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
loans. You save thousands of dollars in mortgage interest over the
life of the loan with an HMFA mortgage.
that your monthly mortgage payments for principal and interest will
remain the same for the entire loan term.
obtained with as little as a three percent cash down payment. HMFA
lenders can help you determine if you can also use a loan or gift
for part of your down payment and closing costs.
for them. To qualify, you must either not own a home (be a
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 home
or having not owned one in the past three calendar years. Home buyers
in Urban Target Areas need not be first-time home buyers. Urban Target
Areas are usually sections of a municipality and not the entire city
Income limits also apply. To qualify, the income limit for a small
family (two members or less) in Mercer County is $63,000, and for
large 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 buyers
and trade-up buyers in targeted cities. These programs are available
through the more than 75 HMFA-approved lenders with offices throughout
the state. These participating banks and mortgage lenders will help
you determine the exact amount you are eligible to borrow and
a mortgage that best suits your needs. In addition, there are income
and purchase price limits for each program that are based on the
of purchase and family size.
minimum down payment mortgage which is offered to qualified first-time
home buyers and urban area buyers. This program requires a down
as low as three percent of the total purchase price for single family
and townhouse buyer, and 10 percent for condominium buyers.
down payment, which can be reduced to three percent from the home
buyer’s savings with the other two percent coming from a gift or loan
from a family member, a nonprofit organization, or from the
in neighborhoods presently designated by the governor’s Urban
Council. They may be eligible for a below market rate mortgage using
the HMFA. "Too Good But It’s True" makes mortgages available
at very low interest rates with zero points for qualified buyers in
neighborhoods throughout Asbury Park, Camden, Elizabeth, Jersey City,
Long Branch, New Brunswick, Newark, Trenton, and Vineland. In
buyers may qualify with no money down.
a down payment for buyers of homes in approved developments. In many
cases, depending on the appraised value of the house, closing costs
can also be included in the loan.
was created to allow first time and urban target area buyers the
to purchase and renovate a single-family home in need of moderate
repairs. The HomePlus Program provides acquisition mortgages for
buyers plus up to $15,000 in home repair money all in the first
to purchase, or home owners to refinance homes in need of substantial
rehabilitation. Mortgages include the funds for acquisition and repair
in one loan, and are available with very low down payments and
earning 80 percent or less of area median income by county to be
for refinancing according to Fannie Mae guidelines.
and rehabilitation loan restricted to storefront properties with a
rates, purchase price, and income limits, consumer mortgage details,
and loan availability. Call the 24 hour hotline at 800-NJ-HOUSE.
Before looking for a home, contact an HMFA lender to
help determine the price range you can afford. Compare your projected
housing expenses to what you are paying in rent. An HMFA mortgage
lender will help you determine the amount you are eligible to borrow
and recommend a mortgage.
"The best way to start the home-buying process is by taking a
realistic look at what you can expect from home ownership and what
owning your own home implies," says Susan Sands, HMFA
officer. "First time home buyers often are surprised at how costly
basic upkeep is, both in time and money. Repairs often represent an
unexpected expense. This makes it imperative that homeowners always
have an available cash reserve on hand."
The rule of thumb, says Sands, is that you can afford a house that
costs 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 make
their 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 monthly
payment — cannot exceed 28 percent of your gross monthly income.
Your personal debt — such as monthly credit card payments,
personal loans, and child support payments — combined with your
Housing Debt cannot exceed 36 percent of your gross monthly income.
In some cases the debt ratio can exceed 28/36, so you should consult
your 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 your
annual gross income in deciding how expensive a home you can buy.
However, your co-purchaser’s debts and credit history will also be
considered in determining how much you can borrow.
