Qualifying for a Mortgage

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When looking at purchasing a new home or refinancing an existing mortgage loan.  The Fair lending rules apply to everyone.  The only way to know if you were violated in the mortgage loan process is by reviewing this rules.
Fair Lending Rules

Discrimination in San Diego Ca mortgage lending is prohibited by the federal Fair Housing Act and HUD’s Office of Fair Housing and Equal Opportunity actively enforces those provisions of the law. The Fair Housing Act makes it unlawful to engage in the following practices based on race, color, national origin, religion, sex, familial status or handicap (disability):

Refuse to make a San Diego mortgage loan
Refuse to provide information regarding loans
Impose different terms or conditions on a loan, such as different interest rates, points, or fees
Discriminate in appraising property
Refuse to purchase a mortgage loan or set different terms or conditions for purchasing a loan
Filing a Complaint

If you have experienced any one of the above actions, you may be the victim of discrimination. Recognizing the signs of lending discrimination is the first step in filing a complaint. HUD investigates your complaints at no cost to you. If you believe you have experienced lending discrimination, visit our housing discrimination complaint website to learn more about the complaint process.
HUD Fair Lending Studies

Pre-application inquiries about mortgage lending financing options represent a critical phase in the homebuying process. If potential homebuyers cannot obtain full and fair access to information about mortgage financing, they may give up on their pursuit of homeownership, their housing search may be restricted, or they may be unable to negotiate the most favorable loan terms. HUD has conducted a number of studies to determine whether minority homebuyers receive the same treatment and information as whites during the mortgage lending process. Read more on San Diego Ca mortgage lending discrimination studies .

Subprime Lending

Sub prime loans play a significant role in today’s mortgage lending market, making home ownership possible for many families who have blemished credit histories or who otherwise fail to qualify for prime, conventional loans. A recent HUD analysis, based on HMDA and related data, shows that the number of home purchase sub prime applications increased from 327,644 in 1997 to 783,921 in 2000.

While the sub prime mortgage market serves a legitimate role, these loans tend to cost more and sometimes have less advantageous terms than prime market loans. Additionally, sub prime lenders are largely unregulated by the federal government. Data shows blacks are much more likely than whites to get a sub prime loan, and many of the borrowers who take out these loans could qualify for loans with better rates and terms. As such, many have expressed fair lending concerns about the subprime market. Read more on Subprime Lending .

Predatory Lending

Some lenders, often referred to as predatory lenders, saddle borrowers with loans that come with outrageous terms and conditions, often through deception. Elderly women and minorities frequently report that they have been targeted, or preyed upon, by these lenders. The typical predatory loan is: (1) in excess of those available to similarly situated borrowers from other lenders elsewhere in the lending market, (2) not justified by the creditworthiness of the borrower or the risk of loss, and (3) secured by the borrower’s home. HUD is working hard to fight against predatory lending .

Minority Homeownership

HUD is committed to increasing homeownership opportunities for all Americans. HUD is engaged in a special effort to boost the minority homeownership rate since the rate for black and Hispanic Americans lags behind that of others. Read more about HUD’s efforts to Increase Minority Homeownership .

These rules should be refered to if you feel that you may have been treated unfairly in the Real estate mortgage loan process.

Source Hud . Gov

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San Diego Borrowers- The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.

The American Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $8,000 for qualified first-time San Diego, CA home buyers purchasing a principal residence on or after January 1, 2009 and closing before December 1, 2009.

1. Who is eligible to claim the tax credit?
San Diego, First-time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a San Diego, Ca home purchase must occur on or after January 1, 2009 and before December 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner.

2. What is the definition of a first-time home buyer?
The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.

For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.

3. How is the amount of the tax credit determined?
The tax credit is equal to 10 percent of the San Diego California home’s purchase price up to a maximum of $8,000.

4. Are there any income limits for claiming the tax credit?
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 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.

5. What is “modified adjusted gross income”?
Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine “adjusted gross income” or AGI. AGI is total income for a year minus certain deductions (known as “adjustments” or “above-the-line deductions”), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.

To determine modified adjusted gross income (MAGI), add to AGI certain amounts such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs.

6. If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
Possibly. It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose MAGI exceeds the phaseout limits.

7. Can you give me an example of how the partial tax credit is determined?
Just as an example, assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time San Diego Ca Mortgage home buyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.

Here’s another example: assume that an individual home San Diego buyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.

Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. San Diego Ca Mortgage borrowers should always consult your tax advisor for information relating to your specific circumstances.

8. How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008?
The most significant difference is that this tax credit does not have to be repaid. Because it had to be repaid, the previous “credit” was essentially an interest-free loan. This tax incentive is a true tax credit. However, California home buyers must use the residence as a principal residence for at least three years or face recapture of the tax credit amount. Certain exceptions apply.

9. How do I claim the tax credit? Do I need to complete a form or application?
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 will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests.

10. What types of San Diego Ca 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.

11. I read that the tax credit is “refundable.” What does that mean?
The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.

For example, if a qualified San Diego Ca Mortgage home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).

12. I purchased a home in early 2009 and have already filed to receive the $7,500 tax credit on my 2008 tax returns. How can I claim the new $8,000 tax credit instead?
Home buyers in this situation may file an amended 2008 tax return with a 1040X form. You should consult with a tax advisor to ensure you file this return properly.

13. Instead of buying a new San Diego home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit with a new San Diego mortgage?
Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been “purchased” on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after January 1, 2009 and before December 1, 2009.

In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.

14. Can I claim the tax credit if I finance the purchase of my home under a San Diego Ca mortgage revenue bond (MRB) program?
Yes. The tax credit can be combined with the MRB home buyer program. Note that first-time home buyers who purchased a home in 2008 may not claim the tax credit if they are participating in an MRB program.

