5 Tips to Buying a Home on Deadline and How the Tax Credit Extension Can Help

November 24, 2009

House shopping usually slows down in the winter, as people put their home searches on hold to trim the tree, buy presents to put under it and avoid the chilly weather. This winter, however, might be different, thanks to the extended—and expanded—first-time home-buyer tax credit.sold2

“We’re going to see far more interest in the fourth quarter than we generally do because of the tax credit,” said Heather Fernandez, vice president of Trulia.com, a real estate search engine. Traffic surged on the site on Nov. 5, the day Congress approved the credit extension, she said.

The new law extends the tax credit for first-time home buyers and opens it up to some existing homeowners as well: The credit is now 10% of the home price, up to $8,000 for first-time buyers and up to $6,500 for repeat buyers. All buyers must have a binding contract on a house in place on or before April 30, 2010. The sale must close on or before June 30. 2010.

To be considered a first-time home buyer, an individual must not have owned a home in the past three years. And to be eligible, existing homeowners need to have lived in the same principal residence for five consecutive years during the eight-year period that ends when the new home is purchased. The credit is only for principal residences.

Income limits have risen as well. According to the IRS, the home buyer tax credit now phases out for individuals with modified adjusted gross incomes between $125,000 and $145,000, and between $225,000 and $245,000 for people filing joint returns.

The inclusion of move-up buyers might inspire homeowners to take action and list their house if they’ve been putting it off, said Carolyn Warren, a Seattle, Wash.-based mortgage broker and banker and author of the book Homebuyers Beware. “If somebody loves their home, it’s not going to entice them to sell. If they’ve had it on the back of their minds and really would like to move up, it might push them into doing it sooner than later,” Warren said.

The credit isn’t expected to have as large of an effect on move-up buyers as it has on first-time buyers, according to the Campbell/Inside Mortgage Finance Monthly Survey of Real Estate Market Conditions. The maximum tax credit is about 4% of the average purchase price for first-time buyers, but about 2% of the average purchase price for move-up buyers.

“We estimate that the first-time home buyer tax credit will result in a 10% increase in home sales from March through November of 2009,” said Thomas Popik, research director for Campbell Surveys, in a news release. “We’d expect the effect of the proposed tax credit for current homeowners to be about half as large—from December until the tax credit expiration in the spring of next year, it might be 5% of 3 million transactions, or about 150,000 incremental home sales. Incremental sales to first-time home buyers could be an additional 300,000, for a total of 450,000 incremental sales due to the tax credit extension.”

Tips for buyers
Interested in buying a home and claiming the home-buyer tax credit? Below are five tips:

1. Don’t procrastinate. Start searching for a home now. Getting an early start will give you a better chance of finding the right house before the credit deadline. Before you start house hunting, get preapproved for a mortgage, said Eddie Fadel, a Miami-based mortgage banker, and do a realistic assessment of what you can afford. Buyers who have to sell an existing home should price it aggressively from the beginning to drum up interest and get a buyer as soon as possible.

2. Don’t count on another extension. The credit won’t be available forever, Fadel said. If you want to take advantage, be sure to make that spring deadline.

“This is a medication for the housing crisis. Once the patient—which is the housing market—cures, there will be no medication needed,” he said.

3. Mind the interest rates. Mortgage interest rates are low right now, but will likely rise next year. Higher rates will affect your monthly mortgage payments, thus the affordability of the house you are buying. Average rates on the 30-year fixed-rate mortgage have been hovering around 5%, but when the government stops buying large amounts of mortgage-backed securities, rates could rise.

4. Communicate with your lender. Throughout the process, make sure you’re communicating with your lender regularly; if there’s a piece of documentation you’re asked for, get it turned in as soon as possible, said Doug Heddings, a New York-based real estate agent with Charles Rutenberg Realty. Good communication is important in making sure the loan closes on time. And think twice before pursuing a short sale if you want to make the credit deadline. That’s where someone sells a home for less than what he or she owes on a mortgage, with permission of the lender. The process can be lengthy and unpredictable because the homeowner’s lender has to approve any deal, and can be complicated when there is a second mortgage associated with the property.

5. Don’t take shortcuts. Don’t forgo any of the steps you would normally take just to make the tax credit deadline. Make sure the house is a good fit for your needs and get a home inspection. Skipping steps could cost you in the long run.

(c) 2009, MarketWatch.com Inc.

Distributed by McClatchy-Tribune Information Services.

