Southeast American Financial Group Inc.'s Blog

Tax Documents: How Long Should You Keep Them?

Tax season is over, and what a relief! But what do you do with all of this paperwork? For years, the rule of thumb for individual tax filers has been to keep federal tax returns and all supporting documents for three full years. This is based on the principle that the IRS can audit your last three returns only if they believe that you made a good-faith error. However, be aware that the IRS can audit your returns for up to six years if they suspect that your income was misrepresented on any tax return by 25% or more. Therefore, to be completely safe, keep tax returns and supporting documents for seven years before shredding them. In addition, it's a good idea to keep a permanent copy of all 1040 forms from each year's return in one file.

Gas-saving Tips
With oil prices reaching record highs, the price of filling up the tank is becoming more and more challenging for many American households. Here are a few simple tips to help you save money at the pump this spring:

Use the octane level recommended by your owner’s manual – According to the Federal Trade Commission, “Using a higher-octane gas than the manufacturer recommends offers no benefit in most cases.” So, as long as your engine’s not knocking or pinging, you can save up to 40 cents a gallon in many cases simply by switching to lower-octane fuel. If you’re convinced that super unleaded is the best choice for the life of your engine, use lower-octane fuel every other time you fill up just until peak gas prices drop to more manageable levels.
Slow down and plan ahead – In most cars, gas mileage decreases at speeds above 60 mph, so leave early and take the slow lane to save a few bucks on fuel costs. Also, you can avoid costly extra trips and traffic by carefully planning out your route in advance. Why not go to the grocery store on your way home from work? While you’re there, use the store’s ATM and avoid another trip to the bank.
Don’t pay more for the same gas – Before you fill up, go online and look for consumer gas-saving sites like . Sites like these reveal which stations in your neighborhood have the lowest rates each day. Some even offer maps and directions! You’d be surprised at how much you can save sometimes at a gas station just three blocks away.

IRS Warns of Scammers:
Thanks to the Economic Stimulus Act of 2008, the US Treasury will send out rebate checks (not to be confused with tax refund checks) to more than 130 million households this spring. Eligible taxpayers will receive up to $600 ($1,200 for married couples), and an additional $300 for each eligible child younger than 17. However, with so much money floating around at one time, the IRS is warning taxpayers about new telephone and email scams designed to steal your stimulus rebate check and your identity.

With this in mind, there are two important things you need to know to avoid becoming a victim:

1) The IRS does not send unsolicited, tax account-related emails to taxpayers. Scammers are using words like “rebate check” or “audit” in the subject lines to entice you to open their emails. Some of these emails have links to fake IRS sites. Don’t fall for it.

2) There is no “rebate check” application of any kind. The IRS relies solely on the 2007 tax return you’ve already filed to see if you qualify for a stimulus rebate check. Scammers are calling people asking for personal or tax information over the phone claiming to be from the IRS or the Treasury Department. Don’t give it up.

Increased Loan Limits This Year Only
The Economic Stimulus Act of 2008 did more than just authorize rebate checks. It also increased loan limits for Fannie Mae, Freddie Mac, and FHA-insured mortgages in many regions throughout the country. For those looking to purchase real estate in a "high-cost region," these loan limit increases could help you avoid the higher interest rates associated with jumbo loans. For current homeowners looking to refinance into a new “conforming loan,” this could be your best chance in all of 2008.

What’s the catch? This legislation is a temporary tool designed to stimulate the economy and the housing market through 2008. This means qualifying mortgages or refinances under this plan must be in place before the end of the year. If you or someone you know would like more information on how to take advantage of this rare opportunity from the government, give us a call right away. We’ll run the numbers and show you how much you can save.

Stimulus Package: Lawmakers raise lending limits
Do you qualify for a better rate?

The Economic Stimulus Act of 2008 is a $168 billion plan intended to jumpstart the sliding U.S. economy. While a lot of media attention has been focused on the $600-$1,200 rebate checks that millions of taxpayers will begin receiving this spring, the new bill is also designed to help certain "high-cost regions" of the struggling housing market by:

• Temporarily increasing the "conforming loan limit" from $417,000 to as high as $729,750 in specified areas; and
• Temporarily increasing the size of loans the Federal Housing Administration (FHA) can insure from $362,000 to as high as $729,750 in specified areas.

If you're looking to purchase or refinance a home in a "high-cost region," this is great news. These temporary increases could help you avoid the higher interest rates associated with "non-conforming," or jumbo, loans. Although these new limits only apply until the end of 2008, the legislation does not exclude the refinancing of any past mortgages into these new "conforming loans." That means, if you qualify, you can take advantage of the new limits no matter how many years have passed since you obtained your mortgage.

While this is great news, I should remind you that qualification standards are tougher than ever. So your credit score and credit worthiness are more important than ever. Give us a call today. We can review your options and discuss if we can make this legislation work for you.

