The Tax Benefits of Selling Your Home

The tax benefits of selling your home can be quite great. The most notable tax break to selling your home is that you can exclude from taxes up to $250,000 in profit from the sale of your home (if you're a single owner) $500,000 (for couples filing jointly) and not owe any capital gains taxes. This exclusion also covers the sale of a parcel of land adjacent to your house - unless it's used for business.

• First, the property you're selling must be your principal residence, which simply means that you live in it.
• Second, you must have lived there for at least two of the previous five years, although this time does not need to be sequential. You are allowed to aggregate your time living in the house to meet the two-year residency requirement. What does this mean? It means that you can rent your house for two years, live in it for two, and rent it for another year and still be eligible since during those five years you owned and lived in the property for two years.
• Finally, while technically there's no limit on the number of homes you can sell and reap tax-free gain, each sale must be at least two years apart. That still leaves you room to make some money on several properties. You can sell your residence this year, pocket any gain within the tax limits and buy a new residence. Two years later, you can do the same thing, again and again every two years.

Please see your tax attorney for more information on tax benefits that are unique to your specific selling situation.

Making Sure Your Credit is in Tip-Top Shape!

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Ukraine and China

Tensions in Ukraine flared up again this week, causing investors to shift assets from stocks to the relative safety of bonds. Weaker than expected economic data in China also favored bonds over stocks, while the US economic data was roughly neutral. As a result, mortgage rates ended the week lower.

The most significant US economic report released this week, Retail Sales, contained some good news and some bad news. On the positive side, the results for February were stronger than expected. Unfortunately, the figures for January were revised lower. Overall, this left the data over the two-month period a little weaker than expected. Given the offsetting effects of the solid headline number and the downward revisions, combined with weather related distortions, the report caused no change in the economic outlook and had little impact on mortgage rates.

There was a lot of talk in the mortgage industry this week about a proposal out of the Senate Banking Committee that would replace Fannie Mae and Freddie Mac. Together Fannie and Freddie purchase or insure the majority of fixed-rate mortgages, so any changes to their structure would have enormous implications for mortgage lending. In the proposal, a new government entity would take over many of the functions of Fannie and Freddie, while some of the default risk would be shifted to private insurers. Both political parties support a reduction in the risk to taxpayers, but beyond that opinions vary widely about the appropriate role of government in the housing market. As a result, this proposal is viewed as a starting point for a long political debate, and the implementation of major reform of Fannie and Freddie is projected by most experts to be many years away.

Delayed Financing After a Cash Purchase!

   


If you’ve got a client who is doing a quick closing with cash but may want to consider doing delayed financing, we have an option for your client!  Help them conserve their cash and have them give us a call!

Your borrower might qualify as long as their cash out refi loan doesn’t exceed their initial investment in the property purchased and was an arm’s length transaction.  We must also be able to verify that no financing was acquired for the cash purchase and we must be able to source/trail all the funds used for the cash closing.  All other refi requirements must be met, but this is a great option for clients who are interested in conserving their cash.  (Note on jumbo delayed financing, the transaction must be completed within 90 days of the initial closing or cash out rules restricting the dollar amount of cash out will apply)

As you know, making a cash offer can be of great value in negotiations and getting delayed financing after closing helps refill your client’s bank account.  It’s a win win for everyone!

We look forward to hearing from you and your clients about all your mortgage needs.  Call us any time!

Strong Demand for US Bonds

The economic data released this week contained mixed results and had little impact on mortgage rates. Strong demand for US fixed income securities was the main influence this week, helping mortgage rates end the week a little lower.

There were strong indications this week that foreign investors, most likely in Japan and China, increased their purchases of US bonds, including mortgage-backed securities (MBS). The currencies of Japan and China have weakened recently versus the dollar, and the economic policies currently in place in both countries have caused investors to expect their currencies to weaken further. This makes US bonds more attractive to investors in those countries as the investor not only receives interest on the investment, but also expects appreciation in the value of the investment.