Read more: http://rismedia.com/2009-11-23/5-tips-to-buying-a-home-on-deadline-and-how-the-tax-credit-extension-can-help/#ixzz0XmtuSnUK

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Written by djumper · Filed Under Real Estate Blog 

1.4 Million Families Have Taken Advantage of First-Time Home Buyer Tax Credit

October 8, 2009

With the First-Time Home Buyer Tax Credit deadline quickly approaching, the Internal Revenue Service recently reminded potential home buyers they must complete their first-time home purchases before Dec. 1, 2009 to qualify for the special first-time home buyer credit. The American Recovery and Reinvestment Act extended the tax credit, which has provided a tax benefit to more than 1.4 million taxpayers so far.tax credit

The credit of up to $8,000 is generally available to home buyers with qualifying income levels who have never owned a home or have not owned one in the past three years.

The IRS encouraged all eligible homebuyers to take advantage of the first-time home buyer credit but at the same time cautioned taxpayers to avoid schemes that help ineligible people file false claims for the credit. Currently, the agency is investigating a number of cases of potential fraud and is using computer screening tools to identify questionable claims for the credit.

Because the credit is only in effect for a limited time, those considering buying a home must act soon to qualify for the credit. Under the Recovery Act, an eligible home purchase must be completed before Dec. 1, 2009. This means that the last day to close on a home is Nov. 30.

The credit cannot be claimed until after the purchase is completed. For purchases made this year before Dec. 1, taxpayers have the option of claiming the credit on their 2008 returns or waiting until next year and claiming it on their 2009 returns.

For those considering a home purchase this fall, here are some other details about the first-time home buyer credit:

-The credit is 10% of the purchase price of the home, with a maximum available credit of $8,000 for either a single taxpayer or a married couple filing jointly. The limit is $4,000 for a married person filing a separate return. In most cases, the full credit will be available for homes costing $80,000 or more.

-The credit reduces the taxpayer’s tax bill or increases his or her refund, dollar for dollar. Unlike most tax credits, the first-time home buyer credit is fully refundable. This means that the credit will be paid to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.

-Only the purchase of a main home located in the United States qualifies. Vacation homes and rental properties are not eligible.

-A home constructed by the taxpayer only qualifies for the credit if the taxpayer occupies it before Dec. 1, 2009.

-The credit is reduced or eliminated for higher-income taxpayers. The credit is phased out based on the taxpayer’s modified adjusted gross income (MAGI). MAGI is adjusted gross income plus various amounts excluded from income—for example, certain foreign income. For a married couple filing a joint return, the phase-out range is $150,000 to $170,000. For other taxpayers, the range is $75,000 to $95,000. This means 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.

-The credit must be repaid if, within three years of purchase, the home ceases to be the taxpayer’s main home. For example, a taxpayer who claims the credit based on a qualifying purchase on Sept. 1, 2009, must repay the full credit if he or she sells the home or converts it to business or rental use at any time before Sept. 1, 2012.

Taxpayers cannot take advantage of the credit even if they buy a main home before Dec. 1 if:

-The taxpayer’s income is too large. This means joint filers with MAGI of $170,000 and above and other taxpayers with MAGI of $95,000 and above.

-The taxpayer buys a home from a close relative. This includes a home purchased from the taxpayer’s spouse, parent, grandparent, child or grandchild.

-The taxpayer owned another main home at any time during the three years prior to the date of purchase. For a married couple filing a joint return, this requirement applies to both spouses. For example, if the taxpayer bought a home on Sept. 1, 2009, the taxpayer cannot take the credit for that home if he or she owned, or had an ownership interest in, another main home at any time from Sept. 2, 2006, through Sept. 1, 2009.

-The taxpayer is a nonresident alien.

Source: RISMedia

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Written by djumper · Filed Under Real Estate Blog 

Builder Confidence Up, But Tax Fears Loom

September 18, 2009

NEW YORK — An index of home builders’ confidence rose in September for the third month in a row, but an industry group said Wednesday the fragile residential real estate market recovery could be cut short if a popular government tax credit isn’t extended.

The National Association of Home Builders said that its Housing Market Index, which it compiles for Wells Fargo, rose one point last month to 19 — the highest level since May 2008.

The index, which fell to an all-time low of 8 in January, has increased steadily in 2009 as the housing market picked up in many parts of the country.

