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What is Form 5405: Repayment of First-Time Homebuyer Credit?
IRS Link to Form — Found Here If a person moves from his first-purchased home, or it is destroyed, and he took the first-time homebuyer credit at purchase, he may have to repay the credited amount if the home was sold or destroyed within 36 months. He must file a 5405 and begin making payments in the form of additional taxes going forward. Form 5405 is the filing for those who sell their home or see it destroyed within 36 months of receiving the first-time homebuyer tax credit. The First Time Homebuyer Look-Up Tool is an IRS database allowing consumers to see all relevant information about when they took the FTHBC and how much they might owe back if they no longer used it as a primary residence within 36 months. Continue reading...
When Can I Access Money in My Roth IRA?
Roth IRAs have some interesting provisions that make them a little more liquid than other retirement accounts. Roth IRAs contain after-tax contributions that actually remain accessible to you at any time, without tax or penalty. The stipulations on withdrawals are only concerned with earnings in the account, not the principal amount. In order to withdraw earnings without paying a 10% penalty and income taxes, you must be at least 59½ and five years must have passed since you first began contributing. Continue reading...
What is a Home Inspection?
A home inspection is performed by a certified home inspector to determine the condition of a property and to find out if there any safety of compliance issues that the home or property may have. Home inspectors are typically hired by real estate professionals and homebuyers when a home is on the market. It is not required except for FHA loan termite inspection requirements, but it is always advisable for a potential home buyer. A home inspection is not to be confused with a home appraisal. Continue reading...
What should I look for in a good “Rent or Own a House” calculator?
The decision process to rent or own a home can be made a little easier with a good rent-or-own calculator. In the ideal “Rent or Own a House” comparison calculator, you should be able to input the following: an assumed appreciation rate for residential real estate in the area, the cost of maintaining an owned home, rent increases, and potential tax benefits of owning versus renting. Make sure to use realistic or even pessimistic assumptions on the inputs, because once time has passed there will be no way to fix overly optimistic assumptions. Continue reading...
What is an FHA Loan?
The Federal Housing Act of 1934 sought to make it easier for Americans to buy homes. It was believed and still is today to an extent that homeownership is a positive foundation for a healthy economy because it provides stability to communities, facilitating healthy family life, community involvement, and the development of businesses in an area where a community will support the business. The Federal Housing Administration runs the FHA loan program with the help of certified lending institutions. FHA loans are a way for lower income earners to be able to purchase a home. Continue reading...
What is Times Interest Earned (TIE)?
Times Interest Earned (TIE) is also known as the interest coverage ratio, is a cash-flow analysis that compares the pre-tax earnings of a company to the total amount of interest payable on their debt obligations. A healthy ratio indicates that a company will probably not default on loan repayments. To compute this ratio, divide a company’s annual income before taxes by their annual interest payments on debt obligations. This ratio is not concerned with the actual principal due on loans since the principal amount is already pegged to some of the assets on the books of the company, and other fundamental equations will already factor that in. Continue reading...
What is a time spread?
A ‘Time Spread,’ also called a Calendar Spread or a Horizontal Spread, involves the use of multiple options of the same type (either all calls or all puts), with the same strike price but different expiration dates. Generally traders will sell a near-term option (take a short position) and buy a far-term option (take a long position). The strategy is virtually identical whether calls or puts are used. Continue reading...
What is a Home Lien?
A lien is a legal filing through which a third party lays claim to certain assets, such as a person’s home, until an amount owed to them is paid. There are mechanic’s liens, judgment liens, and tax liens, any of which could be applied to a person’s home. A lien is a document serving as notice that a significant amount of money is owed to a third party and that certain assets of the debtor may be used to cover the obligation, becoming the property of the lien-holder if the debt is not paid in time. Continue reading...
What is a Credit Crunch?
A credit crunch is when access to liquidity dries up dramatically in rapid fashion, or becomes less accessible due to a spike in borrowing rates. Central banks will often step-in to try and curb the lack of liquidity by offering the markets access to cash at lower than market rates, in the event of a crisis. Perhaps the most famous credit crunch in history occurred in late 2007 and early 2008, when bank balance sheets became highly leveraged overnight due to mark-to-market accounting rules that were applied to the mortgage backed security portfolios on their balance sheets. Continue reading...
What is a Letter of Credit?
A letter of credit is a provided by a bank or financial institution on behalf of a borrower or buyer, to ensure the seller that payments will be made on time and in full. In the event that the buyer is unable to make payment on the purchase, the bank will have to step-in to cover the full or remaining amount of the purchase. Letters of credit are often used in international transactions to guarantee that payment will be received. Continue reading...