After a couple of months of weaker readings, the New Home Sales report released this week was a pleasant surprise. January New Home Sales jumped 10% from December to an annual rate of 468K units, far above the consensus of 400K. This was the highest level since July 2008. Also released this week, January Pending Home Sales posted a slight increase.

Asset Income Loans

Jobs and Manufacturing Fall Short

This week's key economic data showed that the performance of the economy in January was weaker than expected. The shortfalls caused stocks to decline and mortgage rates to improve, but the impact was surprisingly small.

Both the Employment report and the ISM Manufacturing data saw big misses. Against a consensus forecast of 185K, the economy added just 113K jobs in January. Also disappointing, many investors had hoped to see a large upward revision to the weak December reading, but it was little changed. The ISM national manufacturing index declined sharply to 51.3, far below the consensus of 56.0. For perspective, the increase in jobs reflects improvement in the labor market, and readings above 50.0 indicate an expansion in the manufacturing sector. The issue is that the pace of economic growth has slowed.

The relatively minor impact of this week's data must be considered in light of the performance of the stock and mortgage markets so far this year. Entering the week, stocks had experienced significant losses, as the Dow was down roughly 5% in January. Similarly, mortgage rates have seen significant improvement since the start of the year. To some degree, investors were already positioned for weak data this week. In addition, questions about the effect of unusually severe weather caused some investors to question how accurately recent data reflects the underlying strength of the economy.

Slower Economic Growth

Bad news for stocks was good news for bonds again this week. Weaker than expected economic data hurt stocks and helped mortgage rates improve to the best levels since Thanksgiving.

At the start of the year, investors were optimistic that the momentum in economic growth seen during the second half of 2013 would continue during 2014. So far, though, the economic data has been disappointing. The Employment report set the tone early in the month. Then the shortfall in China caused global stock markets to fall. The US economic data released this week was weaker than expected as well. Durable Orders, Home Sales, Personal Income, and Jobless Claims all contained downside surprises. That said, it's difficult to determine how much the unusually severe weather experienced this winter affected the data.

The last Fed meeting, when the Fed decided to begin to scale back its bond purchases, was a major market moving event. There was little drama in this Wednesday's Fed meeting, however. As expected, the Fed announced that it will scale back its bond purchases by another $10 billion to $65 billion per month. The Fed statement was very similar to the prior statement. According to the Fed, "growth in economic activity picked up" in recent quarters. In other Fed news, Janet Yellen takes over as Fed Chair starting February 1. Investors expect that the Fed under her leadership will look and act very similar to the Bernanke Fed.

Chinese Manufacturing Slows

The driving force for mortgage rates this week came from an unexpected source. Chinese manufacturing data fell short of expectations, causing sharp losses in global stock markets. Investors shifted to relatively safer assets, helping mortgage rates end the week lower.

On Thursday, China's PMI manufacturing index dropped to 49.6, below the consensus of 50.3. Readings below 50.0 indicate a contraction in the sector. China has been an important engine of growth for the world economy, so a slowdown would have significant implications for global markets. In fact, the news from China completely overwhelmed the strong results in Europe, which showed that manufacturing in the euro zone reached the highest level since the summer of 2011. The Chinese data caused concerns about the pace of global economic growth, and investors sold stocks. This resulted in an increase in demand for bonds, including mortgage-backed securities (MBS).

This week's Existing Home Sales data showed that, despite a slowdown in the fourth quarter, 2013 reflected a year of solid gains. Over five million existing homes were sold in 2013, an increase of 9% from 2012, and the highest level since 2006. While the gains may be more modest, most analysts expect the improvement to continue in 2014 as well. The National Association of Realtors (NAR) projects a very small increase in home sales next year, but both Freddie Mac and the Mortgage Bankers Association (MBA) forecast home sales to increase about 5% in 2014.

Inflation Remains Tame

Mortgage rates began the week with downward momentum following last Friday's big miss on the Employment report. That, combined with low inflation, more than offset this week's slightly stronger than expected economic growth data, and mortgage rates ended the week a little lower.