According to NAHB, the rebound in builder confidence is largely due to a temporary tax credit that the government created last year for first-time home buyers. Low mortgage rates and rock-bottom home prices also helped boost confidence, the group says.

The credit, which can be as high as $8,000, was established as part of the government’s economic recovery act to help stimulate demand and revive the battered housing market.

As the market begins to show some sings of life, however, builders are becoming worried that the credit, which is set to expire Nov. 30, will not be renewed.

“The window is now basically closed for being able to start a new home that can be completed in time for buyers to take advantage of the tax credit,” said Joe Robson, NAHB’s chairman and a home builder from Tulsa, Okla, in a statement. “Builders are concerned about what will keep the market moving once the credit is gone.”

To that end, the index component that measures builders’ expectations for sales in the near future fell one point in September to 29, after rising for five months in a row.

More than 1.5 million taxpayers are expected to claim the credit, according to an NAHB spokeswoman.

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Meanwhile, the National Association of Realtors said earlier this month that the credit has already brought 1.2 million new buyers into the market, including 350,000 buyers who would not have purchased a home without the credit.

White House press secretary Robert Gibbs said Wednesday that the Obama administration is evaluating how the tax credit has impacted home sales and could recommend that the President extend it.

While the tax credit has helped stabilize the housing market, falling home prices are the real reason why sales have begun to rebound, according to Mike Larson, real estate and interest rate analyst at Weiss Research.

“I believe the tax credit is the icing on the cake of this housing market recovery, not the cake itself,” Larson said in a research report.

Indeed, a government report released earlier this month showed that roughly 315,000 people have claimed the tax credit so far. However, industry analysts point out that those figures reflect a small portion of homebuyers who could ultimately claim it.

For buyers interested in taking advantage of the credit, time is of the essence.

Because it usually takes around 90 days to close on a house after a contract is signed, buyers have very little time left to act. As of Sept. 16, 78 days remain before the credit ends.

In addition to uncertainty about the tax credit, builders are also wary about a “critical lack of credit” for new home construction projects and ongoing problems related to appraisals that NAHB says are sinking one quarter of all new-home sales.

“These concerns need to be addressed if we are to embark on a sustained housing recovery that will help bolster economic growth,” said NAHB chief economist David Crowe, in a statement.

Source: CNNMoney.com

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Written by djumper · Filed Under Real Estate Blog 

IRS Issues Rules to Ease Mortgage Refinancing

September 16, 2009

WASHINGTON – The IRS issued new rules Tuesday designed to make it easier to refinance some commercial real estate loans in an effort to curb the number of defaults.

The rules would allow commercial loans that are part of investment pools known as Real Estate Mortgage Investment Conduits, orREMICs, to be refinanced without triggering tax penalties for investors.

The investment pools were designed to encourage mortgage-backed securities by offering tax benefits not typically available through other investment vehicles. However, under the old rules, investors could have lost those benefits if loans in the portfolio were restructured.

The new regulations come as Wall Street braces for a wave of defaults on commercial real estate loans. More than 90 U.S. banks have already failed this year. Hundreds more banks are expected to fail in the next few years largely because of souring loans for commercial real estate.

“These changes will affect lenders, borrowers, servicers, and sponsors of securitizations of mortgages in REMICs,” the new regulation says.

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The changes will not affect commercial mortgage loans held by investment trusts. However, the Internal Revenue Service said Tuesday it is soliciting comments on possibly expanding the changes to other investment vehicles.

Concept Capital, a New York-based institutional broker, welcomed the changes but cautioned that they will not solve the commercial real estate crisis alone.

“We have all heard stories about commercial real estate loans that are performing now but cannot be refinanced because of the tax rules,” Concept Capital’s Washington Research Group said in a report issued after the regulations were released. “The IRS attempted to ease the tax code problem for these modifications.”

But, the report said, “We still question if there is enough financing available to deal with the wave of commercial real estate loans that must be refinanced by 2012.”

Source: Yahoo! News

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Written by djumper · Filed Under Real Estate Blog 

First-time Buyers

April 30, 2009

First-time Buyers of Corinth, MS homes get up to $8,000 back!

