Tips for Dealing with a Frozen or Reduced HELOC

One result of the credit crunch and the economic recession has been the freezing or reduction of home equity lines of credit (HELOC) by banks. A HELOC is a form of revolving credit in which the borrower’s home serves as collateral. And while this is not a surprising move by banks looking to be more conservative with their lending policies during tough times, many home owners counting on this credit will face some challenges if their HELOC is reduced or frozen.

To help you deal with these challenges, the US Treasury Department and the Federal Reserve each released some tips for homeowners in this situation. The following is a summary of these tips.

Read Everything to the Letter – Your HELOC lender must provide you with a written notice if it has frozen or reduced your HELOC no later than 3 business days after the freeze or reduction. Information about any other changes to your HELOC must be included as well, so read everything mailed to you from your lender.

Pick Up the Phone – Your lender has the right to freeze or reduce your HELOC, even if you have a good payment record. Some common reasons for the action are a decline in the value of your home, a negative change in your financial situation, or a negative change in your credit score. Contact your lender if you have questions or concerns about a freeze or reduction.

Communication is Key – The required notice to freeze or reduce your HELOC will likely contain specific reasons for the action. Find out the reason, and see if you can take any steps to reinstate your HELOC.  The bank might not know about home improvements you made that might affect the value of your home. It might not be aware that you or your spouse got a new job, took a second job, or made some substantial investments that affect your finances. If your credit took a hit, investigate ways to improve your credit and communicate your efforts to your bank.

Don’t Be Afraid to Ask – Your lender must reinstate your credit privileges when the conditions permitting the freeze or reduction no longer exist. You may need to request in writing to have your line of credit reinstated, so be sure to find out why your HELOC was frozen or reduced. Once your lender receives your written request, they must promptly investigate and determine whether your HELOC can be reinstated.

Be Prepared for Fees – There may be some fees involved to cover the costs for an appraisal and/or credit report when a bank considers your request for reinstating your HELOC. However, you cannot be charged a fee to reinstate your HELOC once the condition that caused the freeze or reduction no longer exists.

If you or someone you know has questions about HELOCs, credit repair, purchasing or refinancing a home, please don’t hesitate to give us a call.  To learn more contact Mr. Wayne Black,  New Home Finance LLC  770-844-7200

Six Tax Breaks Every Homeowner Should Know

Benjamin Franklin once said, “In this world nothing can be said to be certain, except death and taxes.” More than 200 years later, this certainly holds true. And while being a homeowner won’t add years to your life, the modern tax code has a number of benefits certain to make your tax bill lower. The following are a few ways your CPA or Tax Preparer can help you save:

 Take an interest in your mortgage interest – Statistics show that only about half of homeowners claim this valuable deduction. Make sure you’re one of them. On average, qualified American homeowners save about $2,000 per return by deducting mortgage interest. And when added up over the life of the loan, this can make a big difference in your retirement savings. This is a huge break that renters don’t get! So take advantage of it.

Don’t forget about the points – Points paid to refinance your home are also fully deductible throughout the life of the loan. For example, let’s say in February of this year you refinanced your home for a new 20-year loan (or 240 months) and you paid $3,000 in points. By the end of this year, you can write off $125.00 for those 10 months (March through December). Beginning next year, of course, and each year thereafter, you can write off the full $150.00 until the points have been fully deducted. It’s important to note that buyers can also deduct mortgage points that are paid by the seller, as long as the cost basis of the property is reduced by the amount of the seller-paid points.

Old points are as good as new – Unamortized points from old refinancing are deductible in the year of a new refinance. Using the above example, let’s say rates dropped again and you refinanced again in February of the next year and paid $2,400 in points. The remaining balance of the points on the old loan, $2,875, is fully deductible – plus the money you could deduct for any qualifying mortgage payments made toward the new points.

Sell Your House – While points are not deductible for sellers, you can exclude as much as $250,000 in gain ($500,000 on a joint return) when you sell your primary home (your principal residence for two of the last five years). If you don’t qualify for the two-year rule, you can get a partial exclusion if the sale of your home is the result of either qualifying changes of employment, health reasons, or other unforeseen circumstances.

