Corrections or additions?
First Home Buyers
These articles were published in U.S. 1 Newspaper on April 7, 1999. All rights reserved.
For first-time buyers in a dilemma about owning a home,
going to the New Jersey Housing and Mortgage Finance Agency (HMFA)
is one way to get unbiased and substantive information. HMFA will
help get mortgages with the lowest possible rates and may even be
able to help some first-time and urban buyers get access to mortgages
at below market rates.
HMFA and the Mercer County Commission on the Status of Women host
a free “Home Ownership Information Fair” on Saturday, April
10, at 9:30 a.m. at the Gallery at HMFA in Trenton for potential home
buyers. For more information about the fair, call 1-800-NJ-HOUSE.
HMFA’s mortgage products are designed for first-time home buyers,
buyers who have not owned a home in the last three years, and trade-up
buyers in HMFA target cities. “HMFA staff will be on hand at the
Home Ownership Information Fair to help determine the amount home
buyers can qualify for, provide a free credit check, and help select
the appropriate mortgage program,” says Deborah De Santis,
HMFA executive director.
The core mission of the HMFA is to expand good affordable housing
opportunities for all New Jerseyans, particularly first-time and urban
area buyers. To fund this ambitious plan, HMFA issues tax-exempt bonds
to private investors. The bond proceeds allow HMFA to offer mortgages
at lower interest rates through participating lenders. Its mortgages
feature:
Low-Interest Financing: HMFA mortgages are belowmarket-rateloans. You save thousands of dollars in mortgage interest over thelife of the loan with an HMFA mortgage.Fixed-Interest Rate Security: A fixed-interest rateguaranteesthat your monthly mortgage payments for principal and interest willremain the same for the entire loan term.Low Down Payment Flexibility: An HMFA mortgage can beobtained with as little as a three percent cash down payment. HMFAlenders can help you determine if you can also use a loan or giftfor part of your down payment and closing costs.These seem like unusually good terms, and not everyone iseligiblefor them. To qualify, you must either not own a home (be a”first-time”home buyer) or be a trade-up buyer in a targeted urban community.The HMFA defines first-time home buyers as having never owned a homeor having not owned one in the past three calendar years. Home buyersin Urban Target Areas need not be first-time home buyers. Urban TargetAreas are usually sections of a municipality and not the entire cityor town.Income limits also apply. To qualify, the income limit for a smallfamily (two members or less) in Mercer County is $63,000, and forlarge families (three or more members) the limit is $72,450 annually.In Hunterdon, Middlesex, Somerset counties, the income limits are$72,900 and $83,835 respectively.HMFA offers a wide selection of programs for first time home buyersand trade-up buyers in targeted cities. These programs are availablethrough the more than 75 HMFA-approved lenders with offices throughoutthe state. These participating banks and mortgage lenders will helpyou determine the exact amount you are eligible to borrow andrecommenda mortgage that best suits your needs. In addition, there are incomeand purchase price limits for each program that are based on thecountyof purchase and family size.The Traditional Home Buyers Program is a low interest,minimum down payment mortgage which is offered to qualified first-timehome buyers and urban area buyers. This program requires a downpaymentas low as three percent of the total purchase price for single familyand townhouse buyer, and 10 percent for condominium buyers.The Community Home Buyers Program requires a five percentdown payment, which can be reduced to three percent from the homebuyer’s savings with the other two percent coming from a gift or loanfrom a family member, a nonprofit organization, or from thegovernment.The Too Good But It’s True Program is for homebuyersshoppingin neighborhoods presently designated by the governor’s UrbanCoordinatingCouncil. They may be eligible for a below market rate mortgage usingthe HMFA. “Too Good But It’s True” makes mortgages availableat very low interest rates with zero points for qualified buyers inneighborhoods throughout Asbury Park, Camden, Elizabeth, Jersey City,Long Branch, New Brunswick, Newark, Trenton, and Vineland. Inaddition,buyers may qualify with no money down.The 100 Percent Financing Program which does not requirea down payment for buyers of homes in approved developments. In manycases, depending on the appraised value of the house, closing costscan also be included in the loan.The Home Plus Mortgage and Modernization Loan Programwas created to allow first time and urban target area buyers theopportunityto purchase and renovate a single-family home in need of moderaterepairs. The HomePlus Program provides acquisition mortgages forqualifiedbuyers plus up to $15,000 in home