Paco Aramburu

In Today's Busy, Chatterbox of The Internet Is Hard To Know Who To Trust

EVeryone Is Afraid of The Next Madoff.

That's Why I Only Trust The Numbers. At first glance the numbers of sales of houses, condominiums and 2- and 3-flats look that they are going down. Most likely is because real estate transactions take a long time to close and these numbers are of the last six months, week by week.

Here is our fisrt look at the Cook County market in the last 6 months. The median price of sold properties is going down. That means those properties that closed where the deeply discounted. The numbers above the green bars represent the number of properties closed in that week.

But if you look at the Number of Units sold in the last six month, you see a defnitive gain in the last weeks And if you want to predict what the future will bring, you need to look at the pending transactions to see where we're going

This uprise in the number of properties that are under contract will signal a future stabilization of prices in the real esyaye market in Cook County. They say you cannot see the bottom of the market until you're out of it. I think we just saw the bottom right there. Slowly but surely we're in for an up curve on real estate prices in Cook County.

You can contact Paco Aramburu in Chicago at:

773 865-5678

pacoargent@gmail.com

This Is Based On An IRS Publication. What You Can Deduct As Home-Mortgage Interest.

Home-Mortgage Interest is any interest you pay on a loan secured by your home (main home or a second home). The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan.

You can deduct home-mortgage interest if the following conditions are met:

•· You file Form 1040 and itemize deductions on Schedule A (Form 1040).

•· You are legally liable for the loan.

•· There is a true debtor-creditor relationship between you and the lender.

•· The mortgage is a secured debt on a qualified home in which you have an ownership interest. "Secured debt" and "qualified home" are explained later.

You cannot deduct interest you pay for someone else if you are not legally liable to pay it.

Fully Deductible Interest. How much you can deduct depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds.

If all of your mortgages fit into one or more of the following three categories at all times during the year, you can deduct all of the interest on those mortgages.

If any one mortgage fits into more than one category, add the debt that fits in each category to your other debt in the same category.

If one or more of your mortgages does not fit into any of these categories, consult a tax expert.

The Three Categories Are As Follows:

Mortgages you took out on or before October 13, 1987 (called grandfathered debt).

Mortgages you took out after October 13, 1987, to buy, build, or improve your home (called home acquisition debt), but only if throughout 2008 these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately)

Mortgages you took out after October 13, 1987, other than to buy, build, or improve your home (called home equity debt), but only if throughout 2008 these mortgages totaled $100,000 or less ($50,000 or less if married filing separately) and totaled no more than the fair market value of your home reduced by (1) and (2).

The dollar limits for the second and third categories apply to the combined mortgages on your main home and second home.

You can use IRS Figure 1 to check whether your home mortgage interest is fully deductible.

Debt Not Secured By Home. A debt is not secured by your home if it is secured solely because of a lien on your general assets or if it is a security interest that attaches to the property without your consent (such as a mechanic's lien or judgment lien).

A debt is not secured by your home if it once was, but is no longer secured by your home.

Wraparound mortgage. This is not a secured debt unless it is recorded or otherwise perfected under state law.

Qualified Home For you to take a home mortgage interest deduction, your debt must be secured by a qualified home. This means your main home or your second home. A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities.

The interest you pay on a mortgage on a home other than your main or second home may be deductible if the proceeds of the loan were used for business, investment, or other deductible purposes. Otherwise, it is considered personal interest and is not deductible.

Main home. You can have only one main home at any one time. This is the home where you ordinarily live most of the time.

Second home. A second home is a home that you choose to treat as your second home.

Second home not rented out. If you have a second home that you do not hold out for rent or resale to others at any time during the year, you can treat it as a qualified home. You do not have to use the home during the year.

Second home rented out. If you have a second home and rent it out part of the year, you also must use it as a home during the year for it to be a qualified home. You must use this home more than 14 days or more than 10% of the number of days during the year that the home is rented at a fair rental, whichever is longer. If you do not use the home long enough, it is considered rental property and not a second home. For information on residential rental property, see Publication 527.

More Than One Second Home. If you have more than one second home, you can treat only one as the qualified second home during any year. However, you can change the home you treat as a second home during the year in the following situations.

• If you get a new home during the year, you can choose to treat the new home as your second home as of the day you buy it.

• If your main home no longer qualifies as your main home, you can choose to treat it as your second home as of the day you stop using it as your main home.

