Ken "Yes You Can" Cook

On one of my blogs the traffic logs keep showing a certain search string containing something similar to "who qualifies as a first time home buyer". There is a remote possibility you, the reader, may not know why this is a popular question. If so the short answer is: Congress just raised the first time home buyer tax credit from $7,500 to $8,000 and extended the qualifying purchase period to homes purchased between January 1 and December 1 of this year (2009).

There are literally thousands of blogs and articles dedicated to explaining the changes so this one deals with this one question only. Who qualifies as a first time home buyer? The answer is dependent on a couple of conditions so the explanation breaks those apart:

If the buyer is single they cannot have owned a primary residence within the last 36 months. This means they cannot have been on title in the last 36 months even if they are a co owner, buyer or signor.

If the buyer is married they nor their spouse may have owned a primary residence in the last 36 months. Investment properties and second homes do not count against them.

Here's the best thing to do if you live in Georgia or Florida and you think you may be a first time home buyer then call me at 866-946-0120 extension 101 or email me at ken AT novationmortgage.com

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Reading the 577 pages of Section B of the American Recovery and Reinvestment Tax Act of 2009 is daunting. Understanding that there are few "new" laws included in it makes you realize you better have some good Thomas skills to cross-reference with the existing laws thich are being ammended. A weekend project is obviously going to turn into a month.

Having read thousands and thousands of pages of Acts, Laws and Regulations I'm not surprised that this would never serve as a stand alone guide. I am, however, blown away that this was in the house for such a short time and in the senate for even less.

Here I have culled one of the parts most important to many AR readers. The first paragraph below the links is the short version, exegesis if you will, of what this ammendment does in my words. The actual text of the Act (the ammendments to the existing Act) is below. Have fun!

Information on the previous First Time Homebuyer's Tax Credit from the IRS.

This information is contained in the text of the second half of HR1-2009-111th Congress

Exegesis:

The tax credit, in the form of a 15 year, interest free loan, has been raised from $7,500 to $8,000. The required recapture period has been changed from a prorated period of the life of the loan to a period ending 3 years following the date of purchase for homes purchased in 2009 only [this needs clarification - it appears if the home is sold during the first 36 months there is a full recapture but after 3 full years there is no recapture. I question this interpretation because it makes no sense]. The time period is extended to cover home purchases made prior to December 1, 2009 (formerly ended July 1, 2009).

SEC. 1006. EXTENSION OF AND INCREASE IN FffiST?TIME HOMEBUYER CREDIT; WAIVER OF REQUIREMENT TO REPAY.
(a) EXTENSION.-
(1) IN GENERAL.-Section 36(h) is amended by striking"July 1, 2009" and inserting "December 1, 22 2009".
(2) CONFORMING AMENDMENT.-Section 36(g) is amended by striking "July 1, 2009" and inserting "December 1, 2009".
(b) INCREASE.-
(1) IN GENERAL.-Section 36(b) is amended by striking "$7,500" each place it appears and inserting "$8,000".
(2) CONFORMING A1VIENDMENT.-Section 36(b) (1) (B) is amended by striking "$3,750" and inserting "$4,000".
WAIVER OF RECAPTURE.-
(1) IN GENERAL.-Paragraph (4) of section 36(f) is amended by adding at the end the following new subparagraph: "
(D) WAIVER OF RECAPTURE FOR PURCHASES IN 2009.-In the case of any credit allowed with respect to the purchase of a principal residence after December 31, 2008, and before December 1, 2009- "
(i) paragraph (1) shall not apply, and "
(ii) paragraph (2) shall apply only if the disposition or cessation described in paragraph (2) with respect to such residence occurs during the 36-month period beginning on the date of the purchase of such residence by the taxpayer.".
(2) CONFORMING AIVIENDMENT.-Subsection (g) of section 36 is amended by striking "subsection (c)" and inserting "subsections (c) and (f) (4)(D)".
(d) COORDINATION WITH FIRST-TIME HOMEBUYER CREDIT FOR DISTRICT OF COLUMBIA.-
(1) IN GENERAL.-Subsection (e) of section 1400C is amended by adding at the end the following new paragraph: "
(4) COORDINATION WITH NATIONAL FIRST TIME HOMEBUYERS CREDIT.-No credit shall be allowed under this section to any taxpayer with respect to the purchase of a residence after December 31, 2008, and before December 1, 2009, if a credit under section 36 is allowable to such taxpayer (or the taxpayer's spouse) with respect to such purchase.".
(2) CONFORMING AlVIENDMENT.-Section 36(d) is amended by striking paragraph (1).
(e) REMOVAL OF PROHIBITION ON FINANCING BY MORTGAGE REVENUE BONDS.-Section 36(d), as amended by subsection (c)(2), is amended by striking paragraph (2) and by redesignating paragraphs (3) and (4) as paragraphs (1) and (2), respectively.
(f) EFFECTIVE DATE.-The amendments made by this section shall apply to residences purchased after December 31, 2008.