The qualification process determines how large a mortgage you are
eligible for, provided your loan application is approved. When you
apply for a mortgage, the lender will consider your income, your
debts, the purchase price of the house, the amount of your
the current interest rate that will be applied to the loan, and the
cost of the property taxes and insurance to determine the size of
To prepare for the loan interview: Try to anticipate everything you
will need and have all of the necessary information such as names
and addresses with zip codes, phone numbers, and dates of employment
readily available. If you and your co-purchaser will both be signing
the mortgage, you should both attend the interview. Some mortgage
lenders will even bring applications to your home.
"We want to make home ownership available to everyone," says
Robert D. Prunetti, Mercer County executive. "The Home
Opportunity Fair puts experts from all fields under one roof, so that
all types of questions can be answered and the process of buying a
home can be made a little easier."
Phone: 609-273-7400. Take the Trenton Freeway/Route 1 south to Route
129, Broad Street, Chambersburg exit. Then take the first exit, South
Broad Street, and turn left on South Broad. Go one block, turn left
on Dye Street. The parking lot is the first entrance on the left.
Whether buying a first home or in the process of selling
one, home ownership can have a big effect on tax returns. Some of
the settlement fees and closing costs can be deducted in the tax year
the 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 is
a way to measure the investment in a home for tax purposes. Costs
like abstract and recording fees, surveys and owner’s title insurance
are included in the basis.
People who itemize deductions can deduct interest on most mortgages
secured by their first or second home. They can deduct qualifying
points on a loan to buy or improve their main home in the year they
paid them. And they can usually deduct real estate taxes imposed by
state or local governments.
The Taxpayer Relief Act of 1997 replaced two tax breaks for home
with a more generous one. Under the old law, those 55 and older could
exclude up to $125,000 of gain. And anyone who bought a replacement
home within two years of the sale might postpone taxes on some or
all of the gain. Under the new law, taxpayers can exclude up to
of gain ($500,000 on a joint return, if both meet the residency
from the sale of a home.
The new exclusion is allowed once every two years, but only if the
person used the home as a principal residence for at least two out
of the five years before the sale. The seller must pay tax on any
gain exceeding the exclusion — the replacement home rule no longer
applies. If a person sells before satisfying the two-year residency
requirement because of a change in employment or health, the maximum
exclusion amount ($250,000 or $500,000) is prorated by the percent
of the two-year time met. This proration also applies to anyone who
owned a home on August 5, 1997, and sells it before August 5 of this
year, regardless of whether there was a change in employment or
Because of this larger exclusion of gain, the average person may not
need to keep track of the home’s cost basis once the two-year
is met. Only if the home sells for more than the maximum exclusion
amount 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 basement
or putting up a fence.
More information on buying, owning or selling a home is covered in
the following free publications from the IRS: Publication 523, Selling
Your Home; Publication 530, Tax Information for First-Time Homeowners;
Publication 936, Home Mortgage Interest Deduction. Call 800-829-3676
or check them out on the IRS website at
Most homeowners do not know if they are over assessed
and they would be shocked to find out that they do not know the
between their property assessment and the value of their home, says
the 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 can
potentially save hundreds of dollars in property taxes every year.
This 35-page booklet is a guide for homeowners going through the tax
appeal process and includes blank forms for Property Profile,
Sale Verification, and Comparable Sale Check List. The booklet also
offers tips about how to handle the hearing process and how to
with the tax assessor. Here is an excerpt:
town’s expert questions, here are some to ask:
impact on your property, such as flooding, overhead power lines, close
proximity to industrial or commercial buildings, and anything that
you think impacts negatively on the value of your property.)
going to get them to break down and make them confess that you are
over-assessed. However, if you ask intelligent questions you will
sound knowledgeable and sincere. Do not get upset, loud, or
This will not help you prove the market value.
There is some information that should not be used as proof of your
property’s market value. This would include:
of your property and the proper assessed value.
Solutions can be ordered for $29.95 by calling 800-878-6942, or by
sending a check or money order to N.J.P.T.A., 397 Route 46 West, Suite
6139, Fairfield 07004.
