Tuesday
morning, Feb. 18, at the Southwest Riverside County Association of REALTORS®
(SRCAR) weekly marketing meeting, Gene Wunderlich, SRCAR Government Affairs
Director (GAD), alerted REALTORS® to an alarming trend that is developing and
spreading heartache across the State of California, soon to be here in the
Temecula-Murrieta Valley.
Without
advocating for or against our president and his legendary Affordable Health
Care Reform Act, commonly known as Obamacare, there are two issues that will
affect real estate sales from this point forward.
New
capital gains tax on the rich
The
first issue is not going to have a direct effect on very many transactions –
but those that it does will feel the consequences. There is now a 3.8 percent
tax on high income home sellers, earning in excess of $200,000 or $250,000 for
married couples filed jointly. The income is for adjusted gross income (AGI).
The new tax is on their capital gains in excess of $250,000 for the single
seller or $500,000 for the married taxpayers.
This is
obviously a very quick snapshot of the new tax and if you want to know more,
you really need to discuss the matter with your tax professional for advice
that is pertinent to you.
Your
health insurance and your new mortgage
When
qualifying for a mortgage, the lender has always looked at your debt to income
ratio, or DTI. Under the new rules of the Dodd-Frank Act, mortgages have to
meet the new "qualified mortgage" (QM). The new QM has a ceiling of
43 percent DTI for most government-sponsored agencies (GSA) like VA, FHA,
Fannie Mae, Freddy Mac, USDA, etc. It was 45 percent DTI last year for those of
you keeping score.
Again,
there is much to this discussion and certainly not enough room here to discuss
in any detail. I just wanted to lay the foundation for the scenario Mr.
Wunderlich shared at the SRCAR weekly marketing meeting.
Lenders have always looked at the borrower’s monthly bills and
obligations in determining debt. This includes rent/mortgage payments,
utilities, un-used gym
memberships,
child care and everything else the borrower spends their money on. This is revealed on the loan application and verified by reviewing three months (or more) of bank statements.
child care and everything else the borrower spends their money on. This is revealed on the loan application and verified by reviewing three months (or more) of bank statements.
Simply
put, the law now requires everyone to be covered or pay a fine. It’s no longer
an option as some lenders up north see it. Therefore, if you never had
insurance in the past, you must have it today. If it’s something you must have,
then it is one more debt that needs to be factored into your DTI. Even if you
have had health insurance for years, chances are very good that you’ll be
paying more for it, resulting in more debt each and every month. Check with a
trust insurance agent to confirm.
What
should you do?
I suppose
that depends if you are in favor of the law or not. Either way, contact your
local politicians and let them know how you feel.
If you
are planning on buying a home anytime soon, I’d look hard at doing it sooner
rather than later. Apparently, this trend has started in Northern California
where one title company has had nine escrows fall out so far this year because
of the DTI factoring in health insurance that the borrower did not have prior
to this year. While there are no known cases here in the Temecula-Murrieta
Valley, or elsewhere in Southern California, it’s believed to only be a matter
of time before it reaches us.
Check
with your trusted local REALTOR® and lender to make sure you are covered. They
will make sure you find that right home within your budget meeting all your
needs. Call us today and get the information you need to make the right
decision. The info is free, call now! (951) 296-8887.
John Occhi, Mike Mason
Friday, February 28th, 2014
Issue 09, Volume 18.
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