repair money all in the firstmortgage.The Buy It and Fix It Program allows first time homebuyersto purchase, or home owners to refinance homes in need of substantialrehabilitation. Mortgages include the funds for acquisition and repairin one loan, and are available with very low down payments andbelow-marketinterest rates.Community Reinvestment Act Loan Program allows householdsearning 80 percent or less of area median income by county to beeligiblefor refinancing according to Fannie Mae guidelines.Upstairs-Downtown Rehabilitation Loan Program is amortgageand rehabilitation loan restricted to storefront properties with ahousing component.The HMFA lender in your area will be able to provide the currentrates, purchase price, and income limits, consumer mortgage details,and loan availability. Call the 24 hour hotline at 800-NJ-HOUSE.Top Of PageWhat’s Affordable?Before looking for a home, contact an HMFA lender tohelp determine the price range you can afford. Compare your projectedhousing expenses to what you are paying in rent. An HMFA mortgagelender will help you determine the amount you are eligible to borrowand recommend a mortgage.”The best way to start the home-buying process is by taking arealistic look at what you can expect from home ownership and whatowning your own home implies,” says Susan Sands, HMFAcommunicationsofficer. “First time home buyers often are surprised at how costlybasic upkeep is, both in time and money. Repairs often represent anunexpected expense. This makes it imperative that homeowners alwayshave an available cash reserve on hand.”The rule of thumb, says Sands, is that you can afford a house thatcosts up to two and one-half times your annual gross income –that is, the amount you make before taxes are deducted. “However,each buyer should examine all the costs of home ownership and maketheir own personal decisions on what will be affordable.”To determine what you can afford, apply the 28/36 maximum debt ratio.That means that your projected housing debt — your monthlymortgagepayment — cannot exceed 28 percent of your gross monthly income.Your personal debt — such as monthly credit card payments,outstandingpersonal loans, and child support payments — combined with yourHousing Debt cannot exceed 36 percent of your gross monthly income.In some cases the debt ratio can exceed 28/36, so you should consultyour lender to make that determination.If you are buying a house with someone else, such as your spouse,a family member, or a companion, you can also consider yourco-purchaser’sannual gross income in deciding how expensive a home you can buy.However, your co-purchaser’s debts and credit history will also beconsidered in determining how much you can borrow.The qualification process determines how large a mortgage you areeligible for, provided your loan application is approved. When youapply for a mortgage, the lender will consider your income, yourexistingdebts, the purchase price of the house, the amount of yourdown-payment,the current interest rate that will be applied to the loan, and thecost of the property taxes and insurance to determine the size ofthe loan.To prepare for the loan interview: Try to anticipate everything youwill need and have all of the necessary information such as namesand addresses with zip codes, phone numbers, and dates of employmentreadily available. If you and your co-purchaser will both be signingthe mortgage, you should both attend the interview. Some mortgagelenders will even bring applications to your home.”We want to make home ownership available to everyone,” saysRobert D. Prunetti, Mercer County executive. “The HomeBuyersOpportunity Fair puts experts from all fields under one roof, so thatall types of questions can be answered and the process of buying ahome can be made a little easier.”The HMFA offices are located at 637 South Clinton, Trenton.Phone: 609-273-7400. Take the Trenton Freeway/Route 1 south to Route129, Broad Street, Chambersburg exit. Then take the first exit, SouthBroad Street, and turn left on South Broad. Go one block, turn lefton Dye Street. The parking lot is the first entrance on the left.Top Of PageTaxes and Home OwnershipWhether buying a first home or in the process of sellingone, home ownership can have a big effect on tax returns. Some ofthe settlement fees and closing costs can be deducted in the tax yearthe home is bought. These costs include certain real estate taxes,mortgage interest and points that meet certain requirements.Other costs may be included in the basis of the property. Basis isa way to measure the investment in a home for tax purposes. Costslike abstract and recording fees, surveys and owner’s title insuranceare included in the basis.People who itemize deductions can deduct interest on most mortgagessecured by their first or second home. They can deduct qualifyingpoints on a loan to buy or improve their main home in the year theypaid them. And they can usually deduct real estate taxes imposed bystate or