From today’s Los Angeles Times:

If you fit the criteria and are considering buying another house in the coming year, you might want to speed up the process and close by the June 30 expiration date.

By Kenneth R. Harney

Reporting from Washington - Take a close, hard look at the new $6,500 federal tax credit for so-called move-up home buyers that passed the Senate and House recently. Though it's been getting second billing to the original $8,000 credit for first-time purchasers -- now extended by Congress through June 30 -- the $6,500 credit for current homeowners just might have your name on it.

How does it work? When will it be available?

The new credit is available now. It took effect Nov. 6, the day President Obama signed the legislation that created it. This means that if you fit the key criteria -- you've owned and lived in your home for a consecutive five out of the last eight years, and your adjusted household income doesn't exceed $125,000 if you file taxes singly or $225,000 if you are married filing jointly -- you can claim the credit as soon as you close on a qualifying house.

That could be next week, next month or next spring. There is no "move-up" requirement in the new credit. In fact, homeowners who plan to downsize into a smaller dwelling may prove to be significant users of the credit, along with people who are moving because of employment changes.

If you fit the criteria and are considering buying another house sometime in the coming year, you might want to speed up the process and sign a contract by April 30 and close by the June 30 expiration date. Think of it this way: If the government is willing to give you $6,500 to act a little faster than you had planned, hey, why not?

Some other key features of the $6,500 credit you ought to know about:

* Whatever you intend to buy, the house cannot cost more than $800,000.

* The replacement house must become your main home. There is no requirement in the legislation that you sell your current home. You could rent it out, turn it into a second home or list it for sale later in 2010 when prices might be higher. If you plan to retain it, however, make sure that you move into the new house on the day you close so that there is no question it was your principal residence at that time.

* Like the first-time buyer credit, the $6,500 version permits a variety of dwelling types for your purchase. These include new or existing single-family homes, condominiums, manufactured or mobile homes, and boats that function as your principal residence. You cannot claim the credit if you are buying a second home or an investment property.

* The Internal Revenue Service is required by Congress to scrutinize claims for tax credits -- both for the $6,500 and the $8,000 credits -- far more closely in the coming months than it did earlier this year. This is because federal investigators have documented significant instances of fraud -- supposed home buyers who were as young as 4, and "sales" that were fabricated. Investigators also found numerous cases of technical violations, such as purchase transactions among immediate family members, which are prohibited.

The revised rules require taxpayers to submit copies of their settlement statements (HUD-1 forms), along with their requests for credits using IRS Form 5405. Congress' new rules also prohibit individuals under the age of 18 or who are counted as dependents on another taxpayer's filings from claiming the credit.

* Home buyers in 2009 -- those who go to closing after Nov. 6 but no later than Dec. 31 -- can claim the $6,500 credit on their 2009 federal tax returns, or amend their 2008 returns. Similarly, eligible buyers in 2010 will be able to file for the credit on their 2009 returns or 2010 returns. Talk to your tax advisor regarding timing decisions.

* If you aren't sure if you can make the deadlines established for the new credit -- a binding contract by April 30 and a settlement by June 30 -- do not assume that Congress will provide another extension. All the political and budgetary signs point the other way, and some of the primary authors of the credit insist that this is it -- no more extensions next year. Take them at their word.

One consumer resource that answers frequently asked questions about both the $6,500 and $8,000 extended credits is www.federalhousingtaxcredit.com, sponsored by the National Assn. of Home Builders.

kenharney@earthlink.net

Distributed by the Washington Post Writers Group.

Moving to a new metropolitan area requires adjustments. There's new streets to learn, new weather patterns to get used to, and new social cultures to assimilate.

There's also new costs.

Just like home values vary by area, so does the Cost of Living. To visit a doctor in Chicago, as an example, costs a person more than to visit a similar-type doctor in Des Moines.

Cost of Living adjustments can't be ignored between two cities because it changes a household's budget.

And while it's a challenge to know exactly how far your dollar can stretch in a new town, Bankrate.com hosts a helpful Cost of Living Comparison Calculator to make the math a little easier. With categories such as dry cleaning, groceries and beauty salon, the calculator goes extra deep into the typical costs to a household, and can help families to make more realistic budgets.

The calculator also shows the equivalent household income between any two metropolitan areas.

Both mortgage guidelines and the economy have tightened since 2006, bringing more attention to "joint homeowners" -- non-spousal partners that buy and share a home as roommates.

The practice is not new, but, anecdotally, co-purchasing is becoming more common.

In the video above -- filmed two years ago but still on-target today -- real estate expert Barbara Corcoran provides good advice for co-purchasing partners.  Like any business relationship, it's important to plan ahead.