Several months ago most lenders started requiring the completion of an IRA form 4506-T in every loan submission package. Not too long afterward I had an applicant in my office signing documents with a Loan Officer when the LO came into my office and said, "They do not want to sign this 4506-T."

A 4506-T is a request for copies of tax filings from the IRS for the most recent 3 years of tax transcripts to prove the applicant filed and that the numbers match what the applicant provided at the time of application.

When I asked the applicant why they did not want to sign she simply replied, "I don't think I have to." Then I asked if it would be a problem if she did she said, "Yes."

What happened next may amaze some of you but it did not even phase me: she demanded all of her documents back including her signed application. Why? She wanted to destroy them of course. Who would want to be convicted of mortgage fraud by their own hand? I'm not sure what happened to her but I sent the story along with the paperwork to the local FBI Field Office to Agent Law. I kid you not, that is her name: Agent Law.

Two times in the last 1 week we have pulled 4506-T reports where the tax returns had not been filed even though the clients had provided us with copies of their returns saying they had been filed. They lied. Both are currently, as I type, at their local IRS offices filing their back taxes.

You will sign a 4506-T. If yo have not filed your taxes or if you filed a different number that is on your tax return it will be discovered. If you fudged the numbers it could result in charges of fraud. It's not worth it. If you have not filed within 30 days of application your 4506-T may still return a negative result. If you have not filed back taxes file them now. If not it could stretch your closing time from 2 weeks to 8 weeks or more. If you filed with a different AGL than you shared with your loan officer correct the mistake now - the 4506-T must reflect exactly what the documents you provide to the owner indicated.

Ken Cook 866-946-0120 extension 101

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THE OPINIONS IN THIS COMMENTARY ARE STRICTLY KEN COOK's PERSONAL OPINION AND NOT REFLECTIVE ON ACTIVE RAIN, NOVATION MORTGAGE, or ANY SPONSOR OF THIS WEBSITE.

EDUCATION BEATS LEGISLATION EVERY TIME. Get your clients, friends and family members to a LENDER RUN home mortgage seminar as soon as possible.

Copyright©2008 Ken Cook. Georgia and Florida real estate investment loans, FHASecure and FHA Home Loans, nationwide commercial hard money and small business loans, non-recourse loans for real estate investors

Novation Mortgage, 2501 E Piedmont Road, Suite 201, Marietta, GA 30062 Georgia Residential Mortgage Licensee 20014. Florida Mortgage Broker Business MBB 0703760 FHA Lender - Equal Housing Lender

Oh, you will certainly encounter brokers and even lenders who tell you they are going to do it for free but I'm confident that you are smart enough to guess there is a catch. What the catch is depends on the person making the statement. If what they mean is they will make enough commission from your FHA streamline refinance to pay the costs for you or if they mean they will roll the costs into your loan so you will not have any out of pocket expense then they are simply being dishonest.

If they expect you to think they will work for free then they are calling you a fool ... maybe even an idiot.

So how are you to know?

There are simple litmus tests to tell if you are getting the best deal for your situation. Always compare the following:

1. The interest rate - this can be "faked" so also check

2. The Annual Percentage Rate (APR) - this is often how the interest rate can be manipulated

3. The discount points - this is how the rate is bought down to a lower level

4. The loan amount - if your loan amount is increasing this is how some or all of your closing costs are being paid

Keep in mind that none of these tactics are "bad" or "against you" unless the lender/broker/loan officer tells you they are doing your FHA streamlined refinance for "free".

Chances of finding a lender to work for free are about as high as finding a checking account that just gives you $3000 for no good reason.

Ken Cook 866-946-0120 extension 101

TWITTER - UTTERLI - BLOGTALKRADIO - EZINE ARTICLES - KEN@NOVATION

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SEO SERP and Content Creation for your real estate related online success.

THE OPINIONS IN THIS COMMENTARY ARE STRICTLY KEN COOK's PERSONAL OPINION AND NOT REFLECTIVE ON ACTIVE RAIN, NOVATION MORTGAGE, or ANY SPONSOR OF THIS WEBSITE.

EDUCATION BEATS LEGISLATION EVERY TIME. Get your clients, friends and family members to a LENDER RUN home mortgage seminar as soon as possible.