local governments.The Taxpayer Relief Act of 1997 replaced two tax breaks for homesellerswith a more generous one. Under the old law, those 55 and older couldexclude up to $125,000 of gain. And anyone who bought a replacementhome within two years of the sale might postpone taxes on some orall of the gain. Under the new law, taxpayers can exclude up to$250,000of gain ($500,000 on a joint return, if both meet the residencyrequirement)from the sale of a home.The new exclusion is allowed once every two years, but only if theperson used the home as a principal residence for at least two outof the five years before the sale. The seller must pay tax on anygain exceeding the exclusion — the replacement home rule no longerapplies. If a person sells before satisfying the two-year residencyrequirement because of a change in employment or health, the maximumexclusion amount ($250,000 or $500,000) is prorated by the percentof the two-year time met. This proration also applies to anyone whoowned a home on August 5, 1997, and sells it before August 5 of thisyear, regardless of whether there was a change in employment orhealth.Because of this larger exclusion of gain, the average person may notneed to keep track of the home’s cost basis once the two-yearresidencyis met. Only if the home sells for more than the maximum exclusionamount will the taxpayer even have to figure the gain. In that case,one would need accurate records of all items affecting the basis.This includes improvements such as adding a room, finishing a basementor putting up a fence.More information on buying, owning or selling a home is covered inthe following free publications from the IRS: Publication 523, SellingYour Home; Publication 530, Tax Information for First-Time Homeowners;Publication 936, Home Mortgage Interest Deduction. Call 800-829-3676or check them out on the IRS website athttps://www.irs.ustreas.gov.Top Of PageProperty TaxesMost homeowners do not know if they are over assessedand they would be shocked to find out that they do not know thedifferencebetween their property assessment and the value of their home, saysthe New Jersey Property Tax Authority. In a newly released booklet”The New Jersey Homeowner’s Guide to Property Tax Appeals,”the New Jersey Property Tax Authority outlines how home owners canpotentially save hundreds of dollars in property taxes every year.This 35-page booklet is a guide for homeowners going through the taxappeal process and includes blank forms for Property Profile,ComparableSale Verification, and Comparable Sale Check List. The booklet alsooffers tips about how to handle the hearing process and how tonegotiatewith the tax assessor. Here is an excerpt:Since you will have the opportunity to ask the assessor or thetown’s expert questions, here are some to ask:1. Did you personally inspect my property? Inside?2. Did you personally inspect my comparable sales? Inside?3. Did you personally inspect your comparable sales?Inside?4. Are you aware of and did you consider: (State anynegativeimpact on your property, such as flooding, overhead power lines, closeproximity to industrial or commercial buildings, and anything thatyou think impacts negatively on the value of your property.)Do not try to sound like Perry Mason or Matlock. You are notgoing to get them to break down and make them confess that you areover-assessed. However, if you ask intelligent questions you willsound knowledgeable and sincere. Do not get upset, loud, orargumentative.This will not help you prove the market value.There is some information that should not be used as proof of yourproperty’s market value. This would include:1. Comparing your assessment to your neighbor’sassessments.2. How much you pay in property taxes.3. How long you have lived in town.4. That you are a senior citizen.5. That you are on a fixed income.The point is, the board is only concerned with the market valueof your property and the proper assessed value.The booklet, published by Fairfield based Insight MarketingSolutions can be ordered for $29.95 by calling 800-878-6942, or bysending a check or money order to N.J.P.T.A., 397 Route 46 West, Suite6139, Fairfield 07004.Top Of PageUncommon MarketingThe most valuable letter you can write is a thank-youletter, says Jeff Dobkin in his book “Uncommon MarketingTechniques,” a collection of 33 articles offering tips andtechniquesof low-cost marketing methods. “The time you always write it iswhen you receive a business referral. A business referral is not tobe taken lightly or casually. It’s the utmost show of trust a clientor a friend can display in you. It’s the leap of faith that you’llperform exceptionally well.”Dobkin will share his tips at the luncheon organized by the New JerseyCommunications and Marketing Association (CAMA) on Wednesday, April14, at 11:30 a.m. at the Forrestal Hotel. Cost: $35. Call 609-890-9207for more information.Dobkin is the president of the Danielle Adams Publishing Company atMerion Station, Pennsylvania, a