Tax Credit for Homebuyers - Extended and Expanded

11/6/2009 - President Obama just signed a bill to extend the tax credit for first-time homebuyers through June 30, 2010. The bill also opens up opportunities for others who are not buying a home for the first time. To learn what the new tax credit means to you, please take a look at the concise overview below.

TAX CREDIT OVERVIEW: Who Gets What?

First-Time Homebuyers (FTHBs): First-time homebuyers (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000.
Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

Current Owners: The tax credit 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.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

What are the New 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.

Tax Credit Versus Tax Deduction
It’s important to remember that the tax credit is just that… a tax credit. The benefit of a tax credit is that it’s a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a first-time homebuyer were to owe $8,000 in income taxes and would qualify for a tax credit of $8,000, she would owe nothing.

Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little income tax liability. For example, if a first-time homebuyer is eligible for a tax credit of $8,000 but is liable for $4,000 in income tax, she can still receive a check for the remaining $4,000!

Higher Income Caps
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 sale price of $800,000.
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Remember, the new tax credit program includes a number of details and qualifications. For more information or answers to specific questions, please call or email me today.

In addition, you may be able to benefit from additional housing related provisions, including the following:
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Tax Incentives to Spur Energy Savings and Green Jobs
This provision is designed to help promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation.

Landmark Energy Savings
This provision provides $5 Billion for energy efficient improvements for more than one million modest-income homes through weatherization. According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills.
Repairing Public Housing and Making Key Energy Efficiency Retrofits To HUD-Assisted Housing
This provision provides a total of $6.3 Billion for increasing energy efficiency in federally supported housing programs. Specifically, it establishes a new program to upgrade HUD-sponsored low-income housing (for elderly, disabled, and Section 8) to increase energy efficiency, including new insulation, windows, and frames.

Expanding Housing Assistance
This provision increases support for several critical housing programs. It includes $2 Billion for the Neighborhood Stabilization Program to help communities purchase and rehabilitate foreclosed, vacant properties.

As always, if you have any questions about your specific situation or would like to discuss how you may benefit from this program, please call or email me. I’ll be happy to sit down with you.

Third Time's A Charm

With as many refinance transactions that have occurred since December of '08 I sometimes wonder if there is anyone left who didn't do it when they had the chance. I know, though, that there are a lot of people who have not yet taken advantage of the lower rates we've experienced this year because they were holding out for something even better or were just too plain busy.

Well, the writing is on the wall and this could be our "last call". As I mentioned in my last post about the Fed's comments from their most recent meeting, we are expecting rates to start going up as they curb their buying of the mortgage backed securities (MBS). Without their high-level purchases we can expect a lot more volatility in the bond market which will directly impact the mortgage rates we're able to offer. As the program phases out at the end of the first quarter of 2010 we should see 30 year fixed rates back into the 6% range. While historically speaking a 6% rate is great, opportunities to refinance into lower rates are running out.

The chart below shows activity in the bond market over the last year (Remember, the higher the price for the bond, the lower the mortgage interest rate. They work inversely of each other). You can see where it all began back in December 2008 when the Fed announced they would be buying up billions in mortgage backed securities. That got another boost in Spring, when most of these refinances took place and now we've found ourselves again at these same record pricing. So, perhaps the third time will be the charm for those who haven't acted yet.

Of course, these great rates also mean that this is a good time to buy a home. I've been beating that drum for awhile as we've discussed the first time home buyer tax credit and affordable home prices. We are hoping for an extension and expansion of that program to include ALL buyers but still have no official word. You can count on me to provide you with the facts as they become available.

Meanwhile, should you or anyone you know still be thinking about restructuring their mortgage, primarily to take advantage of these super-low rates while they are available, please call and I'll give honest advice as to whether there is a benefit. It would be my honor to be of assistance.

For more information on these great opportunities click on this link for my monthly "Views You Can Use" newsletter.

http://www.mmgweekly.com/m/index.html?SID=f073cd45cff903b9a6e8a810ecda129b

9/23/09 - What the Fed Said

Some important information came out of today's Fed Meeting.

As expected, they left the Fed Funds Rate alone, keeping it at a low .25%. This is good news for those of us with Home Equity Loans tied to Prime. Eventually, this rate will have to come back up though. It is only a matter of time.

The real news today was that the Fed's purchases of Mortgage Backed Securities will continue and they still plan to spend the $1.25 Trillion allocated toward this program. HOWEVER they will decrease the frequency of their purchases and draw it out through the first quarter of 2010.

The good news is that they are going to finish what they started. There were rumors that they would discontinue the program early. The bad news is that we're very likely to see mortgage rates creep back up into the Sixes early next year.

What does that mean to Joe and Jane Homeowner? Well, if you were thinking of buying or refinancing you'd be wise to take a look at your options now while the rates are most attractive.

