Your FHA Fact of the Day...

Your FHA Fact of the Day!

DID YOU KNOW:

The guidelines we will use are the following:

We require a minimum of three pieces of credit that have a perfect 12 month history.

At least two of the three must be traditional credit – ie: rent, mortgage, auto loan, credit card, etc

(Note, if rent is to an individual, we will require canceled checks or bank statements for a minimum of 6 months)

One piece of credit can be from the following – Utilities, Auto insurance, rent to own, school tuition, cell phones, department stores, personal loan (with repayment terms in writing and canceled checks) This type of credit reference is not acceptable if it is payroll deducted.

IF A TRADELINE CLOSED OR WAS LAST USED WITHIN THE PAST 12 MONTHS BUT HAD A 12 MONTH HISTORY, IT IS ACCEPTABLE AS PART OF THE THREE TRADELINES.

NOTE: Accounts shown as “authorized user” do not count in building the borrower’s credit history.

REMINDER – if a borrower does not meet the above credit guidelines, the following guidelines come into play.

• Qualifying ratios are to be computed only on those occupying the property and obligated on the loan, and may not exceed 31 percent for the payment-to-income ratio and 43 percent for the total debt-to-income ratio. Compensating factors are not applicable for borrowers with insufficient credit references.

AND

• Borrowers (with or without non occupying co-borrowers) should have two months of cash reserves following mortgage loan settlement from their own funds (no cash gifts from any source should be counted in the cash reserves for borrowers in this category).

Acceptable Types of non-traditional credit references:

Utilities if not included in rent

-gas

-electricity

-water

-land line home telephone service

-cable TV

School Tuition

Retail Stores

Rent to Own stores

Internet/Cell phone services

Payment to child care providers – made to a business providing such services

A personal loan from an individual with repayment terms in writing and supported by cancelled checks for 12 months

New Law Expands Benefits for Taxpayers

This is the latest newsletter from Riolo, Roberts & Freddi, LPP our favorite local CPA Firm. They are located at 1227 Pleasant Grove Blvd. Roseville, CA 95678 and their number is (916) 771-4134 ext 202

The new Worker, Homeownership, and Business Assistance Act of 2009 contains several key provisions
affecting individuals and business owners. The following is a brief summary.
♦ Homebuyer’s Credit
Under prior law, an eligible first-time homebuyer could claim a maximum credit of $8,000 for a principal
residence purchased before December 1, 2009. This credit, however, began to phase out for single filers
with a modified adjusted gross income (MAGI) above $75,000 and joint filers above $150,000.
Under the new law, the credit is available for home purchases made before May 1, 2010 (July 1, 2010, if a
binding contract exists before May 1). Also, the phase-out threshold increases to $125,000 of MAGI for
single filers and $225,000 for joint filers. The homebuyer credit may be elected on a 2009 tax return for a
qualified purchase in 2010.
New limit for everyone: No credit is allowed for purchases after November 6, 2009, if the price exceeds
$800,000.
Not just for first-timers: If you buy a home after November 6, 2009, and have owned and used the previous
home as your principal residence for five consecutive years in the last eight years, you may claim a credit of
up to $6,500.
♦ NOL Carryback
Normally, a business can carry back a net operating loss (NOL) for only two years before carrying it forward
for up to 20 years. A prior law change allowed a carryback for three, four, or five years to qualified small
business for NOLs in tax years beginning or ending in 2008.
The new law extends the longer carryback regardless of the size of the business. This election is generally
available for NOLs incurred in either 2008 or 2009.
Caveat: Under the new law, an NOL carried back to the fifth year is limited to 50% of the taxable income
for the year. Any remaining NOL may offset income in the remaining four years.
♦ Other Provisions
Unemployment benefits are extended for up to 14 weeks (20 weeks for individuals in states with high unemployment
rates). But the tax exclusion for the first $2,400 of unemployment benefits received in 2009 isn’t
extended.
Finally, the new law includes several revenue-raisers to pay for the favorable changes, such as expanded use
of e-filing by small tax return preparers, an extension of the FUTA surtax, and increased penalties for failing
to file partnership and S corporation returns.
NEW LAW EXPANDS BENEFITS FOR TAXPAYERS


NEW RULES IN 2010 FOR ROTH IRA CONVERSIONS
Beginning in 2010, the rules governing Roth IRA conversions will undergo a significant change. Traditional
IRA to Roth IRA conversions will be available to everyone, creating a financial planning opportunity that
didn’t exist previously. Under the 2009 rules, taxpayers with income of more than $100,000 cannot convert a
traditional IRA to a Roth IRA. Tax legislation enacted in 2006 changed the rules and ends the $100,000
income limit, effective January 1, 2010.
The Roth IRA has been a popular investment vehicle, with its ability to give taxpayers tax-free distributions
once the account has been in existence for five years and the taxpayer has reached age 59½. Another Roth
benefit is the lack of required minimum distributions once the owner reaches age 70½.
* * The conversion to a Roth does have a cost. When you convert a traditional deductible IRA to a Roth, you
must include the entire amount converted in your taxable income.
If you do a conversion in 2010, you are allowed to report half of the income on your 2011 tax return and the
remaining half on your 2012 tax return. You can also choose to pay the taxes due on the conversion on your
2010 return. While prepaying seems counterintuitive, remember that present federal tax rates are set to expire
December 31, 2010. Postponing income into future years could mean a bigger tax bill.
The new conversion rules are particularly advantageous to those upper-income taxpayers who could never
participate in a Roth. Now taxpayers in high tax brackets will have access to Roth IRAs. One possible
strategy is to set up a traditional IRA with nondeductible contributions in 2009 and then convert it to a Roth
in 2010.