Casualty deductions – Floods, forest fires, hurricanes, earthquakes and other natural disasters can be devastating, especially to homeowners. Ask your CPA how you can take deductions on casualty losses, even if you collected insurance. In addition, if the President declares your area a disaster area, you have even more options.

$8,000 tax credit for first–timers – The government has created a temporary monetary incentive, a tax credit for first-time home buyers (that’s anyone who hasn’t owned a home in the last three years), as a tool to stimulate the housing market. The tax credit (not a tax deduction) will be 10% of the purchase price of a home, up to a maximum of $8,000. This is a temporary tax break that ends on November 30, 2009, so don’t wait. There are, of course, income limits to qualify for this incentive, and other important details, but give us a call, and we’ll see if you can take advantage of a tax gift that even Ben Franklin could appreciate. Remember, this, or any article you might read on your own, should never serve as tax advice. Always consult with a qualified CPA or Tax Preparer before making any tax decisions. If you need a referral, give us a call, and we’ll be glad to give you the names of the reliable professionals we work with on a regular basis.

To learn more you can contact Wayne Black of New Home Finance LLC at 770-844-7200

Baby Boomers Retire: Reverse Mortgages Gain Popularity

Born between 1946-1964, the generation known as the Baby Boomers will begin to retire in large numbers, substantially shrinking the labor force in the US. As a result, Social Security, Medicare, and other government programs will be significantly affected over the next several years. In fact, the Social Security Advisory Board (SSAB) estimates that, by 2030, about 20% of the American population will be 65 years old or older.

With rising costs of living and a dwindling budget to accommodate the elderly and disabled, we will see increased usage of the reverse mortgage. This loan allows equity to be taken out of the home to meet day-to-day expenses, and was designed in the late 1980s to help those who owned property, but lacked sufficient income to live on. However, there are benefits and disadvantages to be considered before going into this type of loan.

In most loan scenarios a home will go into foreclosure if payment is not made. If payments are made, the debt decreases and equity increases. The opposite holds true for a reverse mortgage; equity is taken out of the home to sustain the family, causing debt to increase while equity decreases. There is an exception – if the actual value of the home increases, less equity will be lost overall.

Most reverse mortgages are set up so there is no monthly payment as long as the owner resides in the home. There are no minimum income requirements, and the money can be used for any purpose. Equity disbursed from this type of loan is tax-free. Depending on the type of plan, reverse mortgages will usually allow the owner to retain the title to the property until they have lived in a different residence for 12 months, sold the property, died, or the end of the loan term has been reached.

On the flip side, reverse mortgages can be more costly than a normal equity loan. Interest is added to the principal balance each month, and the amount of interest owed is compounded over time. The interest will not be tax deductible until the loan is paid off, in part or in full. Also, since the reverse mortgage uses equity in the property, this constitutes a loss of assets one could pass on to heirs.

The Federal Trade Commission warns of abuse with this type of loan, as they have received reports of predatory lenders taking advantage of the elderly. It is best for the individual interested in a reverse mortgage to research and obtain counsel from reputable sources.* HUD does not recommend consulting an estate planning service to obtain a referral to a lender. HUD provides this information free to the public. Even if the home loan was not originally an FHA loan, the reverse mortgage can be federally secured.

To learn more you can contact Wayne Black of New Home Finance LLC at 770-844-7200

Why Your Credit Score Is More Important During the Continuing Credit Crunch

I t is always a good idea to be vigilant about your credit score, but even if borrowing loosens up a bit in 2009, you still need to do everything necessary to keep your credit score high. Fair Isaac, the company that created the FICO score, has been working on a new version of its credit scoring method that might have serious consequences for you if you.re planning on borrowing for a home or opening any new credit line in 2009.

The new version of FICO is going to be particularly focused on your balances, not only on your on-time payment records. Your top priority under this new system: Get balances down. Reports say that the new FICO revision will actually allow a bit of lenience on late payment – something that might affect more than a few consumers with the downturn in the economy. Obviously, this won’t mean that someone can chronically pay late, but once or twice won’t make the same impact as in earlier FICO versions.

