First Time Home buyer Tax Credit Extended Into 2010!
Plus…A New Tax Credit for Certain Existing Home Owners!
It’s official. President Obama has signed a bill that extends the tax credit for first-time homebuyers (FTHBs) into the first half of 2010. This program had been scheduled to expire on November 30, 2009.
In addition to extending the tax credit of up to $8,000 through June 30, 2010, the extension measure also opens up opportunities for others who are not buying a home for the first time.
So Who Gets What?
The program that has existed for FTHBs remains intact with the one exception that more people are now eligible based on an increase in the amount of income someone may now earn.
Additionally, the program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.
Deadlines
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.
Higher Income Caps in Effect
The amount of income someone can earn and qualify for the full amount of the credit has been increased.
Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible.
Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.
Maximum Purchase Price
Qualifying buyers may purchase a property with a maximum sales price of $800,000.
First-Time Homebuyer Tax Credit – Frequently Asked Questions
Here are answers to some commonly asked questions about the tax credit.
What is a tax credit?
A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual’s primary residence.
What is the tax credit for first-time homebuyers (FTHBs)?
An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.
Who is eligible for the FTHB tax credit?
Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible. This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.
As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.
How do I claim the credit?
For those taking advantage of the tax credit in 2009, you may choose to either apply for the credit with your 2009 tax return or you may apply for the credit sooner by filing an amended 2008 tax return with Form 5405 (http://www.irs.gov/pub/irs-pdf/f5405.pdf).
Can you claim the tax credit in advance of purchasing a property?
No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.
Can a taxpayer claim a credit if the property is purchased from a seller with seller financing and the seller retains title to the property?
Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Examples of this would include a land contract, contract for deed, etc. According to the IRS, factors that would demonstrate the ownership of the property would include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property.
Are there other restrictions to taking the credit?
Yes. According to the IRS, if any of the following describe your situation, a credit would not be due.
• You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild.
• You do not use the home as your principal residence.
• You sell your home before the end of the year.
• You are a nonresident alien.
• You are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)
• Your home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
• You owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2009, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2006, through July 1, 2009.
Can you buy a home from a step-relative and be eligible for the credit?
Yes. Provided the person you are buying a home from is not a direct blood relative, the purchase would be allowed.
Can parent(s) who will not live in the property cosign for a mortgage for their child and the child that is a qualifying FTHB still be eligible for the credit?
Yes.
Can a separated spouse who has not owned a home for four years qualify for the FTHB tax credit if the spouse has owned a property anytime in the last three years?
No. However, the spouse may be eligible for the repeat buyer credit. The best path to take in any situation regarding income taxes is to speak with a professional tax preparer or CPA.
If you have any questions that fall outside the situations here, give me a call and if you do not have an accountant to speak with, I can refer you to one.
Michelle Bennett
Loan Officer
Bank of America
(818) 380-5220 direct
(818) 565-9456 cell
(818) 380-5101 efax
MichelleBennett914@gmail.com
www.facebook.com/michellebennett
“To give real service you must add something which cannot be bought or measured with money, and that is sincerity and integrity.”
First-Time Homebuyer Credit Questions and Answers: Basic Information
Attention first time buyers! Below are the details of the expanded tax breaks available to 2009 first time buyers. If we can assist you in your first purchase or you would like more information of these credits and other benefits of purchases right now, give me a call.
First-Time Homebuyer Credit Questions and Answers: Basic Information
Q. What is the credit?
A. The first-time homebuyer credit is a new tax credit included in the recently enacted Housing and Economic Recovery Act of 2008. For homes purchased in 2008, the credit operates like an interest-free loan because it must be repaid over a 15-year period.
The credit was expanded in 2009 for homes purchased in 2009, increasing the amount of the credit and eliminating the requirement to repay the credit, unless the home ceases to be your principal residence within the 36-month period beginning on the purchase date.
Q. How much is the credit?
A. The credit is 10 percent of the purchase price of the home, with a maximum available credit of $7,500 ($8,000 if you purchased your home in 2009) for either a single taxpayer or a married couple filing a joint return, but only half of that amount for married persons filing separate returns. The full credit is available for homes costing $75,000 or more.
Q. Which home purchases qualify for the first-time homebuyer credit?
A. Any home purchased as the taxpayer’s principal residence and located in the United States qualifies. You must buy the home after April 8, 2008, and before December 1, 2009, to qualify for the credit. For a home that you construct, the purchase date is considered to be the first date you occupy the home.
