House Requirements for FHA loan

Monday, May 31, 2010

Hello Hampton Roads,

Many home buyers and home sellers have wondered, "What are the house requirements for FHA loans?"

FHA loans are a popular low-down payment loan of choice for buyers and in our market, many buyers have used these loans.  It is helpful to have an idea  if the home you  are buying or selling may meet the minimum requirements for FHA qualification. 

HUD's website provides good information about property FHA qualifications by letting us know what an appraiser will look for; this information and more can be found under their Homeownership Center Reference Guide .  By having an idea what to expect in advance, sellers can pre-empt issues by taking care of them upfront and buyers will have an idea of the items that may need to be addressed in order for them to obtain an FHA  loan on the property.

Some examples of what is required for a home to pass an FHA appraisal are as follows:

Property must be free of Hazards and Nuisances--that may:

• Affect the health & safety of occupants,
• Affect the structural integrity of the property
• Affect the customary use and enjoyment of the home

Required Repairs
These are repairs that are necessary to preserve the property and it's occupants are known as the 3 S's:

• Safety---repairs required to protect the health and safety of the occupants
• Security--repairs to protect the security of the property/security for the FHA insured mortgage
• Soundness--repairs to correct physical deficiencies that affect structural integrtiy

Utilities Must Be On
The appraiser is required to test the mechanical, plumbing and electrical systems of a house and the utilities must be on in order to do this.  These systems must be in working order and if an appraiser cannot determine if a system is not working properly, then he or she may call for a certification of the system.

Roofs
Roofs must prevent moisture from entering dwelling and there should be no damage or leaks. The roof should also provide future utility--the roof should have a remaining physical life of atleast 2 yrs.  Regarding re-roofing FHA will allow a max of 3 layers. If there are 2 layers and repairs are required, then all old roofing must be removed prior to re-roofing.

Attics
Attics must be accessible and inspected

Crawl spaces
Crawl spaces must be accessible and inspected.  They must be free and clear of debris, not excessively damp and adequately ventilated.

These are just a few common examples of house requirements for an FHA loan but they should give you a good idea as to what to expect regarding the the condition of the property.

I can help with your real estate needs, please feel free to drop me line and Happy Memorial Day weekend!


Thanks for Reading,



_________________________  
Serving your Hampton Roads and Virginia Beach Real Estate needs.

Do I Have to Pay Capital Gains Tax on My House?

Saturday, May 22, 2010

Hello Hampton Roads,

Have you ever wondered, "Do I have to pay capital gains tax on my house?"

When referring to real estate, capital gains tax is the tax paid on capital gains, which is the net profit one makes from the sale of a house.  If you are fortunate enough to make a profit, you may not necessarily have to pay capital gains tax on your house.

According to IRS Publication 523: Selling Your Home (from the website www.irs.gov), here are the rules for exclusion basis:

For single individuals, you can exclude up to $250,000 of the gain on the sale of your main home if all of the following are true:

1. Owned the home for at least 2 years (ownership test)
2. Lived in the home as your main home or at least 2 year (use test)
3. During the 2-year period ending on the date of the sale, you did not exlcude the gain from the sale of another home.

Exception: If you owned and lived in the property as your main home for less than 2 years, you can still claim exclusion in some cases (eg. individual disability, previous home is destroyed etc). However, the maximum amount you may be able to exclude will be reduced.

For married persons, the exclusion can be up to $500,000 that is $250,000 for you and your spouse if  a joint tax return for the year of sale is filed and one spouse meets the ownership and use tests. In order to qualify for the capital gains tax exclusion, the following must be true:

1. You are married and file a joint tax return for the year
2. Either you or your spouse owned the home for at least 2 years (ownership test)
3. Both you and your spouse lived in the home as your primary residence for at least 2 years (use test)

If you don't meet all the home sale exclusion tests, there are still certain circumstances where you still can acquire a tax break. Some of the reasons are as follows:

• You may be able to get a reduced exclusion when you need to sell your home due to a change in health condition or a long distance relocation because of change in employment or unforeseen circumstances. If this applies to you, you would calculate the exclusion based on the time you lived in the home.  For example if you were in the home for half the time and were relocated to another state you would be able to claim 12 out of the 24 months of exclusion or half the amount of the exclusion ($125,000). 
• There is also a special provision for people in the armed forces. The law instituted in 2003 now exempts military personnel from the two-year use requirement for up to 10 years, letting you qualify for the full exclusion whenever you must move to fulfill your service commitments.

If you have capital gain that cannot be excluded, it is automatically taxable. This should be reported on Schedule D or Form 1040. But if you are able can exclude all of the gain then you do not need to report the sale on your tax return.

Otherwise, you can also opt not to take the exclusion by including the gain from the sale in your gross income on your tax return for the year of the sale. This choice can be completed or cancelled before the expiration of a 3-year period beginning on the due date of your return for the year of the sale.

You refer to IRS Publication 523: Selling Your Home for specific explanations and examples and you may use its worksheet 2 to figure the amount of your exclusion and your taxable gain, if any.