Yet credit utilization – essentially the amount of credit you.re actually using relative to your credit limit – is a much bigger deal simply because high balances are so prevalent right now. From the lender’s perspective, high balances mixed with a tough economy means a higher risk of default among customers. So what’s a good target utilization rate for all your revolving credit accounts? No more than 50 percent of your credit limit, and if you can get it lower than that over time, that’s a good plan. So, the lower your credit utilization, the better your score.

What does that mean for ordinary Americans who don’t meet that under-50 percent goal? It means you shouldn’t be applying for new credit or refinancing for awhile. But because most lending institutions may continue their strict lending requirements, you might as well defer borrowing goals in favor of reforming your credit behavior.

So instead of bemoaning your tougher chances of getting a loan for a home or  a car, why not use the current environment to launch a credit makeover that will position you for a better shot six months to a year from now? Some ideas: You’ll need at least a 740 score for the best rates: You’ll often hear that credit scores of 700 and up will get you best customer status with lenders. You should aim higher. For the lowest rates and best terms, you need to get your credit score above 740 (the top credit score, by the way, is 850), so keep that target in mind. Budget: If you.ve never reviewed your spending and picked out areas where you can cut, you.ve never done a budget. Start tracking your spending either on paper or with financial planning software and start pinpointing what spending you can shift over to paying off debt.   

One more time — get those balances down: Get all your nondeductible debt under 50 percent of your credit line in each account. Go after your balances with the highest interest rates first, and once you hit 50 percent…keep trying and get those balances down further.

Get some advice: It might not be a bad time to sit down with a tax professional or a financial adviser, to talk about the way you’re going to manage your debt going forward. Keep an eye on your credit reports: Remember that you have the right to get all three of your credit reports from Experian, TransUnion and Equifax once a year for free. You can do so by ordering them at annualcreditreport.com. Don’t order all three of them at the same time, though. By staggering receipt of each of your credit reports, you’ll get a continuous picture of how your credit picture looks because the three bureaus feed each other the latest information. You’ll also be able to clean up errors as you find them and you’ll also keep an eye out for identity theft. Keep in mind that not all .free. credit report sites are free . If they ask you for a credit card number, remember they.re doing that because they want to charge you. Just go to the site above and you’ll be fine.

Get on time and pay more than the minimum: Yes, we indicated above that you might get a bit of a break on late payments with the new FICO system, but that’s a break you should consider only in a dire emergency. Electronic bill payment will allow you to save on postage while guaranteeing on-time postage, and the budgeting advice mentioned above will allow you to put a few more bucks toward getting that loan or credit card bill paid off.

Once you.re paid off, don’t close the account: In the world of credit scoring, closing accounts (even those that have not had balances for years) is a lousy idea. Lenders want to see a long record of credit management, and longtime accounts that you haven’t touched in years may actually help your score because it shows you have some restraint.

This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Tim Madison, CFP, ChFC, CASL with MONEY CONCEPTS INTERNATIONAL, INC.  who can be reached at Phone: (770) 777-8979

Atlanta CPA on Selecting the Right Mortgage for You and Your Family

Picking the right mortgage for your family is perhaps the most important financial decision you will ever reach. Knowing what to look for and to consider is your best defense to avoiding common mortgaging pitfall, protect your family “nest egg” and to stave off unwelcome financial stress.

-Interest Rate. Mortgage Interest remains perhaps the largest tax deductions for homeowner, regardless of the mortgage and real estate debacle of the last few months and years. Constant monitoring of this expenditure should always be done to ensure that you have a good rate, what your net after tax payments truly are and that the payment period is relevant and appropriate. Many have over the years rushed to refinance when rates fall just a bit, but there are many more variables to consider that just the monthly payment.

-Avoid Surprises. Though mortgage companies might promote that there is no closing cost, these monies are typically added to your mortgage balance, rolling the costs into the loan and making you not only eventually pay these closing costs but the resulting interest on the balance over the next thirty years as well. It at all possible, it is prudent to consider when refinancing to reduce the payment period of your loan thereby working towards paying off the principal balance sooner than later.

-Payment Period. Equally as important is to keep in mind the year you plan to retire so that you might be able to succeed in the goal of retiring debt free. Adjusting to living on a fixed income will be difficult enough without having a fixed monthly mortgage payment, which must also be paid in additional to normal living costs.

