Texas Home Loan Blog: January 2009

Let's first define "First-Time Homebuyer".  Actually, let's define what the heck I'm addressing in the first place.  It's the First-Time Homebuyer Tax Credit.  I trust you've at least heard about it and if not... no biggie... I will give you some of the talking points and the direct address to the site momentarily.

The whole concept of "First-Time Homebuyer" can be a tad misleading for some of you.  You are considered a first-time homebuyer (under this tax credit) if you have not owned another home at any point in time during the three years prior to the date of purchase. 

So what is this Tax Credit all about?

• It acts like an interest free loan because it must be repaid over a 15-year time frame.  If you die, don't worry about it as long as you filed your taxes individually.  If you filed a joint return, it's up to wifey or hubby to pay this interest free loan.  Death, like life & love, can cost money:)
• This only applies to primary residences in the United States of America.  Sorry, the vacation house in Greenwich, Connecticut doesn't qualify.  As far as that Villa in Italy, count that out as well.  Feel free to drop me a bottle of Chianti in the mail, though.  It's got to be your home... the very roof over your head.  On a personal note, I do believe we'd be better off if when buying a home... we'd consider it more than an "investment".  It's where you live folks!  Investments, for most of us, happen over time.  I ain't (love that word) no day trader or speculator.  And I never will be. 
• What's the time frame?  You buy the home after April 8th, 2008 and before July 1st, 2009.  Let's face it, we have low interest rates and a large inventory and considering it is a buyers market in a lot of areas... it may be a damn good time to go ahead and buy that home.  Historians may look back to this period of time and wonder what the fuss was with not wanting to committ, waiting for a more opportune time.  There may be NO more opportune time than now.  Of note, the preceding is a sales pitch delivered by folks to increase business and consumer confidence.   The same can be written about all the bad news flying around.  Don't think that news organizations aren't rolling in dollars about how much "bad news" is being reported.
• How much is the credit?  Quite simply, 10% of the purchase of the home, a maximum available credit of $7500.00 worth of dead presidents.
• How will the IRS know if someone sells their residence before the 15 years are up?  I gotta laugh at this question, though it isn't a stupid one.  In my mind, the only stupid question is one not asked.  To answer this, the website says the following: "Through both self reporting and third-party information."  Right, how ripe.  Without imposing political beliefs upon the masses, they will know.  While I believe in conspiracies, this isn't one in my book.  This is intelligence, the right kind.  I know folks who blatantly took advantage of the system, good for you.  Just don't bitch because we are all in a bundle.  YOU were just as responsible...
• It's repaid, but how?  After the second year of claiming the credit, you must repay that interest free loan.  From what I've read, you will be repaying as an additional tax on your returns for the next 15 years.... $500.00 a pop.

One more thing, before I present the second thing which will end up "lastly".  Real Estate Investors have been stifled because of all these happenings in the Mortgage World.  Personally, I think that is a mistake.  They say you can only own so many properties and your credit score has to be this and your mother has to a direct decendent of Henry the freaking 8th?   Some folks invest in Real Estate for a living, don't ignore them.  Keep that in mind PMI Companies and Credit Scoring Agencies, because I bet ya that you won't be running this industry much longer.

Lastly, and my English Teacher hated starting a sentence like that which is one of the reasons I just did... it's a buyer's market.  That doesn't mean it is right for you, yet it is most certainly something to explore.  In a few years, if you didn't pounce on this, you may just be making someone else a lot of money... who owns your home. 

Direct website @ http://www.irs.gov/newsroom/article/0,,id=186831,00.html

Have some fun @ http://www.youtube.com/watch?v=tfBoMV-HIP4

 

Sardi

 

Everybody needs to Move it, Move it, Move it!!!

'Cause minimum credit scores are going UP! 

I'm not talking about folks having BAD credit and having trouble buying a home... but I have a borrower right now that has a 618 score - NO LATE PAYMENTS.  He has 20 years of credit history...

He owes Best Buy and Macy's and Room to Go (And Amex, and Bof A for 2 cars, and Wachovia for a mortgage or 2).  NO LATES. But his middle score is 618.

Well, according to our friends at Wells Fargo - pretty soon this borrower (who makes over 150K a year) will not QUALIFY to purchase a home!  Even though he has $98,000 liquid.  His ratios are 18 / 31.