With the Fed's recent decision to reduce its bond purchases, investors were left evaluating what they believed to be the appropriate level of mortgage rates for the current economic environment. In short, moderate economic growth and low inflation represent relatively favorable conditions for mortgage rates. This week, the December Retail Sales report revealed gains consistent with moderate growth. Since Retail Sales account for about 70% of economic activity, investors pay close attention to this data. Two of the more significant monthly inflation reports also were released this week, the Consumer Price Index (CPI) and the Producer Price Index (PPI), and both confirmed that inflation remains tame. Core CPI was just 1.7% higher than one year ago, well below the Fed's target level of 2.0%, while Core PPI was even lower at 1.4% on an annual basis.

JOLTS, another report released this week, is quickly gaining prominence with investors because it is considered to be a favorite of incoming Fed Chair Janet Yellen. The JOLTS survey measures Job Openings and Labor Turnover levels, providing another level of insight into labor market conditions. Since the Unemployment Rate has been heavily influenced recently by people leaving the labor force rather than by job gains, investors and Fed officials are eager for additional details to judge the strength of the labor market. The November JOLTS data showed that Job Openings unexpectedly rose to the highest level since March 2008. The percentage of people quitting their jobs was nearly unchanged.

What Separates Us from Other Lenders

We have some fabulous niche products! 

Since every loan is done here LOCALLY at the office, our turn-around times are the BEST!!! 25 day closings NO PROBLEM! Rescues- no problem!

We can do the following loans:

• 1 day out of Short Sale purchase Loan 
• Condo’s with litigation
• No owner occupancy requirements on condos
• Foreign Nationals
• No maximum number of financed properties
• Bank statements to qualify loans (may require additional time for processing)
• No income on tax returns but assets – we can do!
• FHA,VA, Conventional, Jumbo
• 10% down to $750,000 with NO PMI
• 15% down to $1,275,000 loan amounts
• 20% down to $2,000,000 & 30% to $3,000,000 loan amounts  (may require additional processing time)
• Condos- 5% down with PMI with less than 51% owner occupancy-- (even 2% will work!)
• VA - Jumbo’s to $1,500,000 loan amounts (may require additional processing time)
• Non Occupant co borrowers on refinances if they do not qualify 
• Non Occupant co borrowers with 10% down conventional
• Cross Collaterization loans
• Title in LLC, Corporation, Trusts and Partnerships
• Very Competitive Jumbo Pricing 
• And many more!

 Don’t hesitate to contact our team with any questions about the above products or about any of your lending questions.

 We look forward to assisting you and your clients with their new home purchase and refinance needs.  

Job Gains Fall Short

Investors were focused on the strength of the labor market this week. A strong reading for job gains in Wednesday's ADP report caused mortgage rates to move a little higher. The ADP data turned out to be a poor indicator for Friday's weaker than expected Employment report, however, and mortgage rates ended the week lower.

Against a consensus forecast of 200K, the economy added just 74K jobs in November. This was the smallest monthly increase in jobs since January 2011. Given that several other labor market indicators showed greater strength in December, many investors were skeptical about how accurately the data reflects the strength of the labor market. For one thing, bad weather likely was a factor in the shortfall, as the construction sector was particularly weak. Upward revisions to the November data also partly offset the December results, leaving average gains of about 160K over the last two months. Bottom line, though, the report fell short of expectations, causing mortgage rates to move lower after the news.

In another twist, the Unemployment Rate unexpectedly declined from 7.0% to 6.7%, the lowest level since October 2008. Looking below the surface, reported job gains accounted for just 0.1% of the decline, while a large group of people leaving the labor force was responsible for the remaining 0.2% decline. While the headline Employment report is based on data collected from just large employers, the Unemployment Rate is derived from a separate survey of individual households. According to this survey, there were job gains of about 150K in December, while roughly 350K people were no longer seeking work and thus were removed from the labor force. Since the Unemployment Rate is simply the number people in the labor force seeking work divided by the total labor force, it counts equally whether a person stops seeking work by finding a job, giving up on the job search, or retiring.

Updated County Loan Limits for San Diego - 2014