-Always “Under-Buy”. Though advertisers will tell you to get it now, pay for it with credit and to buy all you can, nothing could be further from Biblical truth of money and how it was intended to be used. Debt, if at all possible, should be avoided. If it cannot be avoided, such as in the buying of a home, it should be limited. It debt is required a Believe should work diligently to pay it off, while doing everything in their power not to acquire any more. To help ensure that you do not overbuy I suggest you do three things before acquiring any additional substantive need:

-Consult with Biblical truth and CPA’s/l Advisers Who Are Fiscally Conservative.

-Evaluate if you can still safely make the payment if you have a thirty percent reduction in monthly/annual income.  This will ensure that you buy “within your means” and not up to your means. There will be many in your life who will make offers to you that will not be in your best interests and the offering of a credit or  a bank saying “you qualify” is no different.  Being sure that you financial commitments are well below what you can afford is your best bet to short and long-term financial success.  

John Dillard is a Christian Speaker/Author and Certified Public Accountant (All Rights Reserved). To See how he takes Christ along with him to work visit http://www.hiscpa.com/ (An Atlanta  CPA firm) and for his latest book Overcoming Life’s 9/11’s: Job’s Journey and to learn about his ministry visit http://www.john-dillard.com/ To contact John Dillard CPA (Atlanta Christian Author/Speaker) today call 770. 814.9304 proudly serving Duluth, GA, Gwinnett County and Beyond.

“Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!”

What, then, shall we say in response to this? If God is for us, who can be against us? Romans 8:31

Why are these verses here? Learn how HIS CPA became a Christian Accounting firm visit http://www.hiscpa.com/christian-CPA.html

We advise clients on: IRS representation, Offer in Compromise, Tax Problems, Incorporation in Georgia, Corporate and Personal Income Tax Returns, Part-time CFO, Virtual Controller, Business Planning, Offer in Compromise, Back Taxes, Business Acquisitions/Sales,  Forensic Accounting, Business Valuations and Bookkeeping.  

Atlanta CPA on Home Mortgages…How to Best Avoid Defaulting

Selecting the Right Home Mortgage

With all the different types of mortgages and fund investment strategies it is difficult, if not impossible, for the average investor/home buyer to make a decision about what is the best type of mortgage to pursue: interest only, fixed, variable, or for what term. Care should be given in all financial matters to review a particular households short and long term needs and then ideally balancing as much of these as possible so as to gain as large a financial advantage as possible while not unnecessarily exposing your personal household’s finances. 

With the spirals in the real estate continuing with no apparent end in sight, leveraging or mortgaging real estate still makes financial sense. However, just because someone is willing to give you a loan does not mean that it makes for wise financial sense for your family. Great care and due diligence should be exercised when taking out a loan. Though surely for most if not all of us the first home purchase is one in which we are apt to be the most highly leveraged. Having been fresh out of school and perhaps just starting our careers we do not possess the financial resources to place any substantive amount of down payment. However, for each and every subsequent purchase we should take great care to ensure that our wants do not exceed our ability to pay. Accordingly it is wise to be sure to add a substantive buffer between our monthly expenses and our monthly income as we can always be sure there will be bumps along the way causing minor as well as substantive financial pitfalls along the way. Therefore we should be sure to living well below the standard of living that our income allows us to do so that these downward financial turns which are certain to occur do not unduly affect our ability to keep the financial obligations we incur. Although the loss of a job or a medical illness which occurs over more than just a few months or even years is apt to derail even the best planners, we should be ready to stand up to smaller adversities by ensuring that we keep our debt load low.

Remember “Creative Financing” means that you probably cannot afford it. Although I seldom disagree with a clients decision to buy anything I do often debate the timing as to a certain financial decision so as to not unnecessarily expose your household or business financially. Prudence when agreeing to acquire a property and taking on a debt load will be critical to ensuring long term financial success. Just because a particular lender is willing to give you a loan does not mean that it is a wise decision. I suggest that for all major debt acquisitions such as homes, buildings, and cars that you consult your financial adviser/CPA well before a decision becomes emotional and your desires begin to outweigh your primary concern of protecting the family’s long term financial viability.

