Danilo Bogdanovic-Real Estate Consultant -Loudoun and Fairfax County

Curious as to how the IRS "first time home buyer credit" works, whether you qualify and how to take advantage of it? There's a good FAQ section over at FederalHousingTaxCredit.com that goes over the "first time home buyer credit" in detail.

Here's an excerpt:

1. Who is eligible to claim the $7,500 tax credit?

First time home buyers purchasing any kind of home-new or resale-are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after April 9, 2008 and before July 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs.

2. What is the definition of a first-time home buyer?

The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.

3. How do I claim the tax credit? Do I need to complete a form or application?

Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. No other applications or forms are required. No pre-approval is necessary; however, prospective home buyers will want to be sure they qualify for the credit under the income limits and first-time home buyer tests.

4. What types of homes will qualify for the tax credit?

Any home purchased by an eligible first-time home buyer will qualify for the credit, provided that the home will be used as a principal residence and the buyer has not owned a home in the previous three years. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats.

For the full set of questions and answers regarding the IRS "first time home buyer credit", check out the FAQ section over at FederalHousingTaxCredit.com.

***NOTE: Before you get too excited about the tax credit, make sure you go through all the FAQ's and then go over to CNNMoney.com to read this post about how it may not be all that it's cracked up to be.

I'm off to Vegas! No, not quite for pleasure (though I'm sure to have at least a little bit of fun). I'll be attending RE Blog World, the Real Estate & Mortgage Conference at Blog World and New Media Expo at the Las Vegas Convention Center.

The three day event (today through Sunday) features more than 50 seminars, panel discussions and keynotes from iconic personalities on the leading-edge of online technology, and internet-savvy business. Not to mention all the pre and post session networking with these folks...

RE Blog World presents a unique opportunity for myself and others attending to learn from the top new media and blogging personalities, inside and outside of the real estate vertical. And these folks aren't just bloggers or tech-geeks. They're extremely talented, skilled and successful real estage agents, brokers and mortgage professionals - some of the top guns in the industry.

I look forward to learning a great deal at RE Blog World and implementing that new knowledge and those new technologies into my daily business as a Realtor here in Loudoun County. This will further elevate the level of service I provide to my clients and fellow real estate professionals.

Here are some of the speakers at RE Blog World:

Two questions I get asked often by buyers are, "What are closing costs?" and "How much are closing costs?" Let's answer those two questions in detail.

"What are closing costs?"

Closing costs are the costs/fees associated with purchasing real estate. These costs/fees are in addition to the sales price and are paid to all the other parties involved in a real estate transaction. Closing costs are due at settlement and must be paid in order to complete the real estate transaction.

"How much are closing costs?"

In Virginia, closing costs typically run about 2 to 3 percent of the sales price of the property. They can vary depending on the sales price of the property, the vendors you use and the amount and type of financing and loan program you go with.

Here's a break down of a buyer's closing costs in Virginia:

Lender's Fees

These fees vary from lender to lender. Different lenders charge different amounts for the same items and may charge additional fees depending on whether they're a direct lender or mortgage broker (make sure you check out my post on issues surrounding mortgage brokers).

Application Fee - Some lenders charge application fees to cover their upfront time and costs associated with qualifying you. The application fee is usually not refundable even if you don't close on the loan, but some lenders will credit the application fee back to you if/when you settle. This fee ranges from a couple to several hundred dollars.

Credit Report - Every lender you apply with will pull your credit report. This typically costs between $50 and $70 depending on the lender (even though they all get it from the same place).

Loan Origination Fee - Some lenders charge this fee to cover their administrative costs. Some charge it and some don't. But the ones that do tend to have lower rates. (They have to make money somehow, on the front end or the back end) The amount you see most often is 1 percent of the loan amount.