marketing agency and consultingpracticespecializing in marketing and direct marketing. He has written twobooks on marketing — “How to Market a Product for Under $500″and “Uncommon Marketing Techniques.” These books offer usefulhow-to tips for entrepreneurs, home office pioneers, and owners ofsmall and medium sized businesses. Here is an excerpt from”UncommonMarketing Techniques.””A `Thanks for your kind referral’ letter is withouta doubt the least costly and most effective piece of advertising Ican write. It has become a prime weapon in the marketing arsenal.”A letter is a personal piece of correspondence you send to oneor two people. When you send it to a dozen (or a hundred) people,and it’s designed to get you more business, it’s an ad. It’s a highlystylized ad designed to look like a letter.”Why is it so effective? For one thing, you can make the personfeel comfortable with their recommendation of you, because you’regoing to do the very best job you possibly can for their friend.You’regoing to lean over backward to look good, and to make them look goodfor giving a referral of someone so conscientious. You can’t makethem feel like this with an ad, but it’s easy to do with a letter.”The receiver will remember it, and when the opportunity comesup again, they will continue to refer people to you. You’ve heardof word-of-mouth advertising as the best and cheapest form ofadvertising?This is how you make it happen, again and again.”Top Of PageThe Ever-Helpful IRSChanges in the tax law affect how self-employed peoplehandle income on 1998 returns and how business owners should planfor 1999.Health insurance. On 1998 returns, the amount of healthinsurance premiums deductible by self-employed people increases from40 percent to 45 percent. From 1999 through 2001, 60 percent willbe deductible.Home office. Starting December 31, 1998, self-employedpeople and employees may be able to take a home office deduction ifthey use the office for administrative or management activities andmeet basic tests. There must be no other fixed place where the personconducts substantial administrative or management activities and theoffice must be used exclusively and regularly as a place of business.An employee’s home office deduction qualifies if the office is usedfor the employer’s convenience. One warning here: an employee’sdecisionnot to use suitable space made available by the employer can affectthe deductibility.Paper versus electronic. The IRS will waive penaltieson businesses that use paper federal tax deposit coupons in a timelymanner while converting to the Electronic Federal Tax Payment System(EFTPS). This penalty relief will run through June 30. It appliesto all taxpayers required to enroll in EFTPS and depositelectronicallystarting July 1, 1997, or later. Two toll-free EFTPS customer servicenumbers, 800-945-8400 and 800-555-4477, can answer questions.Too much withholding. Some employees can get more takehome pay with a tax benefit called the advance earned income taxcredit(advance EITC). Advance EITC allows employers to add a portion oftheir employees’ earned income tax credits directly to theirpaychecks.To qualify, employees must expect to earn less than $26,928 in 1999,expect to have at least one qualifying child, complete Form W-5 andgive it back to their employers. Call 800-829-3676 to get Publication15, Employer’s Tax Guide, Circular E.Installment payments. Those who can’t pay their tax billsin full should fill out an Installment Agreement Request (Form 9465)and send it to the IRS along with their tax returns. “Thissingle-pageform allows people to estimate a monthly payment that will fit withintheir budget and allow them to pay off the taxes owed in a reasonableperiod of time,” explains John Dalrymple, IRS chiefoperationsofficer.The requirements for installment payments are new since July. Theamount owed must be less than $10,000, and the taxpayer must havea five-year clean record and be unable to make immediate payment yetable to pay in full in three years plus stay current with federaltaxes. Because the agreement costs $43 plus all interest andlate-paymentpenalties, a bank loan may be less expensive.Deep in debt. A little known tax law provision, “offerin compromise,” allows some to pay an amount less than the fullamount of taxes owed. The IRS will accept this plan if a person’sfinancial situation is such that it’s obvious they may never be ableto pay all the taxes owed, or there is a pending dispute regardingthe tax liability. Most will complete Form 656 and a comprehensivefinancial statement showing assets, liabilities and income. The offermust reflect the maximum they can pay. Also, they must agree to meetall their federal tax obligations for five years or until the amountoffered is paid in full, whichever is longer. Those who fail to meetthe terms of the offer will once again owe all their back taxes infull.”The IRS believes an offer in compromise makes good businesssense,”said Dalrymple. “It benefits