• If your second home is sold during the year or becomes your main home, you can choose a new second home as of the day you sell the old one or begin using it as your main home.

Divided Use Of Your Home. The only part of your home that is considered a qualified home is the part you use for residential living. If you use part of your home for other than residential living, such as a home office, you must allocate the use of your home. You must then divide both the cost and fair market value of your home between the part that is a qualified home and the part that is not. Dividing the cost may affect the amount of your home acquisition debt, which is limited to the cost of your home plus the cost of any improvements. Dividing the fair market value may affect your home equity debt limit.

Renting Out Part Of Home. If you rent out part of a qualified home to another person (tenant), you can treat the rented part as being used by you for residential living only if all of the following conditions apply.

• The rented part of your home is used by the tenant primarily for residential living.

• The rented part of your home is not a self-contained residential unit having separate sleeping, cooking, and toilet facilities.

• You do not rent (directly or by sublease) the same or different parts of your home to more than two tenants at any time during the tax year. If two persons (and dependents of either) share the same sleeping quarters, they are treated as one tenant.

Office in home. If you have an office in your home that you use in your business, see Publication 587, Business Use of Your Home. It explains how to figure your deduction for the business use of your home, which includes the business part of your home mortgage interest.

Home Under Construction. You can treat a home under construction as a qualified home for a period of up to 24 months, but only if it becomes your qualified home at the time it is ready for occupancy.

The 24-month period can start any time on or after the day construction begins.

Home Destroyed. You may be able to continue treating your home as a qualified home even after it is destroyed in a fire, storm, tornado, earthquake, or other casualty. This means you can continue to deduct the interest you pay on your home mortgage, subject to the limits described in this publication.

You can continue treating a destroyed home as a qualified home if, within a reasonable period of time after the home is destroyed, you:

• Rebuild the destroyed home and move into it, or

• Sell the land on which the home was located.

This rule applies to your main home and to a second home that you treat as a qualified home.

Time-Sharing Arrangements. You can treat a home you own under a time-sharing plan as a qualified home if it meets all the requirements. A time-sharing plan is an arrangement between two or more people that limits each person's interest in the home or right to use it to a certain part of the year.

Rental Of Time-Share. If you rent out your time-share, it qualifies as a second home only if you also use it as a home during the year. To know whether you meet that requirement, count your days of use and rental of the home only during the time you have a right to use it or to receive any benefits from the rental of it.

Married Taxpayers. If you are married and file a joint return, your qualified home(s) can be owned either jointly or by only one spouse.

Separate Returns. If you are married filing separately and you and your spouse own more than one home, you can each take into account only one home as a qualified home. However, if you both consent in writing, then one spouse can take both the main home and a second home into account.

Prepaid Interest. If you pay interest in advance for a period that goes beyond the end of the tax year, you must spread this interest over the tax years to which it applies. You can deduct in each year only the interest that qualifies as home mortgage interest for that year. However, there is an exception that applies to points, discussed later.

Mortgage Interest Credit. You may be able to claim a mortgage interest credit if you were issued a mortgage credit certificate (MCC) by a state or local government. Figure the credit on Form 8396, Mortgage Interest Credit. If you take this credit, you must reduce your mortgage interest deduction by the amount of the credit. See Form 8396 and Publication 530 for more information on the mortgage interest credit.

Ministers' And Military Housing Allowance. If you are a minister or a member of the uniformed services and receive a housing allowance that is not taxable, you can still deduct your home mortgage interest.

Mortgage Assistance Payments. If you qualify for mortgage assistance payments for lower-income families under section 235 of the National Housing Act, part or all of the interest on your mortgage may be paid for you. You cannot deduct the interest that is paid for you.

No other effect on taxes. Do not include these mortgage assistance payments in your income. Also, do not use these payments to reduce other deductions, such as real estate taxes.

Reverse Mortgages. Depending on the plan, your reverse mortgage becomes due with interest when you move, sell your home, reach the end of a pre-selected loan period, or die. Because reverse mortgages are considered loan advances and not income, the amount you receive is not taxable. Any interest (including original issue discount) accrued on a reverse mortgage is not deductible until the loan is paid in full.

Rental Payments. If you live in a house before final settlement on the purchase, any payments you make for that period are rent and not interest. This is true even if the settlement papers call them interest. You cannot deduct these payments as home mortgage interest.

