Updated information on tax credit extension until June 30, 2010

Details of the first time home buyer tax credit have been released. This is probably the most positive piece of news in our industry in years!!! Here are the highlights:

• The Tax Credit is the lesser of 10% of the purchase price or $8000
• The Tax Credit is “real money” that you get as part of your tax refund
• This credit does not need to be repaid if you live in the home for 3 years (the big difference from the previous version)
• A First Time Home Buyer is defined as someone who has not owned a Primary Residence in the past 3 years
• Once you marry a homeowner you automatically become a homeowner regardless of who is on the title and the loan
• The credit begins to “phase out” for Singles with income between 75k and 95k and Married between 150k and 170
• If Mom and Dad (that own a home) Co-Sign for their child to help him qualify, the child can still take the Tax Credit. Perfect for an FHA loan!
• Buyers can take the credit on their 2008 Tax Return if they purchase prior to filing their 2008 Taxes. If you have already filed, you are allowed to file an amended 2008 return to get the credit
• This Tax Credit is a Tax Related issue and therefore you should consult a tax professional for advice.

A good website for info is www.federalhousingtaxcredit.com

In understanding the local economy and homebuyers needs CFS is increasing their FHA loan limits today February 25, 2009.
Maricopa County, AZ loan limits:
• Old – $271,050
• New – $346,250
Keep in mind FHA loans only require 3.5% down payment and this down payment can be gifted by family members.

Last week President Obama unveiled a housing plan, that is suppoed to target up to 9 million borrowers, here is some of what we know is on the table and who it will help.

The new $75 billion plan basically has to two basic solutions:

First, the government is aiming to help more homeowners refinance to take advantage of new low interest rates.

Second, it provides incentives to lenders and servicers to restructure mortgages to more affordable levels.

The official guidelines won’t be unveiled until March 4, but here’s how to know whether you’ll likely be able to take advantage of either of these options.

Homeowners looking to refinance
The first part of the program targets borrowers who have kept current on their mortgages. Many of the homeowners in this group have been unable to lower their housing costs through refinancings because of falling home prices.

Currently, if you’re underwater on your mortgage, owing more than the home’s market value, you will not qualify for a refinance. However, the new guidelines in this program should help some of underwater borrowers. Homeowners who owe up to 105% of the value of their home will be eligibile to refinance with the new program. In addition, there will be no prepayment penalties and perhaps even no mortgage insurance. But the current loan must be owned or backed by Fannie Mae or Freddie Mac.

Borrowers Helped By New Program
•Haven’t fallen behind on their monthly payments.
•Owe more than 80 percent of their homes’ currently appraised value.
•Owe no more than 105 percent of the currently appraised value.
•Have mortgages that are owned or guaranteed by Fannie or Freddie.

Borrowers Not Helped By New Program
•Have fallen behind on their monthly payments.
•Have Jumbo Mortgages
•Owe more than 105 percent of the currently appraised value.
•Have mortgages that are not owned or guaranteed by Fannie or Freddie.

Mortgage modification
The second part of the plan addresses homeowners in default or at risk of default. Allowing them to qualify for loan modifications, which restructure the terms of loans.
Anyone with high combined mortgage debt compared to income or who is underwater may be eligible for a loan modification.
Borrowers with high levels of other debt, such as car loans and credit card debt exceeding 55% of their incomes, may still qualify for a modification but they’ll be required to accept debt counseling in a HUD-certified program.
If borrowers qualify, their servicer or lender will reduce their monthly mortgage payments to 31% of their gross income.
The payment would stay there for five years and then gradually revert back to the conforming loan rates in place at the time.
The reduction would come mostly through interest-rate reductions, though in some cases, principal reduction also would be an option.
Borrowers would also receive incentive bonuses of up to $1,000 a year for five years for making payments on time.
Borrowers Helped By New Program
•At risk borrowers who have or are close to defaulting on loan.
•Owner Occupied home loans.
•Homeowners who have jobs and steady incomes.
Borrowers Not Helped By New Program
•Investors who have loans not on a primary residence.
•Modifications that will cost more than foreclosure
•Homeowners who do not have any or little income.