Do You Live in a High-Cost Region?
Not everyone will benefit from these temporary loan limit increases, but experts estimate that areas in at least 17 states will be able to take advantage of it. So how do you know if your neighborhood qualifies?

A high-cost region is typically determined by the median value of its homes. The median value is the specific price that is halfway between the least expensive and most expensive home sold in an area over a given period of time. Do not confuse this with the average home price. The median home price is the price at which half of all buyers bought more expensive homes and half of all buyers bought less expensive homes.

If that sounds confusing, don't worry. It is the responsibility of the Department of Housing and Urban Development (HUD) to determine, within the next 30 days, what the median home price is for regions across the country. But I don't want you to wait until HUD makes its determination; give me a call at 954-967-0584 to discuss if you might benefit from this new legislation.

On 8/31/2007, President Bush announced that FHA will help an estimated 240,000 families avoid foreclosure by enhancing its refinancing program effective immediately. FHA Secure will allow families with strong credit histories who had been making timely mortgage payments before their loans reset - but have fallen behind on their payments as a result of the reset, to qualify for refinancing at traditional FHA rates.

There are many families that this is not assisting as many fell behind as a result of taxes and insurance and waited too long before seeking help. 

If you are falling behind, do not wait until you are past due before you seek help, talk with a lender or housing professional before you do.  While some lenders are working with their borrowers to assist in alleviating a crisis, most are only giving lip service to the idea,  Instead of trying to work to help these borroweres, many lenders are using aggressive collection tactics to have the loan brought current within a 30 to 60 day period.

Today, many individuals who are looking for a mortgage get taken in by not asking the right questions.  Many individuals want a particular home but do not realize that they cannot afford it, because they are not looking at what their total payment is compared to their total take home income.  Make sure you understand what your principal, interest, insurance and tax payments are and that your taxes and insurance can climb much higher than they are the following year when buying a home.

If you are getting a rate that is below the rate at which banks lend to each other, which is called the Fed Funds Rate, currently at 4.75%, something is wrong, ask questions?  Ask your lender how long is that rate going to last, when will it change as it is either an adjustable rate or more than likely it is a payment rate. Ask yourself if the bank is lending to each other at that rate, how can I get a lesser rate for my loan, and the answer is that you cannot. 

Don't get me wrong, there are times when you can buy down the rate for a year or two and you may get a 4.75% for the first year and a 5.75% for a second year, and then in the 3rd year you may pay 6.75%, but you have to pay for it as that is known as a buy down rate. Remember, there is no free lunch.

A payment rate is not an interest rate, it is the amount you can make as a minimum payment, it does not cover the full interest cost of the loan.  If you pay the minimum payment, you will be deferring the balance of the interest which will be added to your principal.  In most cases, these loans will carry a prepayment penalty for one, two or three years, any where from 2% of the loan amount or 6 months interest.  

Credit is frequently the reason for a higher interest rate, if you have credit issues, work to fix the issues before you enter into a contract to buy.  If you already own your home try to make your mortgage payments on time.  Do not wait until after they are past due before you seek help, because by then it will be two late and you will end up with higher rate loans which can be costly.

Contact Janette Davis at 954-967-0584 to learn if you can qualify for the loan and the home you want.

By Janette Davis, MBA, CPA
President/Certified Mortgage Planner
Southeast American Financial Group, Inc.
Office: 954-967-0584
Fax: 954-967-0585
E-Mail: jdavis@southeastamerican.com
Website: www.southeastamerican.com

The purpose of this communication is not to alarm you but to alert you to drastic and irreversible changes currently taking place in the mortgage market. If you or anyone else you know will need mortgage financing in the next 18 months, you need to read this!

Within the past month, American Home Mortgage and its wholesale counterpart, American Brokers Conduit, became the latest casualties of the credit crisis. Last year, this company closed over $58 billion in home loans. Despite being, by all accounts, a well-run business, market conditions forced them to file for bankruptcy, leaving billions of dollars in loans in their pipeline unable to close. Tens of thousands of borrowers have now been left without financing as a result of companies like this going under.

With over 130 national lenders closing their business in the last eight months, this is no longer simply a subprime lending issue. The credit market is experiencing unprecedented turmoil. According to Federal Reserve Chairman, Ben Bernanke, "Financial markets have been volatile in recent weeks, credit conditions have become tighter for some households and businesses, and the housing correction is ongoing."

What does this mean to consumers?

Potential borrowers cannot wait any longer. For those who are considering buying a home, be aware that the volatile credit market can change overnight, leaving fewer options available to borrowers attempting to qualify for a mortgage. This is even more true for those looking to refinance. With decreases in home values and fewer available mortgage instruments, delaying any longer could get significantly more expensive.

Borrowers with applications in process must not delay. Applicants should work with their mortgage professional to complete all paperwork quickly, especially on non-conforming, stated-income, and stated-asset loans. Even minor delays can result in funds being yanked at the closing table!

