Homebuyer Tax Credit

NEW UPDATES……

June 1st, 2009 HUD’s Development Secretary Shaun Donovan announced that FHA will allow homebuyers to apply the $8,000 first-time homebuyer tax credit toward the purchase costs of a FHA-insured home. The announcement details FHA's rules allowing state Housing Finance Agencies and certain non-profits to 'monetize" up to the full amount of the tax credit (depending on the amount of the mortgage) so that borrowers can immediately apply the funds toward their down payments.

Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5 percent of appraised value or their closing costs, which can help achieve a lower interest rate

 

HOMEBUYER TAX CREDIT OVERVIEW

The Homebuyer Tax Credit portion of the American Recovery and Reinvestment Act of 2009 provides an $8,000 tax credit to first-time home buyers (or buyers who have not owned a private residence in the past three years) who purchase a principal residence on or after January 1, 2009 and on or before November 30, 2009. The credit does not require repayment and will be claimed on a tax return to reduce the purchaser's income tax liability. If any credit amount remains unused, then the unused amount will be refunded as a check to the purchaser.

What are the important points to know?

• The Tax credit has been raised from $7,500 to $8,000 or 10% of the purchase price (whichever is less).
• The credit does not require repayment.
• First time homebuyers or buyers who have not owned a home in the last 3 years are eligible.
• To qualify, a single person must make less than $75,000 a year in income.
• Joint ownership must make less than $150,000 a year in income to qualify.
• Qualified buyers must purchase home on or after January 1, 2009 and no later than November 30, 2009.
• The property must be the primary residence.
• Purchaser must remain in home for 3 years or the credit will be recaptured at the sale of home.

Are there restrictions for the home I want to purchase?

• The primary residence can be a condo, single family detached, co-op, townhouse or something similar.
• The home must be located in the United States.
• Vacation homes and rental properties are not eligible.
• For new construction, the "purchase date" is the date you occupy the home. So the move in date must be before December 1, 2009.

Who is not eligible for the credit?

• If your income exceeds the phase-out range. This means joint filers with Modified Adjusted Gross Income (MAGI) of $170,000 and above and other taxpayers with MAGI of $95,000 and above.
• You may not buy your home from a close relative. This includes your spouse, parent,grandparent, child or grandchild.
• Vacation homes and rental properties are not eligible.
• If you stop using your home as your main home.
• If you sell your home before the end of three years.
• If you are a nonresident alien you are not eligible.

Recapture 3 year residency

• If the home is sold prior to three years of ownership, the tax credit must be repaid at closing
• This provision is designed to prevent flipping homes in order to get the credit.

Other provisions

• Purchasers who utilize state/local revenue bond financing can now use the credit.
• Purchasers who bought before January 1, 2009 and received the previous $7,500 tax credit are still subject to the terms of that repayable credit.

When can I claim the Credit?

• It can be claimed on your 2008 Tax Return (to be filed by April 15, 2009), an amended 2008 Tax Return, or your 2009 Tax Return.

 

Source: National Association of REALTORS®

Content 2

Even veteran mortgage brokers agree that it is important nowadays for people who want to get mortgages and loans through brokers to get good ones. Most brokers who have been in the business twenty to forty years ago admit that the mortgage and loan scene at present times is far different from the one twenty to forty years ago.

 

Before, traditional mortgages come in fixed rate packages with the same price and the same length of paying period. Now, it's different. Leonard Wineburgh, a broker and president of Chicago-based Dwinn Shaffer & Co tells us why. Interviewed in a recent article in the National Real Estate Investor, he said that there were no prepayment penalties before because these weren't existing yet. Aside from this, he claims that there were only a handful of lenders to work with and searching for a loan was not as complex as it is now.

 

He also noted that loans today have different kinds of provisions that a mortgage broker must work with aside from documents such as appraisals, guidelines from Environment Protection Agency, engineering reports and other paper works that weren't available years ago. He said that loan business is very sophisticated nowadays.

 

Sophisticated and always changing, yes.  Loan companies keep on churning out packages and programs that offer several options and choices in mortgages. Which is a good reason why borrowers should seek a good mortgage broker.

 

Another reason why a borrower needs a good mortgage broker is to spare him from headaches and other expenses. With work and families taking up our time, it's difficult to keep up with interests and rates that change as frequently as the weather aside from keeping track of lenders that could offer us the lowest and best deals.

 

These two facts are the reasons why a mortgage broker comes in. A mortgage broker could find the lowest rates easily for their clients with their access to numerous lending contacts. Aside from this, they can negotiate provisions that could be bothersome for us to do personally and find stop-gap financing should a traditional loan comes up with some problems. A mortgage broker can also ensure that the closing for the loan or mortgage comes on schedule following the contract.