This post is general information only and not intended as tax advice. The best thing to do is to consult your own tax advisor about your specific situation.

Thanks for Reading,
 
_________________________
Serving your Hampton Roads and Virginia Beach Real Estate needs.

First Time Home Buyers Grants

Tuesday, May 11, 2010

Hello Hampton Roads,

For those first time home buyers who may have missed out on the $8000 tax credit, there are still other options for first time home buyers grants! Specifically, I am referring to the first time home buyer's grant offered by Federal Home Loan Bank Atlanta (FHLBank Atlanta).

FHLBank Atlanta is one of 12 district banks in the Federal Home Loan Bank System, and as of April 30, 2010 has FHP (First Time Home Buyer Program) Funds available in the amount of: $10,562,538.

FHLBank Atlanta has member banks in the state of Virginia which offer eligible buyers, on a first come, first served basis, a first time home buyer's grant up to $7,500.00 per household.

But if you are interested, you better hurry because the money ran out last year in about 4 months!

The grant is awarded on a 5:1 basis meaning that as long as eligbile home buyers contribute $1500 of their own money, they can received $7500.00 in available grant funding.

The grant money is essentially a silent second mortgage which is forgiven over a 5 year time line--1/5 of the amount is foregiven for every year that the house is the buyer's primary residence.

There are several member banks in Hampton Roads:

• ABNB Federal Credit Union
• Monarch Bank
• 1st Advantage Federal Credit Union
• BayPort Credit Union
• Virginia Company Bank
• Bank of Hampton Roads
• Bank of the Commonwealth
• Heritage Bank and Trust
• Northern Star Credit Union, Inc.
• Towne Bank
• Xenith Bank
• Bank @LANTEC

The FHP grant funds can only be for a downpayment or closing costs and must be shown on the HUD 1 settlement statement. The funds cannot be used to refund earnest money or to pay the buyer cash at closing. For more information please feel free to contact me for your housing needs and I will put you in touch with a reputable lender!


Thanks for Reading,
 
_________________________
Serving your Hampton Roads and Virginia Beach Real Estate needs.

HAP Program

Friday, May 7, 2010

Hello Hampton Roads,

The HAP Program (Homeowners' Assistance Program) was created in 1966 by the Dept of Defense and it is run by the Army Corps of Engineers for all branches of the military. The HAP program helps distressed homeowners who are either eligible military or federal civilian employees by offering them financial help should they face a loss from the sale of their primary residence in a declining real estate market.

 

Military personnel and federal civilian employees affected by base closure or realignment and as well as those who have been permanently reassigned may be able to get HAP support.

 

For HAP support the following must be met:

• The property must be owner occupied
• The property must have declined at least 10% in value
• Retiring personnel are only eligible if their positions are moved or eliminated
• The service member is permanently re-assisgned
• Relocation distance must be at least 50 miles away
• The property must sell between July 1, 2006 and September 30, 2012 (the property must have been purchased before July 1, 2006)
• The home owner must not have previously received HAP benefits
• The purchase price cannot exceed Fannie Mae/Freddie Mac conforming loan limits (these loan limits range from $417K-$729,720 and for homes in Virginia Beach, the limit is $458,850.00)

  

Who is Eligible for HAP?

 

In addtion to personell affected by base realignment and closure (BRAC) and service members who have been permanently reassisgned, HAP benefits also extend to the following:

• Military and Civilian Employee Wounded
• Wounded, ill or injured service members or federal civilian employees with a disabilility (a disability rating of 30% or more) due to injuries incurred in the line of duty who need to relocate for treatment or rehabilitation
• Surviving Spouses
• Surviving spouses of service members and federal civilian employees who spouse died while deployed in the line of duty (on or after Sept. 11, 2001 and who relocate from their spouse's primary residence within 2 years of the death of their spouse

 For those who qualify the benefits are substantial.

 Benefits to homeowners include the following:

• Reimbursement for the homeowner for part of the loss of selling his or her primary residence (home must be sold at fair market value)
• Homeowner assistance if the funds for the sale are insufficient to pay off the mortgage.
• If the home doesn't sell within 120 days, the government may elect to purchase the home by paying off the mortgage thus avoiding foreclosure. This is paricularly important for those with security clearance as they are able to avoid foreclosure and keep their security clearance.
• Homeowner assistance if he or she defaults on the mortgage

It is also important to note that the homeowner must actively sell his home even after application for the HAP program. For eligible home sellers it is important to market your home aggressively with the widest market exposure in order to sell your home at it's current fair market value.

 

It would be beneficial to retain the services of a skilled Realtor to help you sell the home and document all marketing activities. If it appears that the home was sold below market value, then HAP eligibility could be lost.

If you think you may be eligible for the HAP program, visit http://hap.usace.army.mil/ for more information and to download a complete application.

Thanks for Reading,

 

_________________________

Serving your Hampton Roads and Virginia Beach Real Estate needs.