The next big question yet to be answered is if the First Time Homebuyer Tax Credit will be extended past November 30 and if they will extend this credit to ALL buyers or increase the amount of the credit.

Stay tuned as I'll be keeping a close eye on this.

Have you benefitted by the lower interest rates or tax credit recently? Do you have questions about the tax credit? Post your comments here or contact me directly at twiggins@affsmortgage.com or 615-627-4869.

Give Yourself Time

We are fast approaching the deadline of the First Time Homebuyer Tax Credit. In order for first time homebuyers to receive this credit of up to $8,000 they must close on their purchase no later than November 30. While you might think, "take it easy Todd, this is mid-September" please keep in mind that what lies ahead is a bottleneck of buyers trying to close by that deadline.

Also please consider that with mortgage interest rates back down yet again and with homes selling at attractive prices, our pipelines are already filling up. Most of our lenders are currently operating on five-day underwriting turn times. From application to closing it typically takes three to four weeks, where a one to two week process was more common. There is the potential that most lenders will need as long as five to seven weeks to close your loan as we near the deadline.

Contributing to these delays are some new guidelines that we are now subjected to, such as the Home Valuation Code of Conduct (HVCC) appraisal process and the new Truth in Lending (TIL) disclosure guidelines. While these were put in place for your protection, I assure you that they offer very little consumer protection and only add to the delays and confusion.

So, should you or someone you know consider purchasing a home this Fall, I recommend that you start that search now.

Follow these steps:

1. gather your income and asset documents (pay stubs, W-2s, tax returns and bank statements for starters)
2. consult with me for an analysis of your best mortgage options and to obtain pre-approval
3. give serious thought to what you are seeking in a new home and break it up into the "must have" and "would be nice" categories (location, # bedrooms and baths, garage, yard, etc.)
4. consult with a professional and qualified realtor to assist you in your home search and negotiations

Please note that there are efforts being made to extend the deadline for the First Time Homebuyer Tax Credit past November 30. It also being requested that the amount of the tax credit be increased and that the credit should be extended all buyers. At this time, however, we have no confirmation that Congress plans to do this.

So don't delay. That awesome feeling of buying your first home won't feel nearly as good on December 1.

For more information on the programs available or on the tax credit, please contact me at twiggins@affsmortgage.com or at 615.627.4869

Is That the Bottom I See?

Hold on to your hats, but we may be finding the bottom of our housing market, or at least a suggestion that a bottom is coming. While prices in most areas continue to decline, the pace of the decline appears to be slowing. Is this just a seasonal adjustment? Is this a reflection of First Time Homebuyers taking advantage of the tax incentives or buyers taking advantage of low interest rates? That has yet to be determined.

I believe that this further emphasizes the importance of getting in on the right side of the curve. If you are in the market to buy, you would be wise to do so before the bottom has been established as you'll have less leverage working with a seller who thinks the market is rebounding.

Of course, you should consult a qualified realtor to see how home prices are performing in the specific area that you desire.

For more details on today's report from Ruth Mantell with MarketWatch, read the excerpt below:

U.S. home prices did fall in April, but overall annual declines are slowing, according to the national Case-Shiller home price index released today.

On a month-to-month basis, prices in 20 selected cities fell 0.6% in April, with declines in 11 cities, compared with a decline of 2.2% in March. The overall annual pace of decline has slowed, said David Blitzer, chairman of the index committee for Standard & Poor's, which compiles the Case-Shiller index.

"Thirteen of the 20 metro areas also saw improvement in their annual return compared to that of March. Furthermore, every metro area, except for Charlotte, recorded an improvement in monthly returns over March," Blitzer said in a statement. "While one month's data cannot determine if a turnaround has begun; it seems that some stabilization may be appearing in some of the regions."

Blitzer added that it will take time to tell whether a recovery has arrived as the market enters a seasonally strong period.

Continuing slower price declines are a "decent bet," wrote Ian Shepherdson, chief U.S. economist with High Frequency Economics.

"The fly in the ointment is foreclosures, which tend to result in much lower prices and are an increasing proportion of transactions," Shepherdson wrote. "For now, though, this is clearly less bad than recently."

For answers to what financing options are available to you, please contact me at 615-627-4869 or at twiggins@affsmortgage.com.

As a mortgage broker, I've been blessed with a steady stream of loan applications this year; most of which have been for my past clients and those referred to me seeking refinance opportunities. Surprisingly, though, my purchase business has been only a small percentage of what I've closed this year in spite of the LOWEST RATES IN HISTORY and several other factors that should be pointing us all to look at buying a home, be it a first home, a move up or even a move down. I recognize that for those of us who already own a home that selling our home can be the biggest obstacle to this goal. Also, I'm aware that the weak economy has kept many prospective buyers from acting. HOWEVER, there is good reason for those fence sitters to consider hopping down and taking a look around and I'd like to take this opportunity to share a few of those reasons with you now.

