In a recent story on MSN Money titled, Mortgage Borrowing Is Getting Easier, it was revealed that:

“Credit is not raining down on would-be borrowers, but it will be a bit more accessible this year.” 

The article bases it findings on the Federal Reserve’s January Survey of Loan Officers. Dan Greene of the Daily Mortgage Report addresses the survey:

“The Q4 2012 survey marks the ninth straight survey in which fewer than 10% of banks tightened standards. Many more are loosening instead. It’s a good sign for the 2013 home purchase market, which has shown strong buyer demand and rising home prices. Despite what you may hear from friends and neighbors, the nation’s banks are no longer tightening their respective mortgage lending standards.”

In the article, Cara Hawkins, a production manager at Ameripro Funding also weighed in on the subject:

“There are more players in the mortgage buying ‘game’ than in past years, which opens the door to looser credit standards because the appetite for loans on the secondary market is higher. While it is still fairly black and white when it comes to mortgage qualification, I am seeing an increase in more approvable loans than in past years because of the market opening up.”

And a recently released report from FICO/PRMIA, US Consumer Credit Risk Trends and Expectations showed:

Expectations among bank risk professionals for the relaxation of lending standards increased sharply, rising from 12.1 to 19.9 percent

Why Are Lending Standards Easing?

The FICO/PRMIA report revealed two reasons for the industry’s current comfort with the housing market.

1. 1. 83.7% believe that the level of mortgage delinquencies will decrease or stay the same, a significant improvement over last quarter.
2. 2. 70.8% feel that home prices were rising at a sustainable pace.

The Niche Report also covered the FICO/PRMIA report explaining:

“One out of five bank risk professionals now expect the approval criteria for loans to become less stringent, the third highest level ever registered for looser lending standards in the three year history of the FICO survey.”

What Will This Mean for the Real Estate Market?

Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs, said it best:

“The latest survey results, combined with data that indicates the real estate market is improving in many regions, paint a positive picture for a sector of the economy that has been slow to join the recovery. Mortgage lenders have been understandably guarded over the past five years. The improvement in their sentiment should be welcome news, and I wouldn’t be surprised to see lenders cautiously expanding their mortgage and home equity lending businesses.”

Understand what expenses can be deducted

Since we are getting painfully close to tax day … I thought it might be useful to share with you the top 10 homeowner tax deductions that are allowable under certain circumstances.   This list is for informational purposes so make sure you consult a tax attorney or CPA with any questions you may have!

1. Mortgage Interest Deduction

Homeowners who itemize their deductions can deduct the interest paid on a mortgage with a balance of up to $1 million. While there is some movement to limit the total itemized deductions for taxpayers with higher incomes (over $400,000), the current deductions holds for all tax brackets. Americans save around $100 million every year by deducting mortgage interest on their tax returns.

2. Home Improvement Loan Interest Deduction

The interest on home equity loans used for “capital improvements” to a home can also be a tax deduction. On loans with balances of up to $100,000, the interest is tax-deductible for a homeowner who uses the loan to make improvements to the home such as adding square footage, upgrading the components of the home, or repairing damage from a natural disaster.

3. Private Mortgage Insurance (PMI) Deduction

If your mortgage was originated after Jan 1, 2007, and you have PMI, it can be a tax deduction. The deduction is phased out, 10% per $1,000, for taxpayers who have an adjusted gross income between $100,000-$109,000 and those above that level do not qualify. The extension of this tax deduction in 2013 was one of many last-second saves by real estate industry advocates.

4. Mortgage Points/Origination Deduction

On a home purchase loan, taxpayers can deduct the entirety of the points that they paid in the same year. On a refinance loan, the points must be deducted as an amortization over the life of the loan. Many taxpayers forget about this amortized benefit over time, so it’ important to keep good records on the deduction of points on a refinance.

5. Energy Efficiency Upgrades/Repairs Deduction

Homeowners can deduct the cost of the building materials used for energy efficiency upgrades to their home. This is actually a tax credit, one which is applied as a direct reduction of how much tax you owe, not just a reduction in your taxable income. 10 percent of the total bill for energy-efficient materials can be used as a tax credit, up to a maximum $500 credit. Insulation, doors, new roofs, and many other items qualify for the energy efficiency credit. There are also individual limits for certain items, such as $150 for furnaces, $200 for windows, and $300 for air conditioners and heat pumps.

