First Time Home Buyer Tax Credit Extended Into 2010 Fot Utah Buyers!
Plus... A New Tax Credit for Certain Existing Salt Lake City 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 for salt lake city home purchasers 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 Salt Lake City 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.
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.
Condo Owners Beware!! !
Is the FTHB Tax Credit Stealing From Future Demand?
I found this article on http://www.mortgagenewsdaily.com/channels/community/103597.aspx
I thought it was pretty interesting
From Thompson Reuters....
WASHINGTON, Aug 28 (Reuters) - Low interest rates and tax breaks are giving the U.S. housing sector a jolt but, like the "cash-for-clunkers" program spurring car sales, the recent spurt in home sales is taking an advance on tomorrow's demand. Thanks to Washington, 2009 has become a tempting year to purchase a home.
First-time buyers may receive an $8,000 tax credit and mortgage rates are invitingly low as the Federal Reserve fulfills its promise to buy nearly $1.45 trillion in mortgage-related securities this year. The real estate industry is lobbying Congress to extend the tax credit beyond its planned November expiration. But there are concerns the program's benefits may be short-lived, uneven and could undercut future sales. For observers like Mark Calabria of the libertarian Cato Institute, the sector is wrongly borrowing from tomorrow's market and the tax credit and other stimulus could prevent an orderly recovery. He sees a risk regional and local housing markets that have not touched bottom will be artificially inflated, while borrowers lured by government stimulus could rush into still-sinking markets.
"This manipulation is going to be disruptive in different ways for different markets," he said.
BORROWING FROM THE FUTURE
Since the tax credit was enacted in February, sales of new homes have climbed for five straight months and sales of previously owned homes have hit two-year highs.
"If you have been saving your pennies and paying your bills, there probably is no better time to buy than right now," said Brian Montgomery, former head of the Federal Housing Administration, which aims to provide affordable home loans.
Some realtors warn the housing sector is eating its seed corn with the help of government incentives and many of today's home buyers will be badly missed in the future.
"It's an offer that has people deciding to make a home purchase sooner rather than later," said Pam Jones, who sells property in Northern Virginia, of the tax credit.
Jones is a 26-year veteran of the suburban Washington real estate market, which soared when easy-to-get, subprime loans were fueling the U.S. market. Now, three out of every four homes that Jones sells are funded by the FHA and some warn that the government is taking on too much risk as it tries to stabilize the market. There are also worries consumers are getting hooked on government subsidies and may stop spending without them.
PENT UP DEMAND
As investors have cooled to risky mortgage investments, the FHA has seen its market share increase. It expects to handle three million applications this year, about 50 percent more than in 2008.
Former FHA chief Montgomery, now a financial services advisor with the Collingwood Group, says the 3.5 percent downpayment his one-time agency still requires is prudent, although he would support increasing it.
He also defends the government's housing stimulus policies. "Is tomorrow going to be a sunnier day? Nobody knows. Does a recovery come in 2011, 2012, 2013?" he said.
James Lockhart, the outgoing regulator for mortgage finance companies Fannie Mae and Freddie Mac, said officials must be careful not to over stimulate today's market. But he said there is plenty of pent-up demand to go around.
"There are two years worth of people who were waiting on the sideline because of fear of falling house prices who are now ready to buy," he said.
Easy credit fueled a five-year housing boom that crashed in 2006, leading to record foreclosures and damaging the credit of millions of consumers.
"There are people with lots of scars and the theory that housing prices always rise has been destroyed," said Lockhart, who will soon become vice chairman of a distressed investment group at Invesco Ltd. But the housing sector "is bumping around the bottom" and government efforts are helping stabilize the market, he said.
A few thoughts for discussion...
What if the government had decided not to provide a subsidy to the housing market? Would we be seeing the so called stabilization in housing? Would the macroeconomy still be "leveling off", as the Federal Reserve puts it. Wasn't borrowing from the future a necessity to save the "here and now"?
"Better than expected" perspectives aside, even with record low mortgage rates and an $8,000 FTHB tax credit, activity in the housing market isn't all that exciting. In my experiences and conversations with mortgage market participants, the times are still pretty tough. Making matters worse is the macroeconomic outlook. The frailness of our labor market does not give me a warm and fuzzy feeling about the health of the consumer. I hear some economists talking about a nonconsumer led recovery, but I have yet to hear how growth will resume once cost cutting and inventory liquidation run their course on domestic output statistics. The reality is the labor market is still incredibly weak....that does not bode well for housing. Less people working equals less people who are eligible to buy a home.
Lets put economic outlooks aside for a moment and focus on a few mortgage industry specifics. Just a few qualms, I won't go nuts.