SunTrust has ALREADY put this rule into play - and now Wells.  PLUS, the pricing for these borrowers (at other places) is already AWFUL!

This is SIGNIFICANT.  This is not just for Conventional loans.  I'm talking USDA, VA, FHA -

NOBODY RIDES if their score is less than 620!

(at least not if they are getting their loan with SunTrust or Wells Fargo!)

I know it won't make any difference, but I still called my Congressmen yesterdayand let them know this is a HUGE part of the homebuying market that is now EXCLUDED from purchasing a home!

If you want more information on how to raise your FICO / Credit Score, check out our site dedicated to helping you out! Steve and Eleanor Thorne, Meridian Residential

 

 

The government is handing out money as a long term loan.  Take advantage of this!!!

 

The Housing and Economic Recovery Act of 2008 produced the tax credit for First Time Homebuyers. In this case, to be eligible for the tax credit, a first time homebuyer is defined as : someone who had not owned a home from July 2, 2005, through July 1, 2008. In order to become eligible, you have to buy your home after April 8, 2008, and before July 1, 2009. I will go over some of the other guidelines later.

 

 

When it comes to buying a home, you can't borrower money to use as a down payment or for closing costs. And you can get county or state assistance under certain programs or grants, to use for your new home purchase. But when it comes to FHA loans, you can actually get 100% gift monies from a relative. It's called a gift because HUD doesn't want the burden of you having to pay back a loan after buying a new home. Hence why this tax credit is still a great way to help you get into a new home prior to July 1, 2009.  And you can still get up to 6% seller help even if you were to get a 100% gift from a family member.

 

 

So, how does this tax credit work?  Please read below for some details :

 

• The maximum tax credit is $7,500 for either a single taxpayer or a married couple filing jointly. It is 10% of the purchase price. So in order to get the maximum credit, the purchase price must be $75,000 or more.

• This credit is an interest free loan and the credit must be repaid over a 15 year period. This loan must be paid back by including one-fifteenth of the amount credited, or $500, as an additional tax on their 2010 return.

• There are income restrictions which can range from $150,000 to $170,000 for a joint return or from $75,000 to $95,000 for a single return. There are other factors involved when determining the actual income restrictions.

• This credit can't be used if you are buying a home from a close relative, which is to include a spouse, a grandparent, child, or even a grandchild.

• You can only use this tax credit for your primary home, not for a second home or an investment property.

 

There are some other restrictions, examples, and explanations to how this tax credit can work. For more information, please read : Tax Credit for First Time Homebuyers

 

 

An example of how this tax credit could work :

If you were to receive a $2,000 refund when filing your return, and you were eligible for an additional $7,500 if you choose to receive this credit, this means that your refund will now be $9,500 instead. On the flip side of things, if you were to owe $2,000, you would actually get back $5,500 instead of owing money.

 

 

One thing to keep in mind.... you can use this money for anything. How could you use this money?

• You could use it to repay other loans or debts.

• To invest in the market or CD's.

• To buy another property such as an investment property. But you would need to understand the seasoning requirements when putting this kind of money into your bank account.

• Use the money to fix up your new home that you just bought.

• To start a business.... to help a business grow.

• And as mentioned, FHA loans allow for 100% gift monies from a relative. Maybe you could thank them later on and give them the money back down the road. I know I wouldn't want this hanging over my head. As of January 1st, 2009, when buying a home with a FHA mortgage, you now need 3 1/2 percent down of your own money (gift monies allowed).

 

 

Lastly, talk to your tax accountant when it comes to the specifics of this tax credit and in regards to gifts and what is allowed before being taxed.

 

 

Happy house hunting. For a creative way to help you finance your new home, please don't hesitate to contact me. There are so many options out there and you need a creative loan officer that knows more than just the basics.

 

 

 

- FHA Loans - USDA Loans - Conventional Loans - VA Loans -

Experience & Knowledge at its BEST !!!

 

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For more information on FHA loans, please go to this link. : The FHA Expert

For more information on how you can obtain your dream home, please click here : Mortgage Financing Options

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags

 

Copyright © 2008 by Jeff Belonger