if you’ve turned 50.  You qualify for the full amount of the IRA if you are not covered by a retirement plan at work.  If you are covered, you can take a full deduction if your “modified” adjusted gross income is less than $52,000 for a single person, $80,000 for married joint filers. The deduction phases out from $52,000 to $62,000 for singles and $80,000 to $100,000 for joint filers.