Qualifying for "record low" rates is not exactly an easy task. The evaporation of consumer credit has resulted in falling FICO scores, pushing many a prospective home buyer (and refinancer) into higher rates as loan level price adjustments are tacked onto mortgage pricing. Above and beyond deteriorating borrower credit metrics, to receive an Approve/Eligible from Fannie/Freddie, borrowers must get passed nervously overtightened lending guidelines. I know underwriting standards got way too relaxed in the subprime era, but come on...regs have gotten rediculous over the past two years. I'd be happy with a return to common sense underwriting. What ever happened to compensating factors?
Then there is the broadly BOOOOOED Home Valuation Code of Conduct. Anyone whose dealt with HVCC will tell you it can be a deal killer. Before anyone takes offense, I am not putting the blame on any specific housing professional, so dont get all upset appraisers. All I am saying is HVCC has not had a positive effect on the loan process. It's done nothing but muddle valuations and block an originator's ability to question whether or not an assesement is remotely rational. Yes, I am willing to concede that in the past, perhaps some appraisers and originators did not respect proper barriers which may have contributed to the overall downfall of the housing market. However, just as lending guidelines have gone too far, so has HVCC. I feel for brokers mostly...those poor souls must deal with AMCs, whereas direct lenders can at least assemble a list of competent, fully paid appraisers.
Instead of asking if we are stealing from future demand, maybe the better question is will there be any future demand? If you agree with ex-FHFA regulator James Lockhart's outlook..will that demand even be able qualify for a mortgage?
There are bigger problems than the expiration of the $8,000 tax credit. Maybe those issues should be addressed too.
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Article by: Winston Smith |
The Worst of Times is the Best of Times: How today is the best time to buy a home
Today's home buying market is the hardest it's been in years. Mortgage loan programs have dried up. No-down-payment programs, 80/20 loans ,and mycommunity 100% loans are all things of the past. Down payment requirements have skyrocketed to 10%. And credit scores are more important than ever; the days of easy credit are gone.
But to paraphrase Dickens, if now's the worst of times it's also in many ways the best of times: with record low interest rates, plummeting house prices, and even government $8,000 incentives for first time buyers, now may actually be the best time ever for buying a home.
Also, though conventional loans have disappeared, there are still plenty of other loan programs available for down payments. These include: USDA loans, Utah Housing Corporation Loans (for low-to-moderate income housebuyers), the VA loan, (for veterans and surviving spouses who do not remarry), and loans available throughout rural Utah, including: Saratoga springs, Eagle Mountain, Tooele, and most of Utah (with the exception of Salt Lake, Davis, and Weber counties, and parts of Washington and Cache counties). Basically, if your customers are low-to-mid income, a vet, or looking to live rural, there are still numerous options available to help them with their down-payment loans.
More good news is that FHA loans have hardly budged at all, increasing from only 3% to 3.5%-as opposed to the 10% down payments required of conventional loans, saving customers thousands of dollars. FHA loans also have lower credit score requirements, making them more attractive in today's economy.
Making loans even easier, the FHA also allows the down payment money to come from multiple different sources.
For instance, a secured loan is now an acceptable source for an FHA down payment loan. For example, a customer's car could be a source of down payment money: any large asset item, such as a car, or truck, or boat, that can get a secured loan placed on it, could be used to generate the loan money for an FHA down payment.
Tax refunds, 401ks, even saleable assets, could all be acceptable sources for down payment money in an FHA loan, sources that customers couldn't get away with in other, more conventional loans.
Other acceptable sources for an FHA down-payment include:
Sale of Assets
Tax Refund
Inheritance
Loan from 401k or other retirement savings account
Employer assistance plans (an employer may pay part or all of the required down payment)
Real estate agent's commission
A gift from a family member, relative, close friend, or domestic partner
Gift of Equity (Relatives may provide equity credit as a gift on a property being sold to other family members)
Gambling or Lottery Winnings (must be documented)
Lawsuit or insurance settlement
Rent Credit
I have just written a blog abour fha allowable sources of down payment. Check it out at http://blog.anthonyvandyke.com/
14 acceptable sources for down payment.
Collatoized secured loan, Funds can be borrowed for the down payment as long as the funds are fully secured by existing marketable assets. These assets may include stocks, bonds, automobiles, real estate (other than the property being purchased), and the cash value of life insurance policies. A tax refund anticipation loan, provided by a lending firm filing automated returns, is considered to be a collateralized loan
Sale of Subject Property. Real estate agents are allowed to use their commission earned towards the down payment on FHA loans.
To read the rest go to my blog at http://blog.anthonyvandyke.com/
Anthony VanDyke
FHA Specialist
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