Discount Point(s) - This is a one-time fee paid to the lender to lower the mortgage rate on your loan. One point equals one percent of the loan amount. Every point you pay wil lower your rate a certain amount, typically between 1/8 and 3/8 of a point. The point(s) is either paid up front or added to the total amount of the loan.

Appraisal - Every lender requires an appraisal and you, the buyer, pay for it. An appraisal typically costs between $350 and $450 depending on the size of the property.

Flood Certification - All lenders will require a Flood Certification determining whether or not your property is in a flood plane. The reason for this is because you must purchase flood insurance if you're property is in a flood plane in order for the lender to approve your loan. This typically costs less than $20.

Tax Service Fee - In most cases, lenders engage a third party to monitor and/or handle the payment of your property tax bills. The Tax Service Fee covers the cost of this service. The purpose of the tax service fee is to ensure that the payments are made on time, and to prevent tax liens from occurring. This fee is typically under $100, but varies from lender to lender.

Title Insurance - Check out my post on Title Insurance for more information on what this is and the cost of Lender's and Owner's Title Insurance is.

Other Lender Fees - Different lenders have different fees and some may charge them and some may not. If you see a fee on your Good Faith Estimate that you're unsure of, make you sure you ask what it's for. A lot of these fees are often referred to as "junk fees". These fees can vary from a few hundred to a thousand dollars.

Pre-Paid Items (including monies put into reserves)

These are items that lenders require you to pay in advance at settlement. Some of these amounts are paid directly to the lender while others are collected by the lender and put in an escrow amount and paid out at a later date on your behalf. Any monies left in your escrow account once you sell the property are given back to you. Different lenders have different guidelines as to how much they collect in reserves. Here's what they are and how they work:

Remaining Month's Interest - Even though you pay your mortgage in arears (for the previous month), the lender will collect the interest on your loan for the remainder of the month in which you are settling. For example...if you settle on the 15th, the lender will collect the interest from the 15th through the end of the month. You will pay this amount at settlement (on the 15th). The amount of interest depends on the loan amount and the interest rate.

Mortgage Insurance Premium/Private Mortgage Insurance (MIP/PMI) - If your loan amount is more than 80% of the property's value, lenders will charge you a premium. Much like Discount Points, this fee is due at settlement or added to the financing in the form of a higher interest rate. If you pay upfront, the lender will also put about 2 months worth of premium payments into your escrow account as a cushion. You don't see this often anymore because most borrowers get a second loan rather than paying for MIP/PMI. MIP/PMI can cost several hundreds of dollars and is usually not tax-deductible. This premium is not cheap and varies by lender. Check with your specific lender for more details.

Hazard Insurance (aka Home Owner's Insurance) - This protects you as the home owner from things such as fire, wind, storm and other natural disasters. This type of insurance does not always include hurricane or flood insurance, which is not common in Loudoun County/Northern Virginia. But if you do live in a flood zone, you will be required to also purchase flood insurance. The lender will typically collect one full year's premium plus about 3 months worth of premium payments to be put into your escrow account as a cushion. You can opt to pay this directly to the Hazard Insurance company yourself, but you must provide proof of coverage and payment prior to settlement date. The cost for this insurance is typically $2.50 per $1000 of the sales price.

Property Taxes - These vary by jurisdiction/county and are typically paid twice per year. A part of your monthly mortgage payment includes your property taxes. Each month's amount is 1/12 of that year's tax bill. The lender will pay your taxes on your behalf as required by the jurisdiction/county you live in (typically twice per year). You will get a notice in the mail from saying that the property tax you owe is "X" amount, but you should not pay that bill since your lender is paying it on your behalf. Lenders typically require 3 months worth of reserves in your escrow account.

Homeowner Association/Condo Association Fees - Some lenders require that this amount be paid upfront. This amount depends on what your speficic Homeowner's Association/Condo Association charges per month.

Transfer Fee - This is the fee that Homeowner Association's/Condo Association's charge all new homeowners. This fee covers their administrative costs associated with getting you set up in their internal system (and their way of saying "Welcome to the neighborhood!"). This fee can range from $50 to $150.