The Senate and House passed a new bill on February 13th!!!  The President is expected to sign it this week.  It was part of the new stimulus bill the “American Recovery and Reinvestment Act of 2009″ which improves the Federal Tax Credit to first-time homebuyers that I posted about a few weeks back.  I definitely am not a supporter of everything in the stimulus package, but this tax credit back to first-time homebuyers is very beneficial and is much needed for helping people buy their first home in Corinth, MS.  What exactly are the terms with this tax credit you ask?  Here are the basics:

  1. The best change is that it is NON-REFUNDABLE!!!  The previous credit back in 2008 had to be repaid over 15 years.  The new one is basically a gift!!!!  It does not have to be repaid AS LONG AS you do not sell the house within the first 3 years of purchasing it.  If you do sell in those first 3 years, you have to repay the full amount of the credit upon sell of the house.
  2. The first-time home buyer will receive up to a maximum of $8,000.00 back on your income tax return withholdings or as a credit against additional tax you owe to the IRS.  The amount of credit received is based on 10% of the purchase price of the home up to a maximum of $8,000.00.  If you do not owe $8,000, then the balance of the credit will be refunded to the home buyer.
  3. The first-time home buyer requirement means that neither the buyer or spouse can have owned a principle residence within the last 3 years of the purchase date to qualify.  So you actually can have owned a home before, just not within the last 3 years.
  4. There are income limitations of the buyer.  A single person must make less than $75,000 to get the full credit and phases out between $75,000 -$95,000.  A married couple filing jointly must make less than $150,000 to get the full credit and it phases out between $150,000 – $170,000.
  5. The purchase must be for a princple residence only.  Does not apply to rental or investment property or second homes.
  6. The real estate purchase must have been made between Jan 1, 2009 and December 1, 2009 to apply.

(Check with your tax preparer for more details.)

For Example, a new home owner in Corinth, MS buys an $85,000 home and gets 10% of that purchase price as a federal tax credit (not to exceed $8,000).  So in this case, the buyer would get a $8,000 credit as 10% of the purchase price would have been $8,500 which exceeds the limit.  Let’s say this home buyer owes the IRS $10,000 for 2009 taxes, so the credit would reduce the amount owed to the IRS to $2,000  ($10,000 owed-$8,000 credit= $2,000 owed).  If the home buyer had only owed the IRS $5,500 then the buyer would have received a refund from the IRS for the additional $2,500 ($5,500 owed -$8,000 credit= $2,500 refunded).

If you bought a $60,000 home in Corinth, MS or Alcorn County then you would be eligible for $6,000.00 ($60,000 x 10%) as a reduction of your taxes or refund from the IRS.

Basically, this will save you up to a maximum of $8,000 in 2009 through either a reduction of the amount you pay in or a refund back to you from Uncle Sam!!!  In net terms, your $80,000 home purchase was really for only $72,000!!!!!  Man, I wish I was a first-time home buyer!!!!!

See the link below for a detail chart from the National Association of Realtors:

http://www.realtor.org/wps/wcm/connect/b32db1004d05f6338052c5fd73e5610f/government_affairs_tax_credit_chart_021308.pdf?MOD=AJPERES&CACHEID=b32db1004d05f6338052c5fd73e5610f

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Written by djumper · Filed Under Real Estate Blog 

$8000 Credit

April 30, 2009

Don’t Miss out on $8,000 First-Time Home Buyer Credit in 2009!!!

See Why So Many Corinth, MS First-Time Buyers Are Taking Advantage Of This Opportunity!!!

Many of you have questions on this First-Time Home Buyer Credit and how it does or will relate to your home purchase in the Corinth, MS area in 2009.  The links below will answer most any of your questions and provide the IRS form you file with your tax return to receive this money.  We are seeing so many people taking advantage of this awesome opportunity!!!

First-time buyers are seeing the value…basically if you qualify and buy an $80,000 home for instance, you will get $8,000 back on your tax return.  So basically you were able to purchase that home for $72,000 after the refund.  The great thing is that even if you did not owe $8,000 in federal income taxes, you will get the difference back.  For example, say you owed $6,000 in federal income taxes, well you could get that $6,000 refunded plus the additional $2,000.

Yes, you can even file this credit/refund on your 2008 return if you close on the house prior to filing your tax return.  If you are closing on your home after the April 15 tax filing date, you can file an extension of your return until October 15th to wait on your house to close, or wait to get credit on the 2009 return.  Check with your accountant to verify this information.

If you are secure in your job,  DON’T let this opportunity and ideal buying situation slip you by!!!

  1. Historically low interest reates…30 year rates under 5%!!!
  2. Reduced house prices.
  3. Up to $8,000 back from Uncle Sam for getting that Dream Home!!!

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Written by djumper · Filed Under Real Estate Blog