• Hire an attorney to draft contracts and agreements
• Have a plan for when one or both parties wants to move or sell
• Consider life insurance policies on each other

The over-riding theme for co-purchasing arrangements is to be prepared.  Done right, however, they can create two proud homeowners where there would have otherwise been none.

With mortgage rates are hovering near all-time lows, lots of Americans are taking advantage of refinance and home buying opportunities. 

The downside of today's unexpectedly-low rates, though, is that mortgage lenders are ill-equipped for the rush of new business. 

As a result, the process of underwriting and approving new mortgage applications is taking some conforming lenders as long as 2 months to complete. 

This is double the time needed as recently as six months ago.

Because there may be 60 days between the application date and the closing date, it's important for applicants to remember that mortgage approvals can be revoked at any time prior to funding. 

As mortgage applicants, there are many events that are out of our control -- job security and health matters, for example.  But there are also events that are within our control. 

Knowing that mortgage approvals can be fragile, here are 8 things you should absolutely not do while your home loan is in process.  It may be the difference between being approved by the bank, and being turned down.

1. Don't buy a new car or trade-up to a bigger lease.
2. Don't quit your job to change industries
3. Don't switch from a salaried job to a heavily-commissioned job
4. Don't transfer large sums of money between bank accounts
5. Don't forget to pay your bills -- even the ones in dispute
6. Don't open new credit cards -- even if you're getting 20% off
7. Don't accept a cash gift without filing the proper "gift" paperwork
8. Don't make random, undocumented deposits into your bank account

Now, avoiding these items may not be practical for everyone.  For example, if your car lease is expiring and you need a larger vehicle, it doesn't mean you can't buy the car -- just check with your loan officer first to be sure the new payments won't "break" your approval. 

The same goes for accepting cash gifts from parents.  There's a right way and a wrong way to accept gifts and doing it the wrong way may prevent you from using the gift as a source of downpayment.

Mortgage lending is full of "gotchas" and with underwriting times stretching to 60 days, it's a lot more likely that a mortgage applicant will trip into one.  Following these 8 rules, though, is a good start.

As part of the American Recovery and Reinvestment Act of 2009, the IRS has officially released Form 5405 -- better known as the First-Time Homebuyer Credit Form.

True to tax code standards, the 10-field form is accompanied by 3 pages of instructions.

Form 5405 is a helpful, go-to resource for home buyers with questions about the tax credit.

For example, the form distinguishes tax consequences for homes bought in 2008 versus 2009, and clearly defines the term "first-time home buyer".

In addition, Form 5405 highlights the math behind the tax credit.  In general, the First-Time Homebuyer Credit is equal to the lesser of:

• $8,000 for homes bought in 2009
• 10 percent of the home's purchase price

Married couples filing separately are entitled to half of the expected credit, and homes sold within 3 years are subject to a credit repayment in the year the home ceases to be the "main home".

Form 5405 is a comprehensive reference.  However, be sure to check with your accountant for specific questions about your personal returns and how the First-Time Homebuyer Credit may impact your finances.  There is no substitute for professional, paid advice.

Everything old is new again.

Conforming mortgages are limited by loan size, based on "typical" housing costs around the country.  The current conforming limit on a single-unit property is $417,000.

In 2008, as part of the Economic Stimulus Act of 2008, Congress authorized conforming loan limits increases in "high-cost" areas around the country.  In Los Angeles County, for example, a mortgage could be as large as $729,750 and still be considered "conforming".

Those temporary increases rolled back effective January 1, 2009, to a maximum of $625,500.

However, as part of the American Recovery and Reinvestment Act of 2009 signed into law this week, conforming loan limits in high-cost areas have been returned to their elevated levels of 2008. 

You can see the text on the bottom of page 111 of 407.

Changes to conforming loan limits impact everyone with a stake in real estate, even if their neighborhoods are not considered "high-cost".  This is because conforming mortgages offer the widest selection of home loan products, and often at the lowest rates.   The widespread availability of conforming mortgages helps to support home sales nationwide as well as providing ample refinancing options for people that need it.

Lenders have yet to pick up the change, but are expected to shortly.  Once they do, more homeowners will be eligible for cheap home financing.

To lookup your neighborhood's conforming loan limits, visit the HUD Web site.  Or, if you have specific questions related to your home or an upcoming purchase, contact me directly anytime.

Consumer Confidence fell this month for the first time in three months, reflecting Americans' concern for the economy, housing, and the financial system. 

The reading isn't much of a surprise given our collective exposure to a near-constant stream of negative news. Before long, the reports become a self-fulfilling prophecy.

