Veterans: Consider a Zero Down VA Loan

US Military Logos
Link to VA Home Loan Benefits

First, if you have served in the armed forces, thank you for your service! I am proud to have served with the US Navy as both a Surface Warfare Officer and as a recruiter. During my service as a recruiter, I bought my first Dallas home using a VA loan. At closing, I wrote a check that was between $100-200 and got the keys to my brand new home. I also took advantage of a small loan from the Texas Veterans Land Board. Together, these benefits of military service helped me to achieve the dream of home ownership.

I recently received an e-mail with information on obtaining a VA Loan from VA Mortgage Center.com. As they are one of the leading service providers for VA loans, I wanted to share their information with you. Hopefully this will help you achieve the dream of owning a Dallas home.

More than 1.7 million veterans reside in Texas, and about 38,000 live in Bell County where Fort Hood fulfills the role of the largest active duty armored post in the U.S. Yet it’s highly unlikely that all these veterans take advantage of the VA home loan program since less than 10 percent of the nation’s 24 million veterans capitalize on the program.

The VA loan program is one of the last remaining home-buying options that lets borrowers put no money down. Compared to conventional loans, VA home loans tend to offer lower interest rates and eliminate the private monthly mortgage insurance. As a result, borrowing veterans’ monthly payments are greatly reduced.

Fort Hood is full of starter homes that veterans could buy with the help of a VA loan. In 2007 and 2008, homes that cost between $100,000 and $159,999 accounted for 44.3 percent and 45.2 percent of homes sold in the Killeen-Fort Hood area, according to Texas A&M’s Real Estate Center (REC). Even during hard economic times, homes in the Killeen-Temple-Fort Hood area appreciated about 2.5 percent in late 2008 compared to 2007. In the same area, the REC found that the annual average rate for a 15-year fixed mortgage was about 1.2 percent, which is quite borrower-friendly.

By the end of 2008, homes in the U.S. began to depreciate, but Texas’ home values did not, according to the REC. The median house or condominium value in Texas in 2008 was $126,800.

Veterans who want to make use of a VA loan to buy a home in Texas need to confirm their eligibility first. For the most part, veterans who are in one of these categories may have va loan eligibility:

-Military members who’ve served 181 days on active duty or three months during war time
-People who have spent at least six years in the National Guard or Reserves
-Spouses of those killed in the line of duty

The maximum VA loan limit in Texas is $417,000, but it’s important to note that VA does not issue loans, it simply backs about one-quarter of the loan. Because of that insurance, lenders, such as the VA-certified VA Mortgage Center.com, are often happy to help veterans get a loan.

Tax Season Is Upon US

OK, so this isn’t my favorite time of year. It seems that as much as I pay in taxes, rarely do I see one of those refund checks. But in the spirit of helping others, here are a few items that might just help you receive a refund on your 2009 taxes. At a minimum, maybe these ideas will help you reduce the amount that you owe. As with all tax related issues, I strongly encourage you to consult with a CPA or tax professional to make sure that these tips apply to your particular situation.

Trulia.com has just posted a great blog entry that covers the following five tips:

  1. 2009-2010 First Time Home Buyer Tax Credit
  2. 2009-10 Move-Up Buyer Tax Credit
  3. Energy Efficient Housing Tax Credits
  4. Private Mortgage Insurance Deduction
  5. The Mortgage Forgiveness Debt Relief Act

 

And if you need to expand that list with a few more ideas, Kiplinger.com offers these:

Source: Kiplinger

Acquisition debt. See Mortgage interest.

Boats as homes. A boat that has eating, sleeping and sanitary facilities can qualify as a first or second home, so you can deduct mortgage interest paid on the loan secured by the boat to buy it. However, if you are subject to the alternative minimum tax, this write-off is not allowed.

Cancelled debt on foreclosure or short sale. Generally, when a debt is canceled or forgiven, the borrower is considered to have received taxable income equal to the amount of the canceled debt. However, through 2012, up to $2 million of debt discharged on a mortgage on a principal residence — in a foreclosure, for example, or short sale — can be tax-free.

Casualty loss. If your home was damaged or destroyed — by fire or storm, for example — you may be able to get financial help from Uncle Sam by deducting a casualty loss on your return. Your deduction is generally the total of your unreimbursed loss reduced by $500 and further reduced by 10% of your adjusted gross income. However, for 2009, the 10% squeeze does not apply to any losses that occurred in federally declared disaster areas.