The most valuable letter you can write is a thank-you
letter, says Jeff Dobkin in his book "Uncommon Marketing
Techniques," a collection of 33 articles offering tips and
of low-cost marketing methods. "The time you always write it is
when you receive a business referral. A business referral is not to
be taken lightly or casually. It’s the utmost show of trust a client
or a friend can display in you. It’s the leap of faith that you’ll
perform exceptionally well."
Dobkin will share his tips at the luncheon organized by the New Jersey
Communications and Marketing Association (CAMA) on Wednesday, April
14, at 11:30 a.m. at the Forrestal Hotel. Cost: $35. Call 609-890-9207
for more information.
Dobkin is the president of the Danielle Adams Publishing Company at
Merion Station, Pennsylvania, a marketing agency and consulting
specializing in marketing and direct marketing. He has written two
books on marketing — "How to Market a Product for Under $500"
and "Uncommon Marketing Techniques." These books offer useful
how-to tips for entrepreneurs, home office pioneers, and owners of
small and medium sized businesses. Here is an excerpt from
a doubt the least costly and most effective piece of advertising I
can write. It has become a prime weapon in the marketing arsenal.
"A letter is a personal piece of correspondence you send to one
or 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 highly
stylized ad designed to look like a letter.
"Why is it so effective? For one thing, you can make the person
feel comfortable with their recommendation of you, because you’re
going to do the very best job you possibly can for their friend.
going to lean over backward to look good, and to make them look good
for giving a referral of someone so conscientious. You can’t make
them feel like this with an ad, but it’s easy to do with a letter.
"The receiver will remember it, and when the opportunity comes
up again, they will continue to refer people to you. You’ve heard
of word-of-mouth advertising as the best and cheapest form of
This is how you make it happen, again and again."
Changes in the tax law affect how self-employed people
handle income on 1998 returns and how business owners should plan
insurance premiums deductible by self-employed people increases from
40 percent to 45 percent. From 1999 through 2001, 60 percent will
people and employees may be able to take a home office deduction if
they use the office for administrative or management activities and
meet basic tests. There must be no other fixed place where the person
conducts substantial administrative or management activities and the
office must be used exclusively and regularly as a place of business.
An employee’s home office deduction qualifies if the office is used
for the employer’s convenience. One warning here: an employee’s
not to use suitable space made available by the employer can affect
on businesses that use paper federal tax deposit coupons in a timely
manner while converting to the Electronic Federal Tax Payment System
(EFTPS). This penalty relief will run through June 30. It applies
to all taxpayers required to enroll in EFTPS and deposit
starting July 1, 1997, or later. Two toll-free EFTPS customer service
numbers, 800-945-8400 and 800-555-4477, can answer questions.
home pay with a tax benefit called the advance earned income tax
(advance EITC). Advance EITC allows employers to add a portion of
their employees’ earned income tax credits directly to their
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 and
give it back to their employers. Call 800-829-3676 to get Publication
15, Employer’s Tax Guide, Circular E.
in full should fill out an Installment Agreement Request (Form 9465)
and send it to the IRS along with their tax returns. "This
form allows people to estimate a monthly payment that will fit within
their budget and allow them to pay off the taxes owed in a reasonable
period of time," explains John Dalrymple, IRS chief
The requirements for installment payments are new since July. The
amount owed must be less than $10,000, and the taxpayer must have
a five-year clean record and be unable to make immediate payment yet
able to pay in full in three years plus stay current with federal
taxes. Because the agreement costs $43 plus all interest and
penalties, a bank loan may be less expensive.
in compromise," allows some to pay an amount less than the full
amount of taxes owed. The IRS will accept this plan if a person’s
financial situation is such that it’s obvious they may never be able
to pay all the taxes owed, or there is a pending dispute regarding
the tax liability. Most will complete Form 656 and a comprehensive
financial statement showing assets, liabilities and income. The offer
must reflect the maximum they can pay. Also, they must agree to meet
all their federal tax obligations for five years or until the amount
offered is paid in full, whichever is longer. Those who fail to meet
the terms of the offer will once again owe all their back taxes in
"The IRS believes an offer in compromise makes good business
said Dalrymple. "It benefits taxpayers by giving them the
to get out from under a heavy financial burden. It gives them a fresh
start and brings them back into the tax system. It also benefits the
IRS and all taxpayers by bringing in taxes that may not be collectible
any other way." Call the IRS at 800-829-1040.