After debate over the final dollar amount, the new economic stimulus bill awaiting President Obama’s signature on Tuesday will contain an $8,000 tax credit. First-time buyers can claim the credit worth $8,000 or 10% of the home’s value, whichever is less either on their 2008 or 2009 taxes.

This credit will be refundable, meaning tax filers see a refund of the full $8,000 even if their total tax bill – the amount of withholding they paid during the year plus anything extra they had to pay when they filed their returns – was less than that amount.

To qualify for the credit, potential home owners must have purchased January 1, 2009 or later and will have up until November 30, 2009 to close on their new home. Buyers may not have owned a home for the past three years to qualify as “first time” buyer. They must also live in the house for at least three years, or they will be obligated to pay back the credit.

Additionally, there are income restrictions: To qualify, buyers must make less than $75,000 for singles or $150,000 for couples. Although higher-income buyers may receive a partial credit.

In addition, applying for the credit will be easy as home buyer will be able to just claim it on their return. No other forms or papers have to be filed. Taxpayers who have already completed their returns can file amended returns for 2008 to claim the credit.

This new plan improves on the current $7,500 tax credit, which was passed in July and was more of an interest free loan than an actual credit. But it did not go as far as a proposed a $15,000 non-refundable credit for all homebuyers.

One of the most talked about new proposals to hit the home buying industry has been that of a $15,000 home buyer tax credit. This credit was part of added amendment to the Senate’s version of currently proposed economic stimulus package. This new provision would provide a tax credit of as much as $15,000 or 10 percent of the home’s purchase price, whichever is less, to anyone buying a primary residence during a one-year period beginning on the date of enactment. Here is what we know so far about this proposal.
DO HOME OWNERS WHO BOUGHT HOMES ALREADY AND QUALIFIED FOR THE $7,500 TAX CREDIT, QUALIFY FOR THIS $15,000 CREDIT AS WELL? – Most likely the answer is no, because the effective date of the new amendment is effective date the new provision will be enacted. This means that if you already purchased a home, you will probably not qualify for the new program.
WHAT WOULD HAPPEN TO THE EXISTING $7,500 TAX CREDIT? – The current $7,500 new home buyer tax credit will be replaced by the proposed $15,000 credit and this new provision applies to all home purchases. So essentially, no one will be able to take the $7,500 tax credit any longer once the new credit is enacted.

WILL THIS ACTUALLY PASS? -We should know this answer very soon as it is a component of the new version of the economic stimulus package. The House of Representatives has already passed its version of the stimulus bill, and the White House is putting pressure on the Senate to do the same. However, there are still hurdles to go through to pass the $900 billion package. However, chances are that if and when a version of this stimulus package is passed, this new home buyer tax credit will remain in the bill and passed into law.

DOES THE NEW CREDIT HAVE TO BE PAYED BACK LIKE THE CURRENT CREDIT? – In the case of the new $15,000 home buyer tax credit, it will not have to be paid back. This will be in contrast from the current $7,500 first-time home buyer credit, which was essentially an interest free loan.

WHAT TYPES OF RESTRICTIONS ARE ON THE NEW HOME BUYER TAX CREDIT? – The new tax credit would be limited to primary residences, but will not come with an income restriction. In addition, you must occupy the home for at least two years as your primary residence and will apply to any home, meaning a condo, a house, foreclosed, new or previously owned property.

WHAT IS THE TAX LIABILITY RESTRICTION? – One potential drawback to the $15,000 tax credit for lower income families is that the tax credit will also correlate to your amount of tax liability. Your tax liability is the amount of taxes paid out to the government, after your deductions. For example, if you had $9,000 withheld from your paycheck for the entire year and received a $1,000 refund at the end of year from the government, your tax liability would be $8,000 and you would be able to only receive that amount back from the tax credit. However, you could also split the credit over two years, meaning you could take the additional $7,000 in left over credit the following year if you had that much tax liability the following year.

IF I PURCHASE A HOME IN 2009 CAN I TAKE THIS CREDIT FOR MY 2008 TAXES? -You will be able to take the credit toward your 2008 taxes, even if you purchase the home in 2009.

The recent talk of the town in the mortgage and real estate industry has been lower home loan rates. Though rates currently sit above the recent lows, there has been a substantial enough move downward in interest rates to propel many new applicants to attempt to refinance their current home loans. As well as to initiate home buyers to make a move to purchase.The question may now be is it the right time for you to make a move as well?