What is Credit Debt?
Credit debt or credit card debt is a type of consumer debt that is incurred through a short-term revolving loan facility. The most common of course is a credit card company issuing a card to a client to make purchases, with the client being responsible for minimum payments plus whatever interest rate applicable. Removing credit card debt from one’s balance sheet is often an effective way of improving your financial life. Continue reading...
What is a call time spread?
A time spread using call options is a strategy that buys and sells the same number of options with the same strike prices, but different expirations. Time spreads are sometimes called calendar spreads or horizontal spreads. They make money based on the time decay of the options being shorted. Two calls are used: one is shorted and one is purchased, and both have the same strike price and same underlying security. Continue reading...
What are credit derivatives?
Stemming from the hedging strategy of Credit Default Swaps, an entire speculative derivatives market continues to grow, in which tranches of credit risk and indices are traded. With the ballooning of consumer credit in recent years, it is only natural that a credit derivatives market would follow it. In essence, the risk associated with a loan or bond is separated from the actual asset and is passed on to a counter-party for a premium, and then other market participants become involved, perhaps in the form of futures contracts or other derivatives. Continue reading...
What is Bank Credit?
Bank Credit is the amount of loaned capital that an individual or business is capable of getting from a bank at a given time. This amount will be based on a series of evaluative metrics such as the total amount of assets an individual has, home equity, income, liquid net worth, work history, credit rating, and so forth. An individual can only borrow so much at a time, and, using these variables, a banker can essentially estimate how much credit could be extended that a given individual at that time. Continue reading...
Stocks and ETFs: AI Real Time Patterns
The best way to make money with pattern trading is to use our premium tool, Real Time Patterns (RTP Stocks, ETFs) You will get real time signals to buy and/or sell stocks or ETFs based on intraday price information. RTP analyzes 39 types of patterns for stocks, penny stocks, and ETFs in real time with the following time-frames: 5min, 15 min, 30 min, 1hour, 4 hours, and 1 day. To access, from the menu bar, simply click the Trading tab, then click on Real Time Patterns. Continue reading...
What is a Credit Spread?
Credit Spread is an indication of the default risk perceived in corporate bonds at the current time. The credit spread is the difference between the yield on the safest bonds and the riskiest bonds. How much does it cost corporations to issue bonds, in terms of the yield expected by investors in the current market? Typically, a higher spread indicates a more unstable economy. Buyers of large quantities of bonds tend to insure their purchases, and the cost of the insurance is usually reflected in so-called CDS's (Credit Default Swaps). The more expensive the CDS's are, the more risky it is to purchase the bond. Continue reading...
What is Bad Credit?
Bad credit implies that an individual or business has a low credit score or rating. Credit histories are reported and kept in publicly accessible databases. FICO (Fair Isaac & Company) is a credit rating institution that gives individuals a credit rating score based on reported credit histories. Scores range from 300-850, generally, but they also issue ratings based on auto loans and credit cards, which are on a scale from 250-900. Continue reading...
AAA/Aaa — credit rating
AAA — S&P / Fitch Aaa — Moody’s AAA/Aaa rated bond issues have an almost nonexistent chance of defaulting, according to the major ratings institutions that issue the ratings. AAA/Aaa is the highest rating a bond issue or company can get. In the aftermath of the 2008 financial crisis and recession, many companies, and the US Government itself, were downgraded from AAA to AA+. Only two companies in the US still retain the AAA rating: Johnson & Johnson and Microsoft. Continue reading...
B+/B1 — credit rating
B+ — S&P / Fitch B1 — Moody’s B+/B1 is within the range of ratings given to High Yield Bonds, also known as Junk bonds. B+/B1 is the 14th rating rating from the top rating of AAA/Aaa in the scales used by the Big Three credit ratings institutions, which are Fitch, Moody’s and S&P. They evaluate the fundamentals of companies, municipal entities, and their bond contracts to determine how much risk of default is present. The limit for the category of Investment Grade bonds is BBB-, and there are a few categories of BB above B. Continue reading...
B/B2 — credit rating
B — S&P / Fitch B2 — Moody’s A bond issue that has a moderate chance of default but a high yield might be given a B2/B rating by the major ratings institutions. Bonds are rated based on their risk of default by the Big Three ratings institutions: Moody’s, Fitch, and S&P. The latter two use the same symbols, so if the algorithms and analysts at the two ratings institutions come to similar conclusions, a company might have the same rating from each of them, such as the “B” in this example. B2/B ratings are the 15th ratings down the scale from the top rating of AAA/Aaa. Continue reading...