Kris Gonet-Hall

Buyers Must Hurry to Meet Credit Deadline
There's still time for a first-time home buyer to complete a transaction before the tax credit expires Nov. 30, says Diann Patton, consumer spokeswoman for Coldwell Banker Real Estate.

But home buyers who have to apply for a mortgage should make sure they have all the necessary paperwork in hand. Patton advises that they'll need to have tax returns, income verification and bank statements, as well as completed applications forms ready to submit.

Buyers in a hurry to claim the credit should also avoid short-sale properties, Patton says, because that process can delay closings.

Unfiled Tax Returns

There are many reasons why taxpayers fail (or forget) to file required tax returns, but whatever the reason, not filing can be a very serious matter

Did you know that the IRS may construe your failure to file tax returns as tax evasion -- a criminal act punishable by a prison sentence for each year a return is not filed. I have seen this happen!

Needless to say, it's one thing to owe the IRS money but quite another to potentially lose your freedom for failure to file a tax return.

The IRS can file "SFR" (Substitute For Return).... Tax Returns on your behalf but without your approval. A Substitute For Return is the IRS's version of an unfiled tax return. Because SFR returns are filed in the best interest of the government, the only deductions you'll see are standard deductions and one personal exemption. You will not get credit for deductions to which you may be entitled such as exemptions for your spouse and children, deductions for interest and taxes on your home, cost of any stock or real estate sales, business expenses, and more.

Notwithstanding any action by the IRS and no matter how late it may be, you have the right to file your original tax return. However, as you can see, such filings can bring great risk unless properly handled by an experienced tax professional.

Servicing Disclosure Statement.

Did you know that RESPA requires the lender or mortgage broker to tell you in writing, when you apply for a loan or within the next three business days, whether it expects that someone else will be servicing your loan (Collecting Your Payments)

On what might seem like a confusing note:

You may start the loan process with a lender or mortgage broker, you could find that after settlement another company may be collecting the payments on your loan. Collecting loan payments is often known as "servicing" the loan. Your lender or broker will disclose whether it expects to service your loan or to transfer the servicing to someone else.

Your monthly mortgage payment will be used to repay the money you borrowed plus interest. Part of your monthly payment may be deposited into an "escrow account" (also known as "reserve" or "Impound" account) so your lender or servicer can pay your real estate taxes, property insurance, mortgage insurance and/or flood insurance. You should ask your lender or mortgage broker if you will be required to set up an escrow or impound account for taxes and insurance payments.