Sellers can no longer be reluctant to accept offers or reduce prices. Tightening credit and diminishing mortgage products will continue to reduce the pool of qualified buyers. This, along with the increase in national housing inventories, means now is not the time to hold out for the "best" price possible.

Buyers with credit issues or who have difficulty providing required documentation can no longer sit on the fence. If market conditions change, buyers who qualify for a loan today may not qualify a few weeks from now for the same exact loan. Just this week, many lenders have stopped offering No-Doc loans, and some lenders have even pulled back on all forms of stated loans. As market conditions continue to change, a buyer's pre-approval status can disappear even more quickly, delaying or spoiling the deal.

Subprime and Alt-A refi candidates, especially those with ARMs scheduled to reset over the next 12 months, need to act now - even those with a pre-payment penalty. ARMs borrowers struggling with monthly payments now might be shocked to know that monthly payments can double in some cases once an ARM resets.

What does this mean to you?

If you or someone you know has an ongoing real estate transaction, I would be glad to help. Please call me right away. As an educated mortgage professional, I will utilize my experience and resources to help you and your loved ones to navigate through these turbulent times. Don't leave your future in the hands of some random mortgage provider. I'm local, accountable, and you can trust that I'll do everything in my power to help you succeed. I can be reached at 954-967-0584 X307

In theory, finding the right mortgage should be a fairly simple process. After all, there are literally hundreds of options to choose from, including Fixed Rate, Adjustable Rate, Hybrids, and Interest Only loans, to name just a few. Mortgages are available with interest rates ranging from an introductory rate of 1.00% to well over 10.00%. Borrowers, in some cases, can even finance up to 100% of their home's value and, in some cases, their closing costs as well.

In reality, however, this vast selection of mortgage products has made choosing the right one a challenging endeavor, to say the least. Without sound advice from an experienced mortgage professional, consumers are at the mercy of a complex financial decision that could impact their lives for years to come. At a minimum, home buyers should consider the following questions before putting any mortgage into place:

· How long do you anticipate living in your new home?

· Do you foresee any changes in a few years, such as expanding your family or having children go off to college?

· Do you anticipate any adjustments in income due to  promotions, relocations, retirement, inheritance, or pensions?

· Are you expecting a change with regard to your investments?

· When it comes to investment strategies, are you conservative, aggressive, or somewhere in between?

As a mortgage professional, it's my job to match clients with the mortgage product that best serves their changing goals and needs. I take pride in helping each and every client succeed in managing in most cases their largest financial asset.

Will you lose your home?

Absolutely not. You remain the homeowner and you can stay in your home for as long as you desire. In effect, you are being paid to live at home. The program is regulated and insured by the Federal Housing Administration. By law, you can't be forced to sell or

move, and no payments are due on the Reverse Mortgage until you no longer live in your home.

If no monthly payments are required, how is the Reverse Mortgage paid back?

This isn't a home equity loan. The loan is paid back when you move out of the home, sell it or all the people on the title have passed away.

What if you want to leave the home to your kids?

It's your home. You can still leave it to your children or to anyone you choose. Your heirs can pay off the loan any number of ways, such as selling the home, refinancing the debt or using other funds to pay off the Reverse Mortgage.

How much cash can you get?

The amount depends on your date of birth, value of your home and lending limits in your area.

What are the costs?

As with any loan, there are closing and other costs, all of which can be paid with the money generated by the Reverse Mortgage but there are NO out-of-pocket costs to the homeowner.

Will this loan affect your Social Security or Medicare benefits?

HECM payments do not affect Social Security or Medicare benefits because those benefits are not based on the assets of the recipient. However, the federal Supplemental Security Income program, requires beneficiaries to keep their liquid resources under certain limits.

This is only just the beginning. If you want to find out more, you should schedule a consultation with knowledgeable and experienced Reverse Mortgage advisor. You are encouraged to consult with family or a financial advisor too. If you have further questions, you are welcome to contact me at 954-967-0584.

Subprime Changes the Lending Landscape

The effects of the subprime crisis are becoming clearer with each passing day. According to the Wall Street Journal, tightening guidelines and fewer available products are creating challenges for borrowers with credit issues. If you're thinking about taking on or refinancing a mortgage, your credit score will be crucial when it comes to obtaining the best loan program available.

For homeowners with ARMs that are scheduled to reset anytime within the next 2 to 24 months, the challenges are even greater. With higher credit standards and tightening guidelines, you may not even qualify for a refinance if you wait too long. At this stage, a fixed-rate product may be your best chance at creating real financial stability before your loan resets and your payment adjusts. Even if your mortgage has a pre-payment penalty, in some cases, not all, it may be less expensive to absorb the penalty now and refinance into a more stable mortgage.

In the event that you now owe more on your home than it's currently worth, or if you don't have enough equity to sell your home and cover expenses, help could still be available – but you have to act now. Meet with a mortgage professional right away and see what options you have.