Depreciation on home. Profit due to depreciation claimed on your residence before May 7, 1997 — because you had a home office, for example, or at one time rented out the property — qualifies for the rule that lets you treat $250,000 of home sale profit as tax-free income. (The limit is $500,000 if you’re married and file a joint return.) Profit due to depreciation after May 6, 1997, is taxed at 25%, unless you’re in a lower tax bracket, in which case that rate applies.

Discharged debt. See Cancelled debt on foreclosure or short sale.

D.C. first-time homebuyer credit. If you bought a home in the nation’s capital during 2009, you may be eligible for a $5,000 tax credit. It doesn’t really have to be your first home … just a home you purchased in the District of Columbia after not owning one in D.C. for at least one year. It doesn’t matter if you have owned a home elsewhere. This break phases out as income exceeds $70,000 on single returns and $110,000 on married filing jointly returns. See first-time homebuyer credit.

Energy credits. You can earn a 2009 tax credit for installing energy-saving home improvements such as new doors, new windows, energy-efficient furnaces, heat pumps, hot water heaters, air conditioners, etc. The credit is 30% of the cost of installing such energy savers, up to a top credit of $1,500. For windows and doors, the credit is based on the cost of the materials; for furnaces and air conditioners and the like, you can count the cost of installation, too. A bigger credit is available for more ambitious projects – like solar hot-water heating systems, geothermal heat pumps and, yes, even residential wind energy systems. Start generating your own power and Uncle Sam will rebate 30% of the full cost of your system…with no dollar cap.

First-time homebuyer credit. If you bought a home in 2009, you may qualify for either an $8,000 or $6,500 home buyer credit. And, you don’t really have to be a first-time home buyer to qualify for either credit. To qualify for the $8,000 credit you (and your spouse if married) must not have owned a home in the three years leading up to the purchase of your new home. The credit is 10% of the purchase price of the home, up to a maximum credit of $8,000. For purchases after November 6, 2009, no credit is allowed for homes that cost more than $800,000. (There’s no price cap for purchases earlier in the year.)

To qualify for the $6,500 credit, you must be a long-time homeowner, defined as owing and living in the same principal residence for five of the eight years leading up to the purchase of your new home. The credit is 10% of the purchase price of the home, up to a maximum credit of $6,500. For purchases after November 6, 2009, no credit is allowed for homes that cost more than $800,000. (Again, there’s no price cap for purchases earlier in the year.)

Unlike a first-time home buyer credit available in 2008 – which had to be paid back over 15 years by adding $500 in each of those years to the taxpayer’s tax bill – the 2009 credit does not have to be paid back, as long as you live in the principal residence for at least three years.

Foreclosure. See Cancelled debt on foreclosure or short sale.

Home-equity debt. Interest on up to $100,000 of debt secured by your first or second home — using a second mortgage, say, or home equity line of credit — can be deducted, regardless of how the money is used. The use of home-equity debt gives homeowners an opportunity to skirt the rules that generally block the deduction of debt used to buy automobiles, for example, or pay for vacations.

Home-office deduction. You can deduct the costs of a home office that you use exclusively and regularly for business. This includes depreciation, utilities and insurance for the office portion of your home. To qualify for the tax break you must either meet with clients there regularly, or the home office must be your principal place of business (unless it is not attached to your house).

Home-sale exclusion. Up to $250,000 of profit from the sale of your home can be tax free; $500,000 if you are married an file a joint return. To qualify, you must own and live in the house for periods totaling two years out of the five years leading up to the sale. A reduced exclusion is available if you fail the two-year test due to unforeseen circumstances such as a move resulting from a job change, for example, or divorce. You can use this exclusion any number of times but no more frequently than once every two years.

IRA payouts for first-time homebuyers. You can withdraw as much as $10,000 from a traditional IRA early (before age 59½) without penalty if the money is used to buy the first home for yourself, a child or grandchild, or your parents or grandparents. Although the payout avoids the normal 10% early-withdrawal penalty, it is taxed. If a Roth IRA is involved it is taxed as income. See Roth IRA payouts for first-time homebuyers.

Loan prepayment penalties. If your lender charges you a penalty for prepaying your mortgage early, the charge is deductible as mortgage interest.

Mortgage interest. You can deduct interest on up to $1.1 million of loans used to buy or build or improve your first or second home and secured by the property. Up to $1 million of such debt is called acquisition debt, which must be used to acquire or improve the property, and up to $100,000 more is called home equity debt, which can be used for any purpose.

Mortgage interest credit. If you received a mortgage credit certificate from a state or local governmental agency, you can claim a tax credit of up to $2,000 of mortgage interest paid.