Home Purchase
There are many opinions out there in regard to the purchase of a home and the current real estate market. With much of what is being reported, just speculation at this point. What we do know is that interest rates are near historical lows currently and the long term probability of them staying low, say this time next year is perhaps unlikely.

Also, the $7,500 first time home buyer tax credit is due to expire on June 30, 2009 and there have been no talks of an extension on this one time credit.
With the market full of low priced properties and opportunities for deals on many properties, such as bank owned homes. There is also the ability for home purchasers to drive down their new payments even lower.

Verdict: If you are a home a buyer and looking to purchase a home to live in, now may be the time to purchase to take advantage of low rates, low prices and tax advantages while they still exist.

Home Refinance:
As interest rates have dropped the amount of home loan applications has swelled with home owners looking to refinance into a lower interest rate loan, with a fixed term. The question is, is this the right time to refinance for you?

First, you must make sure that you can qualify for a home loan. Mortgages are not impossible to obtain in today’s market, but you must be able to document income, have a decent credit score and some equity in your home to qualify for the best interest rates.

Second, if you have an adjustable rate mortgage, now is the time to refinance out of it into a fixed rate loan. Even if you still have a little time left until the adjustment period of your loan begins, there is no telling what will happen with rates going forward. And history tells us that rates will rise again sooner or later, making this the time to refinance if you have a fixed rate loan.

Additionally, if you are looking to take out a new mortgage to consolidate debt, now is an opportune time. You will pay a slightly higher rate for this type of mortgage, but that slightly higher rate may be even higher if you wait, since Fannie Mae and Freddie Mac have implemented additional price adjusters soon to hit these types of mortgages.

Finally, if you are just looking to refinance for a lower interest rate you must first evaluate your situation. All refinances will include some form of closing costs or if not you will pay a higher interest rate for a no cost loan. Most refinances will involve closing costs for the lowest rates and as such you must factor the cost of the refinance, against the monthly savings and the amount of time you will stay in the home.

For instance, if you were to recoup the cost of the loan over the next 12 months (via the monthly payment savings) and planning on staying in your home for the next five years, than this would be a worthwhile refinance.

Verdict: All situations will vary, but if you are looking to refinance from an adjustable rate loan to a fixed rate, do a debt consolidation loan or can recoup the cost through monthly savings in a sufficient time frame, then a refinance may be the best option for you.

There are no clear cut answers as to where interest rates are heading going forward. However, if the mortgage market has taught us anything it is that is unpredictable in nature. Given that fact, it may be time to look into taking advantage of low interest rates while they last.

In today’s real estate market, the amount of foreclosure and short sale properties in the marketplace for sale has grown to a level where it cannot be ignored for new home purchasers. Often times you will even find some of these properties in very good condition. However, other times, the properties will need some work in order to bring them up to an adequate and proper status for the new buyer. For these instances there is one loan that home buyers can turn to that will actually allow them to build the costs of these repairs into the financing of the home purchase. That loan is the FHA 203K or the FHA Streamline Repair loan. Here are the basics you need to know about the program.

Purchase or Refinance
The FHA 203K loan is available for the purchase or refinance of a property and takes into account the purchase price or payoff (in the case of a refinance) and then adds in the cost of repairs to create your new loan balance. The repairs are then completed after the loan closing.

Property Value
The property must be appraised based on what the property will be worth after repairs. This value will then be used for a property value and the loan to value will be based off of the new loan value.

Streamlined
The maximum repair amount allowable is $35,000 with no minimum amount that can be taken for repairs. The funds will be escrowed at closing and released as the work is completed. A general contractor is not needed, but the work must be completed by a licensed professional.

Eligible Improvements
Eligible improvements include: repair/replacements of roofs/gutters, hvac, plumbing, electrical, flooring, painting, appliances, patios, porches, driveways, windows, doors, septic systems and other common repairs.

Ineligible Improvements
Ineligible improvements include: complete remodeling, new construction, structural issues, landscaping. As well any repairs taking longer than three months or not starting within 30 days of closing are ineligible.

These are just some of the basics of the FHA 203K Loan. In today’s market this can be a very important loan program for both new buyers and existing home owners. If you have a property that needs minor repairs, this may be the loan for you.