John Dillard CPA of His CPA PC  (a Christian CPA firm) is an author and Certified Public Accountant (All Rights Reserved). To See how he takes Christ along with him to work visit http://www.hiscpa.com/ and for his latest book Overcoming Life’s 9/11’s: Job’s Journey visit http://www.john-dillard.com/ 

“Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!”

We advise clients on: IRS representation, Offer in Compromise, Tax Problems, Incorporation in Georgia, Corporate and Personal Income Tax Returns, Part-time CFO, Virtual Controller, Business Planning, Payroll Administration, Bookkeeping.

(Proudly Serving Alpharetta & Roswell for Over Twenty Years)  

Avoid Troublesome Mortgages…What You Don’t Know Will Hurt You Later

Everywhere you turn lately, you hear a story about someone who lost their home due to their inability to meet their mortgage payments.  Unfortunately, more and more of these horror stories are appearing everyday because of an overeager real estate surge that made it possible for almost anyone to purchase a home with creative financing.  However, once the creativity is taken out of the financing, you are usually left with a home you can’t afford and no good solution to getting rid of it.  HIS CPA P.C. works with potential homeowners in fulfilling their dream of owning a home or refinancing the home they’re in.  We take great care in evaluating a person’s ability to purchase a home and to afford the mortgage payments, not just today, but also 2, 10, and 20 years from now.  Some things that are crucial to consider when looking for a mortgage company and a home to purchase are:

-Don’t get caught in the hype.

-Under purchase – in other words, don’t purchase what you can afford or a little more, purchase less than you can afford and you allow yourself a cushion should something happen.

-Stay away from promises of creative financing.

-Allow for a cushion – you’ve always heard from every financial advisor around that you should always keep at least a few months rent or mortgage payments stashed away in case of emergency, in today’s volatile job market with downsizing and overseas competition, this has never been more critical.

-Expect Problems – this is where the cushion and the under purchase will really come in handy.

-Be careful in the type of mortgage you are agreeing too – a fixed loan is usually better and not subject to a volatile market where as interest only loans dramatically fluctuate and you should be able to maintain a reserve to pay off the balance in full.

John Dillard is an author and Certified Public Accountant (All Rights Reserved). To See how he takes Christ along with him to work visit http://www.hiscpa.com/ (a Christian CPA firm) and for his latest book Overcoming Life’s 9/11’s: Job’s Journey visit http://www.john-dillard.com/ 

“Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!”

Preparing the S Corporation Income Tax Return K-1 A Guide How to Guide to Prepare a K-1

We advise clients on: IRS representation, Offer in Compromise, Tax Problems, Incorporation in Georgia, Corporate and Personal Income Tax Returns, Part-time CFO, Virtual Controller, Business Planning, Payroll Administration, Bookkeeping.

Serving Barrow, Bartow, Carroll, Cherokee, Clayton, Coweta,  Douglas, Fayette, Forsyth, Fulton, Gwinnett, Henry, Newton, Paulding, Pickens, Rockdale, Walton, Barrow, Bartow, Carroll, Henry, Newton, Bartow, Walton, Rockdale, Barrow, Spalding, Coweta, Dawson, Douglas, Fayette, Newton, Paulding, Spalding, Walton, Henry, Paulding, Douglas, Coweta, Canton, Covington, Douglasville, Druid Hills, East Point, Forest Park, Griffin, Lithonia, Mableton, McDonough, Milton, Mountain Park, Newnan, Powder Springs, Stockbridge, Union City, Villa Rica, Winder, Woodstock,  Smyrna, Sandy Springs, Marietta, East Point, Gainesville, Snellville, Buckhead, Buford, Peachtree City, Dunwoody, Kennesaw, Decatur, Conyers, Stone Mountain, Gwinnett County, North Fulton County, DeKalb County, Hall County, Clayton County, Cobb County, Forsyth County, Hart County, Jefferson County, Duluth, Alpharetta, Johns Creek, Lawrenceville, Milton, Norcross, Snellville, Roswell, Buford, Cumming, Grayson, Lake Hartwell, Suwanee, Sugar Hill, Loganville, Lilburn, Dunwoody, Gainesville, Decatur, and Beyond