 

But, before getting a mortgage broker, it is important to remember that a broker is not necessarily a good broker.  Some deals can either make or break depending on the broker you choose. Here are some guidelines provided by MortgageFit.Com that can help you decide the broker who is right for you:

- The mortgage broker must be affiliated to many lending institutions and should be licensed.

- The mortgage broker should be working at a reputable institution. The name of the company  could be checked at the Best Business Bureau or the Chamber of Commerce.

- The mortgage broker should provide you with the names and contact numbers of people who can be contacted for credibility check.

- The mortgage broker should ask you what you want on your loan. He must ask you questions rather than on giving you lots of facts. He should prioritize what you need and should come up with ways to fit this with various deals available in the industry.

- The mortgage broker should have with him various lists of deals that he can offer. This is a good quality because if not, you might get the best deal.

- The mortgage broker should be knowledgeable and competent with everything that concerns a mortgage or a loan.

- The mortgage broker should be paid on commission which will make him or her work harder for you.

- It is recommended that the mortgage broker should have a local branch near you for it to be accessible should there be any problems with your loan.

 

If you find a mortgage broker who has all these qualities, then you need not worry. You will be in safe hands while dealing with your mortgage.

A mortgage loan is no small thing. It is a long period commitment that usually stays with you 15 to 30 years of your life. Because of this, so many important things have to be thought and planned about and so many factors will be decided whether you will get a mortgage loan or not.

 

These factors can be divided into two. The first one would be those that you need to think about before taking in a mortgage loan and the second would be the factors about you that lenders have to consider before approving your mortgage loan.

 

Let us first consider you.

 

Before you can choose the mortgage plan for you, you have to review your financial situation at present and project if your housing needs might change in the future wile you are still tied with your mortgage loan. You can ask yourself these questions to help you with this:

- How long do you think do you plan to stay in your house?

- Are there expectations for you financial income to increase over time which could allow you to pay more for your mortgage loan?

- What do you think are the significant expenses you might make in the future that could affect your capability of paying your monthly interest? College tuition fees, investing in small business plans, etc are examples of these.

 

The next step is to assess the level of risk you are ready and comfortable in taking. Remember that a mortgage loan takes a long time to close and you have obligations to pay for it seriously and constantly for that length of time. Decide on what mortgage rate you think you can work with. Adjustable rate is risky since interest rates change increasingly which is why it is best to project your income if it can increase over time should you take this. Fixed rate will always be safer because it is stable.

 

The third step is to determine the length of period you want to have the loan. Most terms are 15, 20 and 30 years. Usually, a shorter term means higher monthly payments. This is good for people whose incomes are higher than average and are stable. But, most average income people go for long term periods because aside from a smaller monthly bill that can fit their budgets, mortgage plans like this bring forth assurance to loaners.

 

The last step is to assess the closing costs of a mortgage loan and the lowest interest rate that you can get.

 

Now, let us consider the factors that might affect the approval of your mortgage loan from lenders. There are ten of these which are the following:

 

1. Credit report. The three major credit bureaus: Equifax, TransUnion and Experian provide your credit report. It is important to review these for errors because according to statistics, errors are present in 40 percent of credit reports. These errors can figure in your mortgage loan which would lead you to get higher interest rates or not get the mortgage loan at all.

 

2. Credit Cards. Lenders become suspicious when you apply for new credit cards or close current accounts when you are applying for loan mortgage.

 

3. Outstanding Credit. This figures much in the approval of your mortgage loan. Pay off all credits before applying for the loan.

 

4. Income. A steady income will give you plus points in securing a mortgage loan so it is recommended that you should avoid changing jobs or quitting your job before applying for a mortgage loan.

 

5. Available funds. Make sure that you do not make purchases that could consume your available funds before buying a home. Aside from a down payment, you have to consider other expenses such as closing costs.

 

6. Down payment A bigger down payment assures you of lower interest rates on the mortgage loan.

 

7. Interest rate. This determines how much you will have to pay each month. It is best to consider "lock-in" fees to guarantee yourself that you still get the advantage should interests rise in the market. Remember that interest rates continuously change.

 

8. Price Range. From your current financial assessment of your situation and by figuring out your debt-to-income ratio, determine the price of your home. A lender will not approve of a mortgage loan whose price you cannot meet.

 

9. Lender. Know your lender and inquire about the statistics concerning those mortgage loan applications they turned down and approved. According to financial experts, it is not a good sign if the lender denies 20 percent of those who applied for a mortgage loan. 

 

10. Your honesty. Be honest when filling out all the information the lender requires from you to increase your loan approval. Beware that providing inaccurate information may backfire on you and no lender will be willing to work with you.