Moving expenses. If a move is connected with taking a new job that is at least 50 miles farther from your old home than your old job was, you can deduct travel and lodging expenses for you and your family and the cost of moving your household goods. If you drive your own car, you can deduct 24 cents a mile for 2009 moves. (For 2010, the standard mileage rate for moving is 16.5 cents a mile.) If you moved to take your first job, the 50-mile test applies to the distance between your old home and your new job. The deduction is allowed even if you do not itemize deductions.

Parsonage allowance. For members of the clergy, the value of a home provided by the church is a tax-free fringe benefit. A housing allowance is also tax-free.

Points. Points you pay to get a mortgage for your principal residence are generally fully deductible in the year paid, even if you persuade the seller to pay your points for you. They are not deductible if paid as part of a refinancing; in that case, you deduct the points over the life of the loan.

Presidentially declared disaster. If your home was damaged or destroyed in an area that the President declared a disaster area, special rules apply to the casualty loss deduction. For one thing, for 2009 losses the law waives the requirement that you reduce your loss by an amount equal to 10% of your adjusted gross income to arrive at the deduction. And, you may choose to deduct your loss in the year it occurred or the previous year, whichever is more advantageous.

Property taxes. See Real estate taxes.

Real estate taxes. You can deduct state and local real estate taxes paid during the year on any number of personal residences you own. If you choose to claim the standard deduction rather than itemize deductions, you can add $500 if single or $1,000 if married filing jointly to the regular standard deduction amount if you paid at least that much in state and local real estate taxes. (If you own rental properties, real estate taxes on them are deducted on Schedule E where you report rental income.)

Real estate taxes when you buy a home. If you bought a home during the year, check to see if the seller had prepaid property taxes for a period you actually owned the home. If so, include that amount in your property tax deduction for the year . . .even if you did not reimburse the seller.

Recreational vehicle. If your RV has cooking, sleeping and sanitation facilities, interest on a loan used to buy it can qualify as deductible mortgage interest on a first or second home. If you are subject to the alternative minimum tax, interest on an RV loan is not deductible.

Refinancing points. Generally, points paid when refinancing are deducted over the term of the loan. But if you refinanced a loan that you previously refinanced, you can deduct in full the as-yet-undeducted points remaining on the prior loan. There’s a catch, however: If you refinanced with the same lender, the remaining points must be amortized over the term of the new loan.

Rehabilitation credit. If your residence is certified by the government as a historic building, you can claim a tax credit for 20% of the cost of renovating it. The renovation must be substantial, and the expenses must be incurred within a 24-month period.

Reverse mortgage. Amounts received under a reverse mortgage — either a lump sum payment or periodic payments — are tax free. Interest that accrues on a reverse mortgage is not deductible until it is paid, and then only interest on up to $100,000 of debt can qualify.

Roth IRA payouts for first-time homebuyers. Because the rules for the Roth IRA allow you to withdraw contributions at any time without penalty, the Roth can be a powerful tool for saving for a first home. Say you and your spouse each put $5,000 a year into a Roth for five years. The entire $50,000 could be withdrawn tax- and penalty-free for a down payment and, because the accounts have been opened for at least five years, up to $10,000 of earnings can be withdrawn tax- and penalty-free if used to buy your first home.

Serial refinancers. If you refinanced in 2009 and paid off a home mortgage you acquired when refinancing to pay off an earlier mortgage, any as-yet-undeducted points on the previous refinancing may be deductible on your 2009 return. See Refinancing points.

Tax-free profit. See Home sale exclusion.

Tax-free profit on vacation home. Because Because you can use the home-sale exclusion repeatedly, it’s possible to make profit on a vacation home tax free. If you move into the place and live there for two of the five years prior to selling it, you can qualify to claim up to $250,000 of profit tax free (up to $500,000 if you are married and file a joint return).

Since 2008, however, the potential value of this break has been diluted. For vacation homes converted to principal residences after December 31, 2008, a portion of the gain will be taxed. The taxable part will be based on the ratio of the time after 2008 when the house was a second home or a rental to the total time you owned it. So if you have owned a vacation home for 18 years and make it your main residence in 2011 for two years before selling it, 10% of the gain would be taxed. The rest would still qualify for the exclusion of up to $500,000.

Tax-free rental income. If you rent out your home for 14 or fewer days during the year — when there’s a major sporting event or political convention in your hometown, for example — the rental income is tax-free, regardless of how much you make.

Vacation home. Mortgage interest on your second home is deductible, just as it is for your principal residence. Property taxes can be deducted on any number of homes. If you rent the place for 14 or fewer days during the year, the rental income is tax-free to you. If you rent it for more than 14 days a year, you must report the income, but also may claim deductions for rental expenses.