VA Loan / Veteran Mortgage News
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JUNE 2006
New Tax Benefits for Combat Pay
On May 16th, 2006, Congress passed the Heroes Earned Retirement Opportunities Act (H.R. 1499). President Bush
signed the legislation into law on May 29th. The HERO Act treats tax-free combat pay as taxable compensation for
the purpose of making annual IRA contributions. The provision is effective for contributions made after December 31,
2003 - providing our troops with up to $70 million in tax benefits over the next 10 years.
Current law may prohibit troops from saving in an IRA. Generally, contributions to an Individual Retirement Account
(IRA) are limited to the lesser of $4,000 (in 2006) or the individual's taxable compensation. Combat pay is tax-free.
As a result, members of the military who receive combat pay as their only source of compensation are not allowed to
contribute to an IRA (because their taxable compensation is zero). This current-law rule may limit or prohibit IRA
savings for men and women in uniform.
H.R. 1499 was introduced by Rep. Foxx (NC) on April 6, 2006. The bill was referred to the Ways and Means Committee
but was not considered. On May 23, 2005, the House agreed to H.R. 1499, under suspension of the rules, and passed the bill,
as amended, by a voice vote. S.601 passed the Senate with an amendment by Unanimous Consent on November 15, 2005.
Veterans Need To Be Aware of Identity Theft
In light of the recent press concerning identify theft from the VA, we wanted to shed some light on what you can do.
It is strongly encouraged to take precautions to protect your credit. It seems prudent to register for the no charge
90 day renewable Fraud alert services offered by the three national credit bureaus.
- Contact the fraud departments of any one of the three major credit bureaus to place a fraud alert on your credit file.
The fraud alert requests creditors to contact you before opening any new accounts or making any changes to your existing
accounts. As soon as the credit bureau confirms your fraud alert, the other two credit bureaus will be automatically
notified to place fraud alerts, and all three credit reports will be sent to you free of charge.
Equifax - www.equifax.com
To place the fraud alert, call:
800-525-6285 or write: P.O. Box 981221, El Paso, TX 79998
Hearing impaired call 1-800-255-0056 and ask the operator to call the Auto Disclosure Line at 1-800-685-1111 to
request a copy of your report.
Experian - www.experian.com
To place the fraud alert, call: 800-509-8495 or write:
Consumer Fraud Assistance, P.O. Box 9532, Allen TX 75013
TDD: 1-800-972-0322
Trans Union - www.transunion.com
To place the fraud alert, call:
800-680-7289 or write: P.O. Box 6790, Fullerton, CA 92834
TDD: 1-877-553-7803
- Close the accounts that you know or believe have been tampered with or opened fraudulently.
- File a police report. Get a copy of the report to submit to your creditors and others that may require proof of the crime.
- File your complaint with the FTC. The FTC maintains a database of identity theft cases used by law enforcement agencies
for investigations. Filing a complaint also helps us learn more about identity theft and the problems victims are having
so that we can better assist you. For more in-depth information on recovering from identity theft and help with specific
problems, read:
ID Theft: When Bad Things Happen to Your Good Name
Real Estate Remains Healthy
Home sales are slowing from a record-setting pace, but still remain vigorous in most areas. Average prices nationally rose
12.5 percent in the twelve months ending March 31. Sales are growing in areas where companies are adding workers, notes
the National Association of Realtors (NAR). Ongoing job and income gains will keep the real estate market healthy nationally,
add NAR economists.
Higher rates are causing overall sales to slow, but that's actually a good sign now. Too many speculative buyers made purchases
in recent years in the hope of gaining a quick profit. Yet for most Americans owning a home is primarily a lifestyle
decision. And the good news is that you still can make the purchase you want today.
Fewer home sales are causing price increases to slow. Don't expect to find falling prices in most neighborhoods - but you can
shop from a wide variety of homes now, and not feel as pressured to make a quick offer as buyers did a year or two ago.
Picking the right mortgage is just as important as finding the perfect house. We'll work with you to come up with financing
you'll be happy with for years. Contact us when you're thinking of buying real estate. Our expertise will assist you in
today's changing marketplace.
Time to Invest?
Many baby boomers have taken advantage of low rates and strong real estate markets to purchase vacation and rental
properties. Boomers now are at the peak of their earning years, and owning real estate gives them an array of benefits:
- Homes provide tax breaks for their owners. Mortgage interest and property tax payments are deductible. Investors also can write off insurance and management expenses, plus depreciate the cost of their rental unit.
- Real estate is seen as a stable investment vehicle. Property prices are less likely to dip than stock values are.
- Owning makes sense if you plan to retire to your second home. You then can sell your current house and gain up to $500,000 in profits tax-free.
But since the real estate market has been so strong in many areas, is it smart to purchase now? Investors answer this question
by comparing the return on properties to what they could expect from other assets. Do so by dividing your annual profit
(rental income minus expenses) by the property's value. You then can compare that to the price/earnings ratio on a stock
or the coupon on a bond.
Also look at employment trends in the area where you'll be purchasing, since more workers will add to the demand for rental
units. And check to see how rents have moved in the past year. Some communities have experienced rising rents as
apartment buildings have been converted to condominiums, which then boosts demand for rentals.
Higher interest rates and home prices also give landlords the opportunity to increase rents. Many renters would
find buying more expensive now than a few years ago, which makes renting more attractive.
Gain Control Over Your Bills
Bills can seem like crabgrass - at first they're just an annoyance, but eventually it's hard to control them.
If you're paying too much on high-rate credit cards every month, now is the time to look at solutions.
You may want to obtain a home equity loan or refinance your current mortgage to find the funds to pay off those
bills. Of course, this is not a step to be taken quickly - you'll be making a choice that will affect your finances for years.
We'll show you how a new loan would change your budget both now, and in years to come. Mortgages offer much-lower
rates than credit cards, and their interest charges typically are tax-deductible. You'll give yourself a fresh
financial start by making your total payments affordable again. And when it's time to move, you can obtain
financing on great terms.
It's also important to review your spending habits, to insure you don't find your debts growing in the future.
But often debts pile up due to one-time factors such as a medical emergency or temporary job loss. You owe it to
yourself to make these tough times as easy as possible. Call us right away for more information on how you can
reduce a debt burden.
The GI Bill Can Change Your Future.
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