15. I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?
No. You can claim only one.

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How do I qualify for the new San Diego, Ca First Time Homebuyer Tax program? What are the requirements?  How much time do I have before the program expires?  Get the answer in the following article:

16. I am not a U.S. citizen. Can I claim the tax credit by purchasing a a new home with a San Diego mortgage loan?
Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of “nonresident alien” in IRS Publication 519.

17. 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.

A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the San Diego taxpayer is in the 15 percent tax bracket and owes $8,000 in income taxes. If the taxpayer receives an $8,000 deduction, the taxpayer’s tax liability would be reduced by $1,200 (15 percent of $8,000), or lowered from $8,000 to $6,800.

18. I bought a San Diego, CA home in 2008 and I took out a San Diego Ca mortgage loan. Do I qualify for this credit?
No, but if you purchased your first home between April 9, 2008 and January 1, 2009, you may qualify for a different tax credit. Visit the National Association of Home Builders’ Web site for more information.

19. Is there any way for a San Diego, Ca home buyer to access the money allocable to the credit sooner than waiting to file their 2009 tax return?
Yes. Prospective California home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment.

Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective California home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.

Further, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. Some state housing finance agencies, such as the Missouri Housing Development Commission, have introduced programs that provide short-term credit acceleration loans that may be used to fund a downpayment. Prospective San diego Ca Mortgage home buyers should inquire with their state housing finance agency to determine the availability of such a program in their community.

20. If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
Yes. The law allows taxpayers to choose (”elect”) to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.

Taxpayers buying a home with a San Diego Ca mortgage who wish to claim it on their 2008 tax return, but who have already submitted their 2008 return to the IRS, may file an amended 2008 return claiming the tax credit. You should consult with a tax professional to determine how to arrange this.

21. For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?
Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.

Source: National Association of Home Builders (NAHB) federalhousingtaxcredit.com

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With the new Government programs it is easier than ever to obtain a mortgage refinance on your existing home loan.  San Diego Ca Mortgage borrowers will benefit from the new improvements in the lending limits and loan to value ratios. 

Government Programs Mean Easier Refi’s

When John Jordan and his wife went to refinance the mortgage on their Washington, D.C., townhouse, their appraisal came in too low. But thanks to a new government program, that didn’t kill the deal. “We’re quite happy the program was there, or else we would not have been able to proceed with the refinancing,” says Jordan, who purchased the home in 2004. Home Description: Select One Single Family Multi-Family Condominium Townhouse Mobile Home Manufactured Home Your Credit Profile: Select One Excellent Good Fair Needs Improvement Poor AdvertisementAppraisals have always been key to refinancing. Traditionally, the mortgage amount could not exceed the property’s current market value. Those with Adjustable Rate Mortgages stuck with unaffordable mortgage payments, or those tempted by historic low interest rates have good reason to want – or need – to refinance their loans. Luckily, the federal government has introduced programs to help. The Obama Administration’s Home Affordable Refinance Program, launched early this year, allowed refinances for those whose first mortgage was as high as 105 percent of a comparable market analysis (CMV). A July expansion now allows participation by borrowers current on payments, but up to 125 percent “underwater.” This especially helps those in down markets, such as Las Vegas, where about two-thirds of current mortgage holders owe more than the worth of their homes. Nationwide, 4 to 5 million homeowners whose mortgages are owned or guaranteed by Fannie Mae or Freddie Mac might reach more affordable monthly payments through the program, which falls under the broader Making Home Affordable initiative. Alabama, Alaska, Arizona, Arkansas, California, San Diego, CA, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming, Those with government-based Federal Housing Administration (FHA) loans also have new refinance opportunities thanks to the American Recovery and Reinvestment Act of 2009. The revised single-family loan limits now reflect the higher loan limits set by the Economic Stimulus Act of 2008 or the Housing and Economy Recovery Act of 2008, all determined by county or metropolitan area. Effective through the end of 2009, those limits range from $271,050 to $729,750 and permit FHA to insure loans on amounts up to 125 percent of the 2007 area median house prices. Additionally, this past May, the Helping Families Save Their Homes Act removed some administrative and technical hurdles that made last summer’s HOPE for Homeowners Act so difficult to implement that most people didn’t bother trying. The bill helps homeowners with FHA or USDA rural housing loans to modify or refinance their mortgages. Jorge Gomez, president of the Illinois Association of Mortgage Professionals (IAMP), says, “In theory, [new loan limits] will open up many new opportunities for people to refinance.” Still, borrowers with a second mortgage may not benefit, since the law doesn’t require second lien holders to comply by subordinating their debt. Regarding the program for Fannie Mae and Freddie Mac loans, Marve Stockert, executive director of IAMP, urges anyone who can’t sell their home to use it, “because this type of program may not come around again.” Home Affordable Refinance expires on June 10, 2010. Dan Milstein, CEO of Gold Star Mortgage Financial Group in Ann Arbor, Mich., notes that while “extra room in terms of value will be helpful in the refinance process,” the true impact of the change from 105 percent to 125 percent “remains to be seen.” Besides the second mortgage issue, he explains that loan guidelines remain the same, with verification required for all information. There’s a slight increase of getting an appraisal waiver, but full appraisals are often still required for these transactions. Those best suited for these programs, says Milstein, are homeowners “who originally had 20 percent or more equity in his or her home and then lost that equity not due to increased borrowing, but rather to the slump in the housing market.” The bottom line: The refinancing rules are changing everyday. As the Jordans can attest, there’s no reason to let a decrease in your home value hold you back from attempting to refinance. Be proactive and investigate how new stimulus programs might help you lower your interest rate and save on your monthly mortgage payments. Source: By Melissa Ezarik

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