6. Profit on Sale of Real Estate Deduction

If you’ve sold a home in the past year, you’re likely aware that individuals can claim up to $250,000 of profit from the sale tax-free, and married couples can claim up to $500,000 tax-free. Of course, there are some requirements to escaping the capital gains tax on this profit. The home must be a primary residence. This means that you must have lived in the home, as your primary residence, for two of the past five years. You could rent it out for years one, three, and five, while living in it for years two and four. In this way, a homeowner could potentially claim this tax break on multiple homes within a fairly short time frame, but each tax-free sale must occur at least two years apart from the previous tax-free transaction.

7. Real Estate Selling Cost Deduction

For those lucky folks whose profits on the sale of their home might exceed the $250k/$500k limits, there are still some ways to reduce the tax burden. The costs of selling the home can be significant, and those in themselves can be claimed as tax deductions.  By adding up all of the fees paid at closing, capital improvements made to the home while you owned it, money spent to make repairs to damaged property, and marketing costs necessary to sell the home, you can add a significant figure to the cost basis of your home. This basically raises the original price you paid for the home. Your cost basis begins with the original price of the home, and then adds in the improvement and selling costs. When the new cost basis price is compared to your selling price, it reduces your potentially-taxable profit on the home significantly.

8. Home Office Deduction

Homeowners deduct a percentage of their mortgage, utilities, and repair bills in direct proportion to the amount of their home that is dedicated office space. The home office must be your principal place of business (the primary office location where you get the majority of your work done). It needs to be exclusively used for business (it can’t be your kitchen by day and office by night). You need to be realistic with its size and use (unless you enjoy audits).

9. Property Tax Deduction

New homeowners often don’t know that their property taxes are deductible. While it may sound strange to have a taxdeductible tax, the overall effect is that you don’t pay income tax on money that was spent on property taxes. Homeowners should be careful to only deduct the amount of property tax actually paid to their local municipality for the year. This is not necessarily the amount you paid to your escrow account, and should not include any other city/county fees that might potentially be on the same bill as your property taxes.

10. Loan Forgiveness Deduction

The Mortgage Debt Forgiveness Relief Act of 2007 was created when short sales were becoming a new and growing part of the real estate market. An underwater homeowner might convince their lender to agree to a short sale of their home at $100,000, even though they owe $150,000 on their mortgage. While the lender forgives the extra $50,000 owed after the short sale, the government views it as $50,000 in taxable income (a gift from the lender to the borrower).

The Debt Forgiveness Act temporarily relieved the taxpayer of that burden, but was set to expire this year. Through much effort, it was extended along with many other homeowner tax relief measures this year and homeowners can continue to claim this tax relief in 2013

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Keeping current with Washington DC real estate trends is important if you are thinking about buying or selling a home in the area.  Here are a series of current videos using data compiled from MRIS summarizing the local market conditions in the Washington, D.C. real estate market along with  the Maryland suburbs and Northern Virginia.   Each video is approximately two minutes long and features the current market statistics for each region.

Current Market Watch trends for WASHINGTON, DC …

Current Market Trends for the MARYLAND SUBURBS …

Current Market Trends for NORTHERN VIRGINIA …

Single family home median prices nationwide throughout the major metropolitan areas are rising as distressed home sale decline.  In Q2, median prices rose 7.3% in the 2nd quarter of 2012 compared to the same period in 2011 which represents the highest increase since early 2006.  Currently the median price is about 20% less than at its peak in 2006.

Three of four major metro areas saw rising prices compared to two of four in the preceding quarter according to NAR (National Association of Realtors).   About 26% of the Q2 sales were distressed properties compared with 33% in 2011 while first-time buyers bought 34% of all homes and investors who compete with first-time buyers and typically pay cash accounted for 19% of all sales.

Second-quarter trends in median single-family home prices by region:

•Northeast. Down 1.6% to $241,300 from the second quarter of last year.

•Midwest. Up 7.5% to $149,400.

•South. Up 7.4% to $163,200.

•West: Up 13.4% to $234,000.