Tuesday, July 7, 2009
Please take a look at the attached link. Fred Real Estate Group was recently featured in the Bend Bulletin.
The Federal Housing Administration rolled out details of its policy Friday that will let first-time home buyers apply an $8,000 tax credit to fund home purchases.
Until now, home buyers were only able to get that money after they bought a home, by applying for the credit-10% of the home's price up to $8,000-on their tax returns.
The policy change means home buyers, who use FHA-backed financing, can get a short-term loan to help buy a home. The loan is repaid a few months later, after the buyer files an amended tax return and receives the credit.
A few important notes:
· This is only for FHA loans, which require a minimum 3.5% down payment.
· Borrowers must first come up with the minimum 3.5% themselves. The bridge loan would cover a larger down payment.
· Borrowers can still use loans from certain non-profits and state and local housing finance agencies to fund the 3.5% down payment.
A handful of states, including Colorado, New Jersey and Ohio, have already launched programs providing bridge loans that allow home buyers to ‘monetize the tax credit,' which expires Dec. 1. And Realtors and homebuilders have pushed hard for the agency to do the same. But the industry could be disappointed by the plan, announced at a builder conference Friday by HUD Secretary Shaun Donovan, because they wanted to allow buyers to use the credit to fund the initial 3.5% down-payment. The FHA's policy makes sure that buyers still have "skin in the game" by funding their initial down payment, even if they use tax credit to fund closing costs and a larger down payment.
Note the text highlighted in red. Like all the programs recently announced to help either distressed homeowners (Making Home Affordable, Fannie Mae DU refi plus, Freddie Mac Refinance Relief program) this one is also going to be a constantly changing landscape as the government, and lenders, assess and reassess the parameters of this program.
Federal officials on Monday reversed an earlier decision to allow first-time home buyers to use an $8,000 tax credit to borrow the down payment on a home.
A week earlier, U.S. Department of Housing and Urban Development Secretary Shaun Donovan had told the National Association of Home Builders that HUD would let banks and local governments offer short-term "bridge loans" to cover the down payment for first-time buyers eligible for the tax credit. The loans would have been available to applicants for federally insured mortgages such as Federal Housing Administration loans.
Lenders, home builders and real- estate agents had reacted favorably to the bridge-loan proposal, saying it would open up the housing market to more first-time buyers.
However, not everyone was in favor of using the tax credit as collateral on a down-payment loan.
"That tax credit should be savings, not debt," said Patricia Garcia-Duarte, executive director of Neighborhood Housing Services in Phoenix.
Garcia-Duarte said the proposal too closely resembled a now-illegal practice known as seller-funded down-payment assistance, which allowed a home's seller to "gift" the down payment to a specific buyer through a non-profit organization.
Phoenix loan originator Dean Wegner was among the housing-industry professionals who had expressed enthusiasm about the bridge-loan plan.
Wegner said the program would have boosted local home sales, but he added that the bridge loans likely would have come with a high interest rate.
The loans also could have created income-tax issues, according to the IRS officials who shot down HUD's plan.
Still, Wegner remains optimistic that the government will seek other means to circumvent the FHA's required 3.5 percent down payment.
"They will probably come out with a zero-down FHA loan starting January 1, once the $8,000 goes away," he said.
I think we will just wait and see how this pans out so I will be cautious about telling my clients about this plan. HUD talked about rolling out a 100% loan program in 2004 and nothing materialized, then again in 2007 I believe. With the lack of 100% loan programs out there in today's market, I have been talking with my borrowers with limited assets about USDA, VA and the $100 down HUD repo purchase through FHA.
I am sure there will be more information over the next weeks and months, so stay tuned.
Fred Real Estate Group is pleased to announce that it will begin offering flat fee listings for sellers looking to take advantage of the exposure and marketing the local MLS can give their property but do not need the professional representation of a realtor.
We are offering these options to sellers for a few reasons. Every seller is in a different situation. Some have limited equity, some are investors that have sold many homes on their own or some simply want to try selling their home "For sale by owner" for a while.
We have developed two flat fee programs to get them the exposure they need. And, we are doing to save our sellers money. Our flat fee programs start at $179.
We feel that if we can save our sellers money and offer them more options than traditional real estate while providing superior service, we will have repeat business from them for years to come.
If you or anyone you know would like more information on any of our real estate packages, please visit www.fredrealestate.com or call me directly at 541-647-8322 or 503-422-7653. Fred Mannila
NEW YORK (CNNMoney.com) -- If you're thinking of buying a home, there could be a big bonus for you in the economic stimulus bill that's now before Congress.
Among its many provisions is a $7,500 tax credit for first time home buyers. The House passed the $819 billion stimulus plan, including this tax credit, in a vote late Wednesday. The Senate may vote on its version of the bill some time next week.
Technically, the stimulus bill is actually changing the terms of the $7,500 tax credit that was issued as a part of the Housing Recovery Act, which Congress passed last summer. That legislation required that the tax credit be repaid over 15 years, making it more of a no-interest loan. Not surprisingly, the measure had little impact on the market. The stimulus bill now under consideration would make that tax credit a true credit that doesn't need to be repaid.
Many in the housing industry believe this credit could do a lot to jump start the moribund housing market.
"Our economists have studied the effect [of the credit] and they say there could be a 10% increase in home sales if it's implemented," said Mary Trupo, a spokeswoman for the National Association of Realtors. "It gives people who are sitting on the fence or who have inadequate funds for closing costs an incentive to act now."
A 10% increase would yield an extra half million sales this year.
Who qualifies
To be eligible, buyers cannot have owned a home for the past three years, and the new home has to be used as a primary residence. The credit phases out as income rises above $75,000 for singles and $150,000 for couples, and disappears entirely at $95,000 and $170,000, respectively.
Applying for it is easy, or at least as easy as doing your income taxes. Just claim it on your return. That's it. No other forms or papers have to be filed.
Both the Senate and the House versions of the new act remove the requirement that buyers repay the credit. The Senate bill applies retroactively to any purchase completed between January 1, 2009 and the end of August. The House version is also retroactive to the start of the year, and expires at the end of June. As long as buyers don't sell for at least 36 months, they keep the money.
And the credit is refundable, meaning that it can be claimed even if the amount of the credit earned exceeds the buyer's tax liability. So even if your total tax bill comes to just $5,000, you can still qualify for a full $7,500 refund.
The housing industry has been pushing this idea for many months, arguing that first-time homebuyers are the key to boosting home sales. First time buyers who purchase from existing homeowners free those sellers to trade up to bigger, better houses.
Buyers beware
But the credit has its drawbacks, according to Bob Williams, a spokesman for the Tax Policy Center, which gave it a mediocre C+ grade in its Tax Stimulus Report Card.
Williams argues that the credit is poorly targeted because it goes to every first-time buyer, not just the ones who wouldn't buy without it. So, it merely provides a windfall for many people who would have purchased anyway. (See correction, below).
And in the end, a $7,500 tax credit, regardless of the details, does nothing to address the issue that's holding most buyers back - the suspicion that prices are going to keep falling.
"As long as people are uncertain about what markets are going to do, this won't help much," said Williams. "It's not enough to change that."
The industry would like to make the tax credit stronger by making it available to all homebuyers, not just first-timers. And it's pushing to have the credit last through the end of the year, at least. Courtesy of CNNmoney.com - Les Christie
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