Taxpayers (including spouse, if married) who owned a principal residence at any time during the three years prior to the date of purchase are not eligible for the credit. This means that you can qualify for the credit if you (and your spouse, if married) have not owned a home in the three years prior to a purchase. If you make an eligible purchase in 2008, you claim the first-time homebuyer credit on your 2008 tax return. For an eligible purchase in 2009, you can choose to claim the credit on either your 2008 or 2009 income tax return.
Q. Can I apply for the credit if I bought a vacation home or rental property?
A. No. Vacation homes and rental property do not qualify for this credit.
Q. Who is considered to be a first-time homebuyer?
A. Taxpayers who have not owned another principal residence at any time during the three years prior to the date of purchase.
Q. When do I have to buy a new home to get the credit?
A. The home must be purchased after April 8, 2008, and before December 1, 2009, in order to obtain the credit. For a home you construct, the purchase date is considered to be the date you first occupy the home.
Q: How do I apply for the credit?
A: The credit is claimed on new IRS Form 5405 and filed with your 2008 or 2009 federal income tax return.
Q. Are there income limits?
A. Yes. The credit is reduced or eliminated for higher-income taxpayers. The credit is phased out based on your modified adjusted gross income (MAGI). For a married couple filing a joint return, the phase-out range is $150,000 to $170,000. For other taxpayers, the phase-out range is $75,000 to $95,000. This means that the full credit is available for married couples filing a joint return whose MAGI is $150,000 or less and for other taxpayers whose MAGI is $75,000 or less.
Q. I purchased a home that qualifies for the first-time homebuyer credit. I will be renting two of the bedrooms and reporting the rental income on Schedule E. Will I still qualify for the credit if I use the home as my principal residence?
A: Yes, if you meet all first-time homebuyer eligibility requirements. See Form 5405, First-Time Homebuyer Credit, for more details.
Q: If two unmarried people buy a house together, how do they determine how much each may take of the credit?
A: IRS Notice 2009-12 provides guidance for allocating the first-time homebuyer credit between taxpayers who are not married.
Q. I am a single co-owner of a home. How do I get this credit?
A. Depending on the year of purchase, you will claim the credit on either your 2008 or 2009 federal income tax return.
Q. I don’t owe taxes and/or my income is exempt from tax and I do not have a filing requirement. Do I qualify for the credit?
A. The credit is fully refundable and, if you qualify as a first-time homebuyer, having tax-exempt income will not preclude eligibility. Although there are maximum income limits for qualifying first-time homebuyers, there are no minimum income criteria. Thus, someone with no taxable income who qualifies as a first-time homebuyer may file for the sole purpose of claiming the credit for a refund.
Q. Does the first-time homebuyer credit apply to homes located in the U.S. Territories?
A. No.
Q. Would I be considered a first time homebuyer if I owned a principle residence outside of the United States within the previous three years?
A. Yes. A taxpayer who owned a principal residence outside of the United States within the last three years is not disqualified from taking the credit for a purchase within the United States.
Q. If qualified, are homebuyers required to claim the first-time homebuyer credit?
A. No.
Q. Who cannot take the credit?
A. If any of the following describe you, you cannot take the credit, even if you buy a new home:
• Your income exceeds the phase-out range. This means joint filers with MAGI of $170,000 and above and other taxpayers with MAGI of $95,000 and above.
• You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild.
• You do not use the home as your principal residence.
• You sell your home before the end of the year.
• You are a nonresident alien.
• You are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)
• Your home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
• You owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2005, through July 1, 2008.
CAMILO MORENO
Mortgage Professional
Purchase Money Specialist
Great western Bancorp Inc.
6033 W. Century Blvd # 700
Los Angeles CA 90045
310 216 1700 ext 116
310 216 1750 Fax
www.gwbmortgage.com
FHA Rehabilitation Loan Program (203k)
Here’s a briefly explanation of our FHA 203K rehab loans, please call me with any questions,
FHA Rehabilitation Loan Program (203k)
Funds for Handyman-Specials and Fixer-Uppers
The purchase of a house that needs repair is often a catch-22 situation, because the bank won’t lend the money to buy the house until the repairs are complete, and the repairs can’t be done until the house has been purchased.
HUD’s 203(k) program can help you overcome this obstacle by enabling you to purchase or refinance a property plus the cost of making the repairs and improvements in one mortgage. The FHA-insured 203(k) loan is provided through approved lenders nationwide and is available to persons wanting to occupy the home.
