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Francis Vayalumkal

Things have changed in the mortgage market. Credit standards have tightened but mortgages are still available despite talk of a credit crunch. Qualified borrowers can find conforming and FHA-insured mortgages easily. Jumbo mortgages are more scarce, but available. Rates move up and down depending on market conditions. But the mortgage marketplace isn't frozen.

Credit standards have been getting tighter all year, reducing the number of people who qualify for loans. It's hard to quantify how many people have been disqualified merely because of more strict lending standards. The income-documentation requirement is part of a yearlong trend in which mortgage insurers and Fannie Mae and Freddie Mac have added fees and restrictions, little by little. Each change knocked a few more people from the ranks of qualifying borrowers. No-income or even stated income loan programs are pretty much history.

Take the mortgage insurers, who protect lenders from the costs of borrower default when borrowers make down payments of less than 20 percent. Last year, the mortgage insurance companies began publishing lists of "restricted markets," where home prices are declining. Borrowers have to make bigger down payments and have higher credit scores to get mortgage insurance in restricted markets.

The mortgage insurers have tightened the screws slowly, adding cities and states to the lists of restricted markets and increasing requirements. In the latest example, Mortgage Guaranty Insurance Corp. recently boosted the minimum credit score needed to buy a house in a restricted market. In August, the minimum score was 680. In October, the minimum score is 700.

Fannie, Freddie and fees

Mortgage financing giants Fannie Mae and Freddie Mac have been adding restrictions, too. Before they were taken over by the federal government in early September, Fannie and Freddie had been on a months-long campaign of adding fees that were then passed along to borrowers either directly or through higher mortgage rates. The Fannie terminology for these fees was "loan level price adjustment."

Jumbos are scarce

It's not all good news. The marketplace for jumbo mortgages has been in disarray for more than a year now, and it isn't getting better. Jumbo rates are higher than rates on conforming loans (mortgages of $417,000 or less). The credit requirements on a jumbo loan are much tougher now and most of the lenders are staying away from them.

If you are planning on purchasing a home, make sure you spend enough time planning and getting your finances and financial records in order. While things have gotten tighter, the mortgage process can still be painless when you deal with a trusted professional.

Francis Vayalumkal is a mortgage banker with Colonial Bank and can be reached at (813) 719-0303

Kamlesh Patel


A valuable business tax break is scheduled to expire at the end of December. That's the special bonus depreciation allowed on the purchase of new business equipment. It was included in the stimulus legislation passed earlier this year.

Now you shouldn't run out and buy new equipment just to earn a tax break. But if you're already planning some purchases for early next year, you might want to consider accelerating the purchase date to capture the bonus.

The bonus depreciation applies to most new equipment you purchase, provided you place it in service before year-end. If your purchase qualifies, you can deduct 50 percent of the cost as a bonus depreciation expense in 2008. The bottom line is that you'll have an extra deduction against this year's taxable income. Most new business equipment and certain leasehold improvements qualify for the bonus.

Another expanded tax break for business purchases is scheduled to end after 2008. That's the provision that allows you to immediately expense the entire cost of some of your equipment purchases. Expensing allows you to write off the full cost against your taxes immediately, instead of deducting it as depreciation over several years. This year, you can potentially expense up to $250,000 of business equipment, subject to certain limitations. Most new or used tangible personal property you buy for your business qualifies.

Note that bonus depreciation applies only to new property, while expensing may be taken on new or used property. Also, the two benefits can be combined; the expensing option can be taken for a purchase, and the bonus depreciation can be used on the remaining basis if the property qualifies.


Nobody wants to address their own mortality, but knowing that your life is organized in the event of incapacitation or death can be very comforting. You certainly want to spare your family members the sad task of rummaging through all of your drawers and files in order to locate important records and documents.

What type of records should be organized? The list would include the location of any estate planning documents such as wills, trusts, and health care directives. Also include the location of financial records, such as tax returns and deeds or notes. If you have a safe deposit box, provide the location and the keys. If you have made prior funeral arrangements, include those documents.

Account numbers (including any online passwords) are important. Make sure that they are provided for all of your bank, savings, credit union, brokerage, and other financial accounts. If you have direct deposits into your checking account (such as a monthly social security check), make sure to disclose that information.

You'll also want to make sure that policy numbers for all life, long-term care, home, and liability insurance are listed along with the actual policies. Finally, don't overlook phone numbers for the people with whom you do business, such as your accountant, attorney, financial planner, and insurance agent.

There are many ways to accomplish this task. You can create a list detailing all of this information and where items can be found. Or you can keep the information on your home computer. You might choose to memorialize these details in a letter which is to be sent to loved ones after your death. The best way is the way that makes sense and works for you. Just be sure to update your information at least annually. Don't overlook this important task, not only for your peace of mind but also to ease the burden on your loved ones.


For many individuals, a Roth IRA is preferable to a traditional IRA, especially as retirement nears. But you may have built up a nest egg in a traditional IRA, or several IRAs, over the years. Should you convert your traditional IRA to a Roth? It's a simple question, but the answer can be complicated.

Here are the basic rules. With a traditional IRA, your contributions may be wholly or partially tax-deductible. (If your income exceeds a specified annual threshold and you or your spouse have a retirement plan at work, your contributions may not be deductible.) However, distributions representing the portion of your account that was tax-deductible and all of the earnings are taxed at ordinary income rates.

In contrast, contributions to a Roth IRA are never tax-deductible, but qualified distributions are completely exempt from tax. Generally, a "qualified distribution" is one made from a Roth IRA that has been in existence at least five years and made after you've reached age 59½.

If you want to convert a traditional IRA to a Roth, there's a price to pay. Amounts attributable to tax-deductible contributions, plus all of the earnings, are subject to tax. To further complicate matters, conversions to a Roth IRA are permitted only in a year in which your adjusted gross income is $100,000 or less.

There is a tax change coming that you need to consider. The $100,000 income limit will be removed starting in 2010. In addition, for a conversion in 2010, you can elect to pay the tax bill ratably over the following two years - 2011 and 2012. So you may want to wait to convert.

Note that another tax law change allows one-step conversions from a 401(k) plan to a Roth.

Kamlesh H. Patel, CPA, can be reached at (813) 949-8889 or e-mail or

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