Settlement Company Fees

These are the fees charged by the Settlement Company and some of the other third parties that perform work on their behalf. These fees include the city, county and state fees those governements charge as part of the real estate transaction.

Settlement Fee - This is the fee charged by the settlement company for performing the actual settlement. This fee can range from $190 to $500+ depending on the settlement company.

Abstract or Title Search - This fee is usually paid out to a Title Search firm that specializes in doing title searches. This fee is typically between $100 and $200. Note that this fee may be bundled into the "Settlement Fee".

Title Examination - All settlement companies have their in-house lawyer examine the title for discrepancies and "red flags". This fee is typically between $100 and $150. Note that this fee may be bundled into the "Settlement Fee".

Title Insurance Binder - The settlement company has to prepare a Title Insurane Binder for the lender. This typically costs between $175 and $250. Note that this fee may be bundled into the "Settlement Fee".

Delivery/Courier Fees - This covers the charge for having a courier hand-deliver and record the deed in Land Records at the local courthouse. The fee for this is between $50 and $75 depeding on which courier company the Settlement Company uses.

Survey (only applies to town homes and single family homes, not condos) - This usually costs between $275 and $350.

Recording of the Deed and the Deed of Trust (Mortgage) - State Fees: $2.50 per thousand based on sales price AND the loan amount. County Fees: $0.8333 per thousand based on sales price AND loan amount. (Some people use another equation which comes out to the same amount: $33 plus $3.34 per $1000 of the sales price and $46 plus $3.34 per $1000 of sales price) Note that these are actually 4 separate fees, one for the deed AND one for the deed of trust for the county in addition to one for the deed AND one for the deed of trust for the state.

Power of Attorney (if applicable) - The fee varies from company to company. The fee for recording the Power of Attorney at the local courthouse is $42.

Misc. Fees

Home Inspection - Not necessarily a "closing cost" in the traditional sense, but still a cost incurred by a buyer as part of the transaction. The fee ranges from $250 to $600+ depending on the size/square footage of the property.

Radon Test - Not necessarily a "closing cost" in the traditional sense either. The test costs between $100 and $150 depending on whether you bundle the Radon Test in with the Home Inspection with the same vendor.

Pest Inspection (if applicable) - This is usually paid for by the seller, but may be paid by the buyer sometimes. Typically runs between $35 and $60.

If you have any questions or concerns, don't hesitate to drop me a line - 703.582.6900 or danilo.bogdanovic@gmail.com.

This was a great week for borrowers locking in their rate - rates plunged almost half a point. Rates are below 6 percent. Several loan officers I spoke with yesterday said that they saw rates as low as 5.75 percent with no points.

Why did rates suddenly plunge? They plunged due to the Fannie Mae/Freddie Mac take-over by the Feds which brought some much-needed calm and (some) stability to the market. Now that the Feds are running Fannie and Freddie, GSE mortgage-backed securities are more appealing to investors. That effect is felt by you and I in the form of lower rates.

What will rates do in the short to mid term? Many are expecting rates to stay at or below 6 percent through the end of the year (and the election).

What affect does this have on the real estate market in Loudoun County? We should see a tick up in buyer demand as buyers take advantage of the very low mortgage rates and prices. This summer saw less inventory and greater buyer demand and this trend should accelerate this month and next due to the even lower rates.

Source: Darran Anthony, Suntrust Mortgage and BankRate.com

When Twitter first came out, it seemed to just be a "tech geek" communication platform with no practical business applications. Well, that's changing. Mass media such as LoudounExtra.com (Washington Post) and ABC 7 News have all gotten on Twitter and are using it to connect with those in the community.

Feel free to follow LoudounExtra.com and/or ABC 7 News to keep up with what's going on in the area as it happens. And feel free to also follow me on Twitter if you'd like.

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