The down payment requirement for an owner-occupant (or a nonprofit organization or government agency) is approximately 3.5% of the acquisition and repair costs of the property.
The 203(k) loan includes the following steps:
• A potential homebuyer locates a fixer-upper and executes a sales contract after doing a feasibility analysis of the property with his/her real estate professional. The contract should state that the buyer is seeking a 203(k) loan and that the contract is contingent on loan approval based on additional required repairs by the FHA or the lender.
• The homebuyer then selects an FHA-approved 203(k) lender ( Great Western Bancorp Inc) and arranges for a detailed proposal showing the scope of work to be done, including a detailed cost estimate on each repair or improvement of the project.
• The appraisal is performed to determine the value of the property after renovation.
• If the borrower passes the lender’s credit-worthiness test, the loan closes for an amount that will cover the purchase or refinance cost of the property, the remodeling costs and the allowable closing costs. The amount of the loan will also include a contingency reserve of 10% to 20% of the total remodeling costs and is used to cover any extra work not included in the original proposal.
• At closing, the seller of the property is paid off and the remaining funds are put in an escrow account to pay for the repairs and improvements during the rehabilitation period.
• The mortgage payments and remodeling begin after the loan closes. The borrower can decide to have up to six mortgage payments (PITI) put into the cost of rehabilitation if the property is not going to be occupied during construction, but it cannot exceed the length of time it is estimated to complete the rehab.
Escrowed funds are released to the contractor during construction through a series of draw requests for completed work. To ensure completion of the job, 10% of each draw is held back; this money is paid after the lender determines there will be no liens on the property
For real estate purchasing questions please contact Igor Korosec (owner of Best Hollywood Homes) at 310-499-1305
For mortgage questions please contact the contributor of this article:
CAMILO MORENO
Mortgage Professional
Purchase Money Specialist
Great western Bancorp Inc.
6033 W. Century Blvd # 700
Los Angeles CA 90045
310 216 1700 ext 116
310 216 1750 Fax
www.gwbmortgage.com
First-Time Home Buyers Can Turn Tax Credit Into Cash
The $8,000 federal tax credit for first-time home purchasers is about to morph into a ready-cash down payment source, thanks to a federal policy change.
Buyers eligible for the credit who apply for mortgages insured by the Federal Housing Administration may soon also be eligible for bridge loans or cash advances — up to $8,000 — that they can use for the down payment, closing costs or other loan expenses pending receipt of their tax credit check from the IRS.
Housing and Urban Development Secretary Shaun Donovan announced the FHA change this month. The idea, he said, is to “monetize” — turn into immediately spendable cash — a tax credit that often is not received until months after the settlement date.
As many as half of all would-be first-time buyers do not have enough cash on hand for a down payment and closing costs, according to building and real estate industry estimates. By advancing these buyers as much as $8,000 at closing, many more would be able to afford the purchase.
Officials at the National Association of Home Builders say the bridge loan feature could double the total number of home purchases stimulated by the 2009 tax credit program to more than 300,000, depending on how many private lenders and state housing agencies participate.
Under guidance drafted by the FHA, all lenders approved to do business with the agency will be authorized to provide bridge loans at closing — secured solely by the tax credit the borrower anticipates receiving. State and local government agencies and nonprofit organizations approved by the FHA will be allowed to offer either bridge loans or second mortgages secured by the house.
Although the $8,000 tax credit carries the name “first-time homebuyer,” eligibility extends to anyone who hasn’t owned a principal residence during the past three years. The credit amount from the IRS is the lesser of 10 percent of the purchase price of the dwelling, or $8,000.
Donovan’s announcement came as a small but growing number of states started bridge loan programs to help stimulate home purchases. California has even created its own state-funded tax credit program — a 10 percent credit payable to the buyer over three years — but has limited it to newly built houses
Many mortgage companies, which do not have banking deposits to tap, will need a few weeks to prepare documentation for what will essentially be secured personal loans. Plus they’ll need to locate a source of funds for their advances. In the meantime, would-be buyers who believe they are eligible for the federal credit shouldn’t sit around. They should shift into high gear shopping for a house — the Cinderella date of Nov. 30 is looming — even if they will need a bridge loan or a cash advance to complete the deal.
Hope you find this information helpful, please call me with any questions or any financing scenarios for your clients.
Call real estate consultant Igor Korosec for more details on how to buy your first home right now.
For loan pre-approvals and questions please contact:
CAMILO MORENO
Mortgage Professional
Purchase Money Specialist
Great western Bancorp Inc.
