New homeowner can avoid debt and still spruce up her kitchen

Q. I am a first-time homebuyer. I bought my house earlier this year. I have a few big projects that I would like to tackle, mainly a kitchen remodel. I had hoped to pull equity from my new home. But since the turn in the market, I doubt I will see any appreciation.

I am interested in finding other loan options. I am aware of the $7,500 income tax credit for first-time buyers. Unfortunately, I closed on April 8, 2008, one day shy of the time period stated.

I am not sure where I can look for other options. I am hoping you can point me in the right direction!

A. Don't feel too bad about not receiving that $7,500 first-time buyer credit. For one thing, it's not a check for $7,500, but rather a lower income tax bill. Sure, that's better than a sharp stick in the eye, but it might not be a lot of immediate help with kitchen remodeling.

In addition, it's really an interest-free loan, not an outright gift. You'd repay it at the rate of $500 a year.

The direction I'd point you in right now is to forget about further borrowing. Enjoy your new house as is until things change. You'd be surprised how much a kitchen spruces up with just paint, better lighting or new cabinet hardware.

Q. Thanks for your help and prompt responses about the property we've been trying to buy on a short sale. The process lasted 31/2 months from initial offer to close. Not bad by short sale standards but a clear indication these properties are better suited for either a) investors, or b) someone with more patience than me. This experience has left me with a question: Why doesn't the government require buyers to pass a test that shows they understand the basic principles of their mortgage?

I admit it would be hard to administer, but there are certain things all people should know before they sign the dotted line (what will happen to a balloon rate or ARM, what fixed means, how escrows work and what penalties are). I feel part of today's mess with the housing market is because nobody required buyers to demonstrate knowledge of these concepts.

A. Interesting idea. In different areas, some housing grants on the local level do require homeowner education.

Q. I would like to refinance my conventional loan to a Veterans Affairs loan. Is it possible and what would be estimated costs of conversion?

A. For those who already have a VA mortgage, an inexpensive "streamline" refinance procedure is available. It won't work with your present conventional loan, though. You'd have to place a new VA mortgage with the usual closing costs.

Q. I'd like your opinion about a real estate transaction suggested by my husband. When we got married I kept the house I owned and I rent it out.

My husband is partial owner of a company. His company has offered to buy my house at slightly above its market value and then sell it back to me a few months later at a lower price. The company would use the loss somehow for tax purposes and I would make some profit. He thinks it is a win-win situation. Do you see any problem?

A. As a real estate investor, you should have your own attorney and accountant. Your husband's company must also. Those are the people to give you advice about the proposal. Offhand I see one problem: You will owe capital gains taxes, including some for recaptured depreciation, when you sell rental property.

Then again, I have the impression the IRS doesn't look kindly on what it calls "self-dealing." Is that what we're talking about here? I don't know. After all, I'm just a real estate writer. If the whole thing was suggested by one of those professionals, and if the others said it was a good idea, then you don't need my OK.

Q. My Realtor is horrible! Neither I nor the buyer of our home wants to deal with her. Are we allowed to fire her and complete the transaction on our own? We are in the early stages with our buyer waiting for loan approval.

A. Talk with the managing broker in that office who is responsible for your agent's actions and needs to know how you feel. Perhaps another agent in that company can take over to guide you through the rest of the transaction. You may still need expert assistance before it's all over.

• Edith Lank will personally respond to any questions sent to her at 240 Hemingway Drive, Rochester, N.Y. 14620 (please include a stamped return envelope), or readers may e-mail her at ehlank@aol.com.

2009, Creators Syndicate Inc.