Mortgage Proceeds Invested In Tax-Exempt Securities. You cannot deduct the home mortgage interest on grandfathered debt or home equity debt if you used the proceeds of the mortgage to buy securities or certificates that produce tax-free income.

Refunds Of Interest. If you receive a refund of interest in the same year you paid it, you must reduce your interest expense by the amount refunded to you. If you receive a refund of interest you deducted in an earlier year, you generally must include the refund in income in the year you receive it. However, you need to include it only up to the amount of the deduction that reduced your tax in the earlier year. This is true whether the interest overcharge was refunded to you or was used to reduce the outstanding principal on your mortgage. If you need to include the refund in income, report it on Form 1040, line 21.

If you received a refund of interest you overpaid in an earlier year, you generally will receive a Form 1098, Mortgage Interest Statement, showing the refund in box 3. For information about Form 1098, see Form 1098, Mortgage Interest Statement, later.

For more information on how to treat refunds of interest deducted in earlier years, see Recoveries in Publication 525, Taxable and Nontaxable Income.

Mortgage Insurance Premiums

You can treat amounts you paid during 2008 for Qualified Mortgage Insurance as home-mortgage interest.

The insurance must be in connection with home acquisition debt, and the insurance contract must have been issued after 2006.

Qualified Mortgage Insurance. is insurance provided by the Department of Veterans Affairs, the Federal Housing Administration, or the Rural Housing Service, and private mortgage insurance (as defined in section 2 of the Homeowners Protection Act of 1998 as in effect on December 20, 2006).

Mortgage insurance provided by the Department of Veterans Affairs is commonly known as a funding fee. If provided by the Rural Housing Service, it is commonly known as a guarantee fee. The funding fee and guarantee fee can either be included in the amount of the loan or paid in full at the time of closing. These fees can be deducted fully in 2008 if the mortgage insurance contract was issued in 2008. Contact the mortgage insurance issuer to determine the deductible amount if it is not reported in box 4 of Form 1098.

Special Rules For Prepaid Mortgage Insurance. If you paid premiums for qualified mortgage insurance that are properly allocable to periods after the close of the tax year, such premiums are treated as paid in the period to which they are allocated. No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term (except in the case of qualified mortgage insurance provided by the Department of Veterans Affairs or Rural Housing Service).

At the time this publication went to print, regulations were being considered that would allow you to allocate qualified mortgage insurance premiums paid in connection with a mortgage obtained after 2006 over the shorter of the stated term of the mortgage or 84 months, beginning with the month the insurance was obtained.

More information can be found in Publication 553, Highlights of 2008 Tax Changes which is available at www.irs.gov/formspubs. Information on this and other changes affecting individual taxpayers can also be found at www.irs.gov/formspubs. Click on Highlights of Recent Tax Changes and then on Individuals.

Limit on deduction. If your adjusted gross income on Form 1040, line 38, is more than $100,000 ($50,000 if your filing status is married filing separately), the amount of your mortgage insurance premiums that are otherwise deductible is reduced and may be eliminated. See Line 13 in the instructions for Schedule A (Form 1040) and complete the Qualified Mortgage Insurance Premiums Deduction Worksheet to figure the amount you can deduct. If your adjusted gross income is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums.

Form 1098. The mortgage interest statement you receive should show not only the total interest paid during the year, but also your mortgage insurance premiums paid during the year, which may qualify to be treated as deductible mortgage interest. See Form 1098, Mortgage Interest Statement, next.

Form 1098, Mortgage Interest Statement

If you paid $600 or more of mortgage interest (including certain points and mortgage insurance premiums) during the year on any one mortgage, you generally will receive a Form 1098 or a similar statement from the mortgage holder. You will receive the statement if you pay interest to a person (including a financial institution or cooperative housing corporation) in the course of that person's trade or business. A governmental unit is a person for purposes of furnishing the statement.

The statement for each year should be sent to you by January 31 of the following year. A copy of this form will also be sent to the IRS.

The statement will show the total interest you paid during the year, any mortgage insurance premiums you paid, and if you purchased a main home during the year, it also will show the deductible points paid during the year, including seller-paid points. However, it should not show any interest that was paid for you by a government agency.