to file their Form 941 quarterly returns by telephone with the
package, including the 941TeleFile Tax Record, a payment voucher,
and a paper Form 941 for those who do not meet the filing
The call takes about 10 minutes; there is nothing to mail. The IRS
TeleFile help desk number is 901-546-2690, and it is not a toll-free
Call 800-829-3676 for the Tax Guide for Small
Publication 334, with general information for sole proprietors who
file Schedule C or C-EZ.
(publication 1518) provides tax tips ranging from starting a small
business to planning for retirement. It also shows the taxes due each
month, lists other free publications and describes ways to get tax
and business information from IRS and other agencies. Publication
year-round tax services, tax season assistance and frequently
publications for businesses and individuals.
also offers forms, publications and interactive assistance. Clicking
on the "Tax Info for Business" section provides frequently
asked tax questions and the latest information on selected business
tax topics. Business owners can browse publications online or download
forms they need.
Entrepreneurs deal with new terms and concepts everyday.
What does it mean when your accountant says: These numbers don’t
You have heard the term before but what exactly does "due
mean? Or "ROI" or "payback?"
Steve Murphy, director of PricewaterhouseCoopers’ technology,
information, entertainment, and communications group, will be
these and many more other concepts at the dinner meeting of the New
Jersey Entrepreneurs Forum on Thursday, April 8, at 6:30 p.m. at
Restaurant, Somerset. Cost: $45. Call 908-789-3424 for more
Murphy will be joined by Kevin Healy, a manager in
assurance and business advisory services group.
How to get leads is always a challenge, and a group
in East Windsor aims to help. The Central Jersey Networking Group
has the distinction of allowing participants to get their beauty
it meets at 8:30 a.m. rather than at 7 a.m., on second and fourth
Thursdays for a one-hour breakfast buffet. The next meeting is
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 members
who from any one "category." Of 20 members, 10 to 15 show
up regularly, says Drew Tomasko, the group’s founder. A $5
includes a continental breakfast buffet. Call him at 732-792-8100
Tomasko is affiliated with a national financial services firm that
offers mutual funds, retirement funds, life insurance, and mortgages.
A chemical engineer from Rutgers, Class of 1982, he is pursuing his
MBA at Rider.
Tomasko planned the group to be very informal — no dues are
"I didn’t want it to be a big ordeal, but for it to have a life
of its own." But don’t miss three meetings in a row without
to say why. Your category will be declared vacant.
In the North Brunswick and Highland Park area, donations
of "gently used business clothing" for women are needed for
Women Helping Women and Women Aware. Clothing that is clean and on
hangars can be dropped off between April 12 and 23. For details call
Middlesex NJAWBO members Carol Wright of the Wright Agency at
732-238-8408 or Candice P. Howard of CPH Solutions at
All state vehicle inspection stations that formerly
operated 51 hours a week now operate 55 hours a week. All state
are now open from 7:30 a.m. to 4:30 p.m., four days a week. There
is one extended night per week (Wednesday nights at Bakers Basin)
when stations will be open from to 7:30 p.m. On Saturdays the schedule
has been extended by two hours, from 7:30 a.m. to 12:30 p.m. to 7:30
a.m. to 2:30 p.m.
Parsons Infrastructure and Technology Group, a division of the
Parsons Inc. was awarded the contract to implement and oversee New
Jersey’s enhanced vehicle inspection and maintenance program by the
state. "This shift will result in more efficient service for New
Jersey motorists because all of the state’s 35 vehicle inspection
stations will be fully staffed at times when most people take their
vehicles for inspection," says Larry Sherwood, Parsons’
Corrections or additions?
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