Despite falling confidence, however, the housing industry appears to be reviving.  Sales of existing homes are on the rise and an increasing number of homes are under contract to sell.  And, if these statistics seem out of place, consider the external forces that are accompanying this "down" economy:

• In some markets, home values have plummeted to early-2000 levels
• Government intervention has brought mortgage rates to near-5 percent
• Congress is pledging key support to housing and mortgage markets

These points can't be captured in confidence surveys which, by comparison, ignore facts and focus on Big Picture behavioral questions like "Do you think you'll be better off a year from now?" and "What's your attitude toward buying major household items?".  It's useful information for economists, but not so much for home buyers.

Anecdotally, a lot of the country's housing markets have already started their recovery.  Couple that with the natural momentum of Spring Buying and the stimulus package's proposed first-time home buyer tax credit and you can clearly see the disconnect.

Just because confidence is down doesn't mean that home prices will be, too.

When a homeowner sells his home and decides to buy a new one, there are 3 basic options for the residence -- sell it, keep it, or rent it.

Unfortunately, no matter which path they choose, move-up homebuyers in need of a new conforming mortgage will find qualifying for a home loan to be more difficult this season than in the past. 

Mortgage guidelines are dramatically tighter for people "carrying two mortgages".

Among the changes this spring's buyers face:

Selling the primary residence
If you plan to close on your new home prior to the closing of your existing home -- even if it's only by a day -- both payments must be listed as monthly debts on your mortgage application. This will disqualify the majority of homebuyers.

Converting your residence to a second home
If your current home has less than 30 percent equity in it, your mortgage application for the new home will not be approved unless you can show 6 months worth of mortgage payments + taxes + insurance in reserves for the current home and new home combined.

Converting your residence to an investment property
If your current home has less than 30 percent equity in it, any rental income derived from a tenant is disallowed on your mortgage application for the new home.  You must still count the mortgage payment + taxes + insurance as a monthly debt.

In other words, being a move-up buyer isn't as simple as it used to be.  New lending rules make buying a new home an exercise in timing and financial planning.  And the rules are expected to get tougher, too.

Therefore, if you expect to be a move-up buyer in the next 12 months, consider moving up your timeframe or -- at least -- planning ahead for it. 

Understanding the new mortgage landscape and how they can influence your upcoming purchase may be the difference between getting approved for a home loan, and getting turned down.

After a weak holiday shopping season, annual retail sales declined in 2008.

It marks the first annual Retail Sales decline since the government started tracking the data 40 years ago.

It also gives credence to the notion that the U.S. economy is suffering through a deeper recession that previously thought.  A pullback in spending -- especially during the shopping-heavy month of December -- highlights how cautious nature of today's American shoppers.

And in a strange sort of way, all of this may end up being good news for Spring home buyers.

Because Retail Sales are reflective of consumer spending, a dramatic pullback helps to keep the economy in slow gear, countering the inflationary impact of government stimulus and direct intervention.  Inflation, you'll remember, causes mortgage rates to rise.  It's absence, therefore, helps to keep mortgage rates low.

In addition, it's earnings season on Wall Street and weak corporate guidance has spurred a 6-day decline in the Dow Jones Industrial Average.  As dollars leave the stock market, investors are parking them in the safer world of bonds.  This includes mortgage bonds, of course, which further pressures rates lower.

As we're seeing, economic weakness -- to a point -- can be the friend of a person in need of a new home loan.  For active home buyers or people entering the market this Spring, therefore, the timing may be just right.

(Image courtesy: The Wall Street Journal Online)

For the first time in over a year, the sales of "used homes" fell below the 5-million unit trendline, helping to push the total home inventory higher by 0.1 percent nationwide.

Based on the rate at which homes are selling nationwide, it would take 11.2 months for the existing housing supply to be exhausted.

For home buyers, this is an opportune time for negative news on housing. 

First, sellers know that between now and the Super Bowl, housing activity will be light.  The general scarcity of buyers may force a seller to accept a bid he wouldn't have accepted otherwise.

Second, the economy is showing weakness and that, too, can concern a home seller.  Buyers are less likely to extend themselves during times of economic uncertainty, further reducing the buyer pool and, again, putting pressure on the seller to "make a deal".

And lastly, because the government has been trying to force mortgage rates down as a way to stimulate the economy, the weak housing data is actually making it cheaper to finance a home.  This means that a well-qualified home buyer can better stay within budget.

Each 0.500 percent rate reduction saves $33 per $100,000 borrowed.

It is important to remember, though,  that the U.S. housing market is not national -- it's highly localized.  This is one reason why national real estate reports can be misleading.  Just as figures from Phoenix have little to do with statistics from St. Paul, even data from neighboring ZIP codes can vary.

The universal truth, however, is that a home that is priced fairly will sell more quickly than a home that is not.  And, until the Super Bowl passes in 45 days, expect fewer buyers to be out there competing for them.

(Image courtesy: The Wall Street Journal Online)