Lorraine Angelil

A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property's loan.^[1] It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the borrower. Both parties consent to the short sale process, because it allows them to avoid foreclosure.

First Time Buyer Tax Credit 101:

Who is eligible to claim the 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 January 1, 2009 and before December 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner.

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. However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. 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.

How is the amount of the tax credit determined? The tax credit is equal to 10 percent of the home's purchase price up to a maximum of $8,000.

Are there any income limits for claiming the tax credit? Yes. The income limit for single taxpayers is $75,000; the limit is $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI - defined below) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers within these amounts.

How do I claim the tax credit? Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on line 67 of the 1040 income tax form for 2009 returns (line 69 of the 1040 income tax form for 2008 returns).

Waiting a few extra days or weeks to purchase a home this spring could cost buyers thousands of extra dollars as the office of Housing and Urban Development (HUD) implements several changes for loans guaranteed by the Federal Housing Authority (FHA). Coming just weeks before the April 30 deadline for the Home Buyer Tax Credit and just days after the March 31 expiration of the Federal Reserve Board's mortgage backed securities purchase program (which has kept home loan rates artificially low for over a year), these FHA changes make it even more important to act now to save big. Here are a few reasons why: On April 5th, the cost of required up-front mortgage insurance for loans guaranteed by the FHA will increase from 1.75% to 2.25%. For a borrower purchasing a $200,000 home with a $7,000 down payment, the up-front mortgage insurance will increase by $965. Up-front mortgage insurance is typically financed in the final loan amount so the impact to a monthly payment will be minimal but overall, the increase is still borne by the borrower both upfront and monthly. Later this spring, the amount of money that a seller can return to the buyer from their sale proceeds will be reduced from 6% to 3%. The reduction in these "seller concessions" can increase the amount of cash a buyer will be required to pay at closing by $6,000 for a home purchase of $200,000. There is only one way to avoid being affected by all of these costly changes that lie ahead - submit all FHA mortgage applications by the last week of March.

November 6, 2009, Congress voted to extend and expand the First-Time Home Buyer Tax Credit program. There's 100 days left to claim it.

The expiration date of the up-to-$8,000 tax credit has been pushed forward to spring, requiring homebuyers to be under contract for a home no later than April 30, 2010, and to be closed no later than June 30, 2010.

In addition, "move-up" buyers were also added to the program's eligibility list meaning you don't have to be a first-time home buyer to be eligible for the tax credit. If you've lived in your home for 5 of the last 8 years, you meet the IRS requirements.

Move-up buyers are capped at a total tax credit of $6,500.

The tax credit's basic eligibility requirements remain the same:

• You can't purchase the home from a parent, spouse, or child
• You can't purchase the home from an entity in which they're a majority owner
• You can't acquire the home by gift or inheritance
• All parties to the purchase must meet eligibility requirements

The new law includes some notable updates, however.

First, the subject property's sales price may not exceed $800,000. Homes sold for more than $800,000 are ineligible. And, also, household income thresholds have been raised to $125,000 for single-filers and $225,500 for joint-filers.

And lastly, don't forget that the program is a true tax credit - not a deduction. This means that a tax filer who's eligible for the full $8,00 credit and whose "normal" tax liability totals $5,000 would receive a $3,000 refund from the U.S. Treasury at tax time.

Feel free to contact me for additional details

Time is running out for the First time homebuyer tax credit. Please see below for a few faq.

Frequently Asked Questions About the Home Buyer Tax Credit

The American Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $8,000 for

qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before

December 1, 2009 .

The following questions and answers provide basic information about the tax credit. If you have more

specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional

about your unique situation.

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.

However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a

first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter.

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.

How is the amount of the tax credit determined?

The tax credit is equal to 10 percent of the home's purchase price up to a maximum of $8,000.

Can you give me an example of how the partial tax credit is determined?

Just as an example, assume that a married couple has a modified adjusted gross income of $160,000.

The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this

amount. Dividing $10,000 by the phaseout range of $20,000 yields 0.5. When you subtract 0.5 from 1.0,

the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available

to this couple, multiply $8,000 by 0.5. The result is $4,000.

Here's another example: assume that an individual home buyer has a modified adjusted gross income

of $88,000. The buyer's income exceeds $75,000 by $13,000. Dividing $13,000 by the phaseout range of

$20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35

shows that the buyer is eligible for a partial tax credit of $2,800.

Please remember that these examples are intended to provide a general idea of how the tax credit

might be applied in different circumstances. You should always consult your tax advisor for

information relating to your specific circumstances.

What types of homes will qualify for the tax credit?

Any home that will be used as a principal residence will qualify for the credit. This includes singlefamily

detached homes, attached homes like townhouses and condominiums, manufactured homes

(also known as mobile homes) and houseboats. The definition of principal residence is identical to the

one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion

for principal residences.

I am not a U.S. citizen. Can I claim the tax credit?

Maybe. Anyone who is not a nonresident alien (as defined by the IRS ), who has not owned a principal

residence in the previous three years and who meets the income limits test may claim the tax credit for

a qualified home purchase. The IRS provides a definition of "nonresident alien" in IRS Publication 519.

Please contact Lorraine Angelil, Realtor for more deatails

Lorraine Angelil, Realtor

954-628-5911

www.lorraineangelil.com