• Interest Rates: as mentioned, we've experienced the lowest rates in history earlier this year and we aren't far from them now. In the last few weeks we've seen a tremendous amount of volatility. Investors are starting to see that the Fed's aggressive buying of mortgage back securities, which kicked off these super-low rates to begin with, may be giving these securities a false value. There aren't a lot of other buyers out there. And, as a result of all of the refinances we've been closing this year, we've created our own problem by overflowing the market with new paper. Should our economy get on a roll here (even just a hint of one), we could easily and quickly see these rates take a significant shift up. We've already shifted up a bit. We were locking rates in the high four and low five percent range and are now in the low to high 5's. While rate should not be the deciding factor to buy a home it sure should be an incentive to get off the couch and see what you could buy.


• First Time Homebuyers Tax Credit: Lots of talk about this incentive, which has morphed since it's inception last Fall. A first time homebuyer (or anyone who has not owned a home in the last three years), can qualify for up to $8,000 credit from the government. This credit is received via your income tax return by completing the appropriate form (IRS form 5405) and either ammending your 2008 tax return or filing it with your 2009 return. This incentive runs out December 1 of this year. Since it is often times taking 30 -45 days to close a loan, you don't want to wait until November to start your home shopping. For details on this program click on this link: http://www.irs.gov/newsroom/article/0,,id=206291,00.html


• THDA Stimulus Second Mortgage Program: The catch for many First Time Buyers is that to get the tax credit you have to buy the house first, and in this "nervous" lending environment, mortgage lenders are not doling out Zero-Down loans like we used to. So, buyers had to come up with money in order to get the money. FHA has loosened up their guidelines and Tennessee is one of a few states that has a solution for our First Time Buyers who face this dillema. The Tennessee Housing Development Agency (THDA) is offering a second mortgage equal to the down payment required on the first mortgage so that no money actually has to be put down at closing. Should the seller agree to pay your closing costs, you can get in with no money out of pocket at all. And there is no interest on the small second mortgage until June 2010. By that time the borrower should have already received their tax credit and can choose to use it to pay off the second mortgage altogether, never having to have made a payment on it. I advise my clients to put down their own money or money gifted to them from family, but if they can not, THDA has provided an attractive solution. Again, to take advantage of this you must close by December 1.


• USDA Rural Development financing: The best "zero down" option out there is a loan called the Rural Development loan which is offered by the USDA. This is not a farm loan. In fact it quite the opposite, however it does require the home being purchased to be located in an "eligible" area, which is typically "rural". You'd be surprised at how many nice homes are considered to be in "rural" areas. A true no-down payment loan that offers attractive fixed rates and no mortgage insurance fees, it is right up there with VA as one of the best zero-down options out there.


• Buy Before the Bottom- Not after: While predicting the "bottom" of our local real estate market is a challenge if not impossible, it is also hard to predict what "type" of bottom it will be. Will it be a "flat" bottom where prices hold but don't go up for several months? Or will it be a V-shaped bottom where home prices rebound quickly once consumers see that real estate is a great investment and people rush to "get in while the gettin's good"? Well one thing is for sure: you'd be better off to be dealing with a seller while we are still on the downslope rather than catching a seller who thinks the market is on it's way up. Do you think you'd have better luck coming in low with your offer, or asking for contributions or other contingencies when dealing with a seller who is happy to have an offer (ANY OFFER) or with a seller who sees life in the market and who is optimistic about other potential offers and who is no longer questioning the value of their home? You may end up at the same price point, but you'll find it easier to get what you want out of the transaction if you catch a seller at the bottom or on the way toward it.

So, the point is... Don't miss the boat. Sure, you could buy down the road but it is likely going to be at a higher rate and a higher price.

If you qualify and your comfortable with the obligation and resonsibility that comes with owning a home, then you should at least investigate your options.

For those of you who don't want to sell in a down market consider this: if you wait until the market rebounds, while you might be able to get more for your house it is very likely that the seller of the house you wish to buy will also be able to get more for theirs. So, if your gain is nullified by the seller's gain you may as well be pro-active and take advantage of the low fixed rates while they are available.

As I mentioned earlier, I have plenty of business, and now it is a better mix of purchases and refinances. So, please don't interpret this as some desperate plea for customers. I'll gladly help anyone who wants to research their options, but I'm "putting this out there" because I believe our friends, family and people we care about need to know that in spite of the recent mortgage and home value turmoil, home ownership is good and is the main ingredient in a financial portfolio that leads to wealth. We've just experienced a major correction in how we perceived home values and how we assessed risk in lending and we're back on track. Now is the best time ever for people to enter into home ownership or to move up to the home they've been wanting. Again, you have to qualify, and if you do - you won't get a bad loan. Only good loans are left and we've got them for you.

So spread the news, tell your friends and hit me with your questions. Call your realtor and see what's available. I believe you'll be pleasantly surprised.