6033 W. Century Blvd # 700
Los Angeles CA 90045
310 216 1700 ext 116
310 216 1750 Fax
www.gwbmortgage.com
Housing Prices INCREASING despite reduced demand
By Tim & Julie Harris – REO Specialists and owners of www.agentreosecrets.com
Interest rates are INCREASING for the best borrowers….
Rates on average 30-year fixed mortgages rose to 6.37 percent this week, about the highest in six years. More than 70 percent of new home loans are bought or guaranteed by the government-chartered companies, known as “prime” mortgages.
Higher rates for the safest borrowers may exacerbate the worst housing market since the Great Depression and thwart efforts by Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson to bring mortgage rates down. The slowest-growing economy since 2001 is already shutting out some buyers and increasing costs for those seeking to borrow with smaller down payments or below-average credit scores.
As rates rise, sellers are forced to lower prices for buyers seeking to make the same monthly payments. A rate of 6.37 percent equates to a monthly payment of $1,871 on a $300,000 mortgage, up from $1,739 when rates were as low as 5.69 percent in May, according to data from Bankrate.com in North Palm Beach, Florida.
Response to Igor Korosec regarding his support for permanently increasing the conforming loan limit
Dear Mr. Korosec:
Thank you for contacting me to express your support for permanently increasing the conforming loan limit. I appreciate the time you took to write and agree with you.
The Federal Housing Administration (FHA) plays an important role in insuring home mortgages for those in underserved communities. It is critical that FHA programs be modernized to provide more homebuyers and borrowers looking to refinance with the opportunity to obtain an FHA loan. This remains especially important in California where the cost of housing remains high. For homebuyers faced with so-called “jumbo loans” subject to higher interest rates, raising the government-sponsored enterprise (GSE) conforming loan limit will bring more liquidity to the market and lower interest rates.
On February 13, 2008, the President signed the Economic Stimulus Act of 2008 (H.R. 5140) into law. As the bill was being developed, I sent a letter to Senator Majority Leader Harry Reid (D-NV) expressing strong support for increasing the previous GSE conforming loan limit of $417,000 and the FHA loan limit of $362,790 to $729,750. While I am pleased that a temporary increase was included in the bill, the new loan limits will expire on December 31, 2008.
On July 11, 2008, the Senate passed the “Foreclosure Prevention Act of 2008,” (H.R. 3221) introduced by Senators Christopher J. Dodd (D-CT) and Richard C. Shelby (R-AL). Prior to Senate consideration of the bill, I urged Senators Dodd and Shelby to keep the FHA loan limit and GSE conforming loan limits at the current level of $729,750. The Senate passed its version of H.R. 3221 on July 11, 2008. While the Senate-passed version of the bill would only raise the loan limits to $625,500, the House-passed version would keep them at their current level. On July 11, 2008, I joined 52 members of the California Congressional delegation in sending a letter to leaders of the Senate and House leadership urging them to retain the $729,750 limits in the final version of this important bill.
I fully support the higher limit and will continue to push to make it permanent.
Thanks for writing.
Sincerely yours,
Dianne Feinstein
United States Senator
Senate passes foreclosure rescue
Did you hear the big news? Your Senate just passed the mortgage rescue bill to give homebuyers a TAX CREDIT of up to $8,000. This tax credit will stimulate home buyers to get off the fence and buy foreclosure resale deals now, which translates into shorter investor hold times, faster resales, and bigger banked profits.
Unlike earlier versions of this bill ($7,500 credits for foreclosure buyers only) this $8,000 tax credit is good for first time home buyers (or anyone who has not owned a home in the last 3 years). And it will be much farther reaching by affecting ALL types of homes.
Jul 11, 2008 5:55 PM (3 days ago) By JULIE HIRSCHFELD DAVIS, AP
WASHINGTON (Map, News) – A mortgage rescue to help hundreds of thousands of struggling homeowners avoid foreclosure and get more affordable, safer loans passed the Senate overwhelmingly Friday, but it faces a bumpy road amid continuing turmoil in the housing market.
The 63-5 vote reflected a keen interest by Democrats and Republicans to send election-year help to distressed homeowners with economic issues topping voters’ concerns.
The plan lets homeowners buckling under mortgage payments they can’t afford keep their homes and get more affordable mortgages backed by the Federal Housing Administration. Banks that agreed to take substantial losses on those distressed loans could avoid costly foreclosures and be assured of recovering at least some money.
The new program would let the FHA insure as much as $300 billion in new mortgages, helping an estimated 400,000 homeowners. Full Story