Everywhere you turn lately, you hear a story about someone who lost their home due to their inability to meet their mortgage payments.  Unfortunately, more and more of these horror stories are appearing everyday because of an overeager real estate surge that made it possible for almost anyone to purchase a home with creative financing.  However, once the creativity is taken out of the financing, you are usually left with a home you can’t afford and no good solution to getting rid of it.  HIS CPA P.C. works with potential homeowners in fulfilling their dream of owning a home or refinancing the home they’re in.  We take great care in evaluating a person’s ability to purchase a home and to afford the mortgage payments, not just today, but also 2, 10, and 20 years from now.  Some things that are crucial to consider when looking for a mortgage company and a home to purchase are:

-Don’t get caught in the hype.

-Under purchase – in other words, don’t purchase what you can afford or a little more, purchase less than you can afford and you allow yourself a cushion should something happen.

-Stay away from promises of creative financing.

-Allow for a cushion – you’ve always heard from every financial advisor around that you should always keep at least a few months rent or mortgage payments stashed away in case of emergency, in today’s volatile job market with downsizing and overseas competition, this has never been more critical.

-Expect Problems – this is where the cushion and the under purchase will really come in handy.

-Be careful in the type of mortgage you are agreeing too – a fixed loan is usually better and not subject to a volatile market where as interest only loans dramatically fluctuate and you should be able to maintain a reserve to pay off the balance in full.

Atlanta CPA on Wild Swings in the DOW…Are Our Mortgage Markets Safe?

Recent Uncertainty in the Mortgage Market

In light of tightening of credit the home mortgage industry there is evidence that perhaps loans that were made in the past are no longer going to be accessible to those who do not qualify. In the last several years in response to a good economy and increased competition, loans were extended for which the underwriting requirements were not as strict or severe as they had been in the past. As a result there has beeen a recent shakedown of the good credits from the bad and a day of reckoning/correction in the marketplace.

Interest only loans have been very popular as of late offering the allure of a lower payment as no principal payments are required. But as with all marketing teasers there is always a catch and for mortgage loans there is no exception. If you have substantive other capital available to pay off a loan if need be then a interest loan might be a prudent and wise decision. However, many utilized this option for the purchase of homes which were really beyond their financial means. Remember “Creative Financing Means You Probably Cannot Afford It.” Wise and careful money managment dictates that you should always live below and not up to your standard of living that your income affords you. In this way you will best be able to handle the inevitable financial road bumps which will happen along the way.

It is wise that one acquires an equity line on their home as an additional insurance policy to handle any financial emergencies as well as making these monies potentially deductible.  Mortgage interest continues to be the largest itemizations that one can take when preparing their taxes and equity interest, as long as you meet certain exceptions, will help lower your overall tax bill.

The shakeout in the market/DOW will more than likely continue for an extended period but those in the market should not react but rather respond to the volatilites. Though some/mabye even all of your investments both pre and after tax may have fallen, you should still evaluate your dollars invested in light of other alternative opportunities. Human response being what it is will typically steer us to sell at the lowest possible price out of our fear while reality/intellectually a depressed stock cycle might be providing the highest opportunity for future bargains and increased returns. Though a volatile market necessitates an increased state of awareness and examination of your investment portfolio, it might not necessarily be a time to make any sell decisions. Working with both your CPA and financial advisor through these times will help guide and direct you towards making wise decisions.

John Dillard CPA of His CPA PC  (a Christian CPA firm) is an author and Certified Public Accountant (All Rights Reserved). To See how he takes Christ along with him to work visit http://www.hiscpa.com/ and for his latest book Overcoming Life’s 9/11’s: Job’s Journey visit http://www.john-dillard.com/ 

“Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!”

We advise clients on: IRS representation, Offer in Compromise, Tax Problems, Incorporation in Georgia, Corporate and Personal Income Tax Returns, Part-time CFO, Virtual Controller, Business Planning, Payroll Administration, Bookkeeping.

(Proudly Serving Lawrenceville & Snellville for Over Twenty Years)