As a general rule, Form 1098 will include only points that you can fully deduct in the year paid. However, certain points not included on Form 1098 also may be deductible, either in the year paid or over the life of the loan. See the earlier discussion of Points to determine whether you can deduct points not shown on Form 1098.

Prepaid Interest On Form 1098. If you prepaid interest in 2008 that accrued in full by January 15, 2009, this prepaid interest may be included in box 1 of Form 1098. However, you cannot deduct the prepaid amount for January 2009 in 2008. (See Prepaid interest, earlier.) You will have to figure the interest that accrued for 2009 and subtract it from the amount in box 1. You will include the interest for January 2009 with other interest you pay for 2009.

Refunded Interest. If you received a refund of mortgage interest you overpaid in an earlier year, you generally will receive a Form 1098 showing the refund in box 3. See Refunds of interest, earlier.

This article is not meant to be taken as tax advice, but simply a way to remind you that the tax man is coming and that we need to prepare to save some money. Specially in this economy.

Paco Aramburu is a dedicated residential real estate Agent working in the Chicagoland area.
pacoargent@gmail.com
(773) 865-5678

That's like: "If your nose is running, are you getting any exercise?"

Short sale is a banking term meaning: the bank sells short of what they invested.

In this schema, the main problem for the investors is the declining real estate market as illustrated by the calendar of the example home.

If the buyers, for whatever reason, cannot afford the mortgage payments they end up with few options. Since the house is valued at less than the value of the mortgage, they cannot refinance and they cannot sell outright for the same reason.

The option is to contact the bank with a short sale offer.

The bank will talk to the investors, who would then approve/reject the offer.

Some people just abandon everything (a bad option), others try to sell the property on their own.

Buyers of short sales have done okay in those cases where the investors have approved the sale.

If you're in either side of a transaction, consult a competent real estate Agent to defend your interests.

The Government Is "Giving" Money Away, So Banks Are Charging Close to 5%

Right now money has gone down in price. The banks are at a historical low of 5.25% on a 30-year fixed mortgage. So you'll be set for the next 30 years!

Add to that a low price on those few homes that are for sale and you have a candy store ready for kids to shop around.

I could give you examples of great bargains snatched by my buyers these days. But who better than the New York Times to explain this market for you.

Enjoy: http://www.nytimes.com/2008/12/06/business/yourmoney/06money.html?_r=1

The Federal Housing Finance Agency -- overseer of Fannie Mae and Freddie Mac - has one of the most ambitious mass-market "loan modification" programs. Along with the 33 banks and mortgage servicers that make up the private-sector Hope Now Alliance.

The program, scheduled to start Dec. 15, is aimed at borrowers who are seriously behind on payments -- three months or more -- and are slipping fast toward foreclosure. To be eligible for intervention, owners need to document that they can handle mortgage payments with up to 38% of their Monthly Gross Income. They also need to demonstrate that they have experienced some form of financial reversal that made them delinquent on their payments, and prove that they did not intentionally go into default just to get better terms.

Borrowers may qualify for sharply reduced interest rates, deferrals of principal payments or extended loan terms -- whatever combination is necessary to get them an affordable payment with their current income.

Even though the formal kickoff isn't until next month, participating lenders say they want to hear as soon as possible from potential beneficiaries. If homeowners can't connect directly, they can work through the Hope Now Alliance (http://www.hopenow.com) or through the Department of Housing and Urban Development (http://www.hud.gov/foreclosure). Hope Now also has a toll-free hot line -- 1-888-995-HOPE -- staffed by counselors.

The same day the new federally assisted mass-modifications effort was announced, one of the largest lenders and servicers, Citicorp, unveiled a program designed to catch at-risk homeowners before they fall behind. Beginning this month, Citicorp will reach out to an estimated 500,000 customers who are not currently delinquent but who appear to be at risk -- either because their credit files show telltale signs of financial stress or because their homes are in markets Citicorp classifies as facing serious economic strains and job losses in the coming year.

The bank said it expects to complete up to $20 billion in "pre-emptive" mortgage modifications in the next six months using rate reductions, term extensions and even reductions in principal debt balances. Citicorp also intends to halt all foreclosures in the coming months for owners who have sufficient income to handle modified monthly loan payments at some level, and who are working in good faith with the bank to save their house.

Get a loan modification if you qualify and need one. But talk with your servicer to make sure that the revised terms you're signing up for are realistic for your long-range economic situation and not likely to be just a temporary patch.