taxpayers by giving them theopportunityto get out from under a heavy financial burden. It gives them a freshstart and brings them back into the tax system. It also benefits theIRS and all taxpayers by bringing in taxes that may not be collectibleany other way.” Call the IRS at 800-829-1040.Phone-in Form 941. Millions of small businesses areeligibleto file their Form 941 quarterly returns by telephone with the941TeleFilepackage, including the 941TeleFile Tax Record, a payment voucher,and a paper Form 941 for those who do not meet the filingrequirements.The call takes about 10 minutes; there is nothing to mail. The IRSTeleFile help desk number is 901-546-2690, and it is not a toll-freecall.Top Of PageFree Tax InfoCall 800-829-3676 for the Tax Guide for SmallBusiness,Publication 334, with general information for sole proprietors whofile Schedule C or C-EZ.The IRS’s 12-month wall calendar for small businesses(publication 1518) provides tax tips ranging from starting a smallbusiness to planning for retirement. It also shows the taxes due eachmonth, lists other free publications and describes ways to get taxand business information from IRS and other agencies. Publication910.A Guide to Free Tax Services (publication 910) describesyear-round tax services, tax season assistance and frequentlyrequestedpublications for businesses and individuals.The IRS website (https://www.irs.ustreas.gov)also offers forms, publications and interactive assistance. Clickingon the “Tax Info for Business” section provides frequentlyasked tax questions and the latest information on selected businesstax topics. Business owners can browse publications online or downloadforms they need.Top Of PageBean Counting: NJEFEntrepreneurs deal with new terms and concepts everyday.What does it mean when your accountant says: These numbers don’t”foot?”You have heard the term before but what exactly does “duediligence”mean? Or “ROI” or “payback?”Steve Murphy, director of PricewaterhouseCoopers’ technology,information, entertainment, and communications group, will beexplainingthese and many more other concepts at the dinner meeting of the NewJersey Entrepreneurs Forum on Thursday, April 8, at 6:30 p.m. atMcAteersRestaurant, Somerset. Cost: $45. Call 908-789-3424 for moreinformation.Murphy will be joined by Kevin Healy, a manager inPricewaterhouseCoopers’assurance and business advisory services group.Top Of PageLeads at Mom’sHow to get leads is always a challenge, and a groupin East Windsor aims to help. The Central Jersey Networking Grouphas the distinction of allowing participants to get their beautysleep;it meets at 8:30 a.m. rather than at 7 a.m., on second and fourthThursdays for a one-hour breakfast buffet. The next meeting isThursday,April 8, at 8:30 a.m. at Mom’s Diner, 433 Route 33, East Windsor.Like similar groups, this one tries to limit the number of memberswho from any one “category.” Of 20 members, 10 to 15 showup regularly, says Drew Tomasko, the group’s founder. A $5chargeincludes a continental breakfast buffet. Call him at 732-792-8100for information.Tomasko is affiliated with a national financial services firm thatoffers mutual funds, retirement funds, life insurance, and mortgages.A chemical engineer from Rutgers, Class of 1982, he is pursuing hisMBA at Rider.Tomasko planned the group to be very informal — no dues arecollected.”I didn’t want it to be a big ordeal, but for it to have a lifeof its own.” But don’t miss three meetings in a row withoutcallingto say why. Your category will be declared vacant.Top Of PageDonating DudsIn the North Brunswick and Highland Park area, donationsof “gently used business clothing” for women are needed forWomen Helping Women and Women Aware. Clothing that is clean and onhangars can be dropped off between April 12 and 23. For details callMiddlesex NJAWBO members Carol Wright of the Wright Agency at732-238-8408 or Candice P. Howard of CPH Solutions at732-828-9415.Top Of PageMV Inspection HoursAll state vehicle inspection stations that formerlyoperated 51 hours a week now operate 55 hours a week. All statestationsare now open from 7:30 a.m. to 4:30 p.m., four days a week. Thereis one extended night per week (Wednesday nights at Bakers Basin)when stations will be open from to 7:30 p.m. On Saturdays the schedulehas been extended by two hours, from 7:30 a.m. to 12:30 p.m. to 7:30a.m. to 2:30 p.m.Parsons Infrastructure and Technology Group, a division of theCalifornia-basedParsons Inc. was awarded the contract to implement and oversee NewJersey’s enhanced vehicle inspection and maintenance program by thestate. “This shift will result in more efficient service for NewJersey motorists because all of the state’s 35 vehicle inspectionstations will be fully staffed at times when most people take theirvehicles for inspection,” says Larry Sherwood, Parsons’general manager.Corrections or additions?This page is published by PrincetonInfo.com— the web site for U.S. 1 Newspaper in Princeton, New Jersey.