Copyright©2008 Ken Cook. Georgia and Florida real estate investment loans, FHASecure and FHA Home Loans, nationwide commercial hard money and small business loans, non-recourse loans for real estate investors

Novation Mortgage, 2501 E Piedmont Road, Suite 201, Marietta, GA 30062 Georgia Residential Mortgage Licensee 20014. Florida Mortgage Broker Business MBB 0703760 FHA Lender - Equal Housing Lender

Golfers already know - par is when you reach balance with the score on the golf course. Many golfers instead of writing down the total number of strokes record the number of strokes over or under the par. In golf par is the standard to aim for. The same applies in mortgage lending and investment borrowing.

Not every golf player "shoots at par". Others actually beat par - they beat the standard. Tiger Woods has a bad day when he shoots a par score on the golf course and I am joyous when I'm within 15 points over par. In fact that is my handicap. I have a handicap of 15. Essentially this means I can reasonably expect to have to hit the ball (add a stroke) on 15 holes and get the other 3 at par.

Par on the golf course is determined by playing a few games and keeping my score then using a weighted set of numbers called Course Difficulty and Course Slope. On a more difficult course I may actually shoot 17 over par and still hit my mark and on a less difficult course I may have to shoot a 13 or even a 12 over par game to keep my handicap.

All of the things that go into course difficulty and slop ratings have to do with the course itself plus a sampling of all the other "scored" games played on that course. To make it really fun the actual hole, called the cup, is moved around on the green, the condition of the turf (the grass), dry weather, wet weather, windy weather, and the list goes on, all effect the golfer's chance of scoring a par. All of those are a part of the risk and all go into the resulting score which is how far you are from par.

I think you probably know where I am going with this, eh?

Par interest rate is the zero rate. It's where the broker is not making any YSP (Yield Spread Premium). It is lower than the retail rate you would get if you called the bank directly. There are some very small but very vocal groups out their claiming the par rate is the rate the borrower is qualified for. Nothing could be farther from the truth. Par is the equivalent of wholesale.

Do you go into a restaurant expecting to pay wholesale for your prepared meal? If you do you must be uncle Posie who bargains with the checker at Publix over a can of peas. Let us look at that prepared meal. The restaurant has paid wholesale for the items and provided all the services needed to put that meal together. They have created a price and placed it on their menu. You have agreed to pay that price and calculate it to be a worthy value. In some ways loans are not too different but that's for another day.

Your interest rate (not the interest rate) is based on the risk you and your home present to the lender. So let's say the par rate is 6% for example. And let's say you are a very good borrower. You have a credit score of 800 plus, a debt-to-income ratio of 35% on all of your credit payments, 36 months of liquid reserves, your home is in a very low foreclosure area where values are still actually increasing (these areas do actually exist) and you only need to borrow 75% of your home's value. Chances are you are going to get the best rate available. If your loan amount is high enough and you are going to be paying your closing costs "out of pocket" you will be able to get the par rate. In fact you can even pay "discount points" to get the rate below par.

Closing costs are paid from somewhere and everybody pays closing costs. You either pay origination, discount or a premium rate. You may even pay a combination of the three. You want par? You will be paying the costs somewhere - either out of the proceeds of the loan, out of your pocket or in the rate.

One last note: the misconception (and it is a horrible misconception) is the brokers add the yield spread to the rate. Absolutely NOT true. If you want to get the broker's wholesale rate then you will have to pay all of the broker's fees out of pocket. The broker's par rate is not your rate, it is the wholesale rate. The par rate is lower than the rate you get from the bank specifically so the broker can be paid by the lender OR by you for part or all of their origination fees. This does not increase the cost of the loan to you over what you would pay at the bank.

If you have been quoted ANY rate with no closing costs you better have a very good understanding of what you are looking at because you can bet you ARE paying for closing costs - one way or another. If you are shopping and nobody has looked at your credit, income, assets, and property value the rate quote is worthless. The rate quote is no good if you do not qualify for it. Unfortunately the mortgage industry is still filled with liars and inexperienced loan officers who do not properly complete the Good Faith Estimate and Truth-In-Lending. And remember, until they have seen your credit, income, assets, and property value that GFE and TIL are still worthless.

When you're ready for the truth and you live in the Southeast call me. I will tell you the truth and if that doesn't sound good enough for you then you can go away. 866-946-0120 extension 101. America's most honest mortgage company. Seriously, we lose business every day because we refuse to lie. Unfortunately we have volumes of stories from people who could have had a great loan, reasonably priced and how we told them who ended up at the closing table feeling forced to sign documents and get a loan that was nothing like the big national lender told them it would. WE WILL NOT MISLEAD YOU but we will give you the choices you need to make an intelligent decision.

99% of borrowers do not understand the mortgage process. Do not be embarrassed to admit you don't. Every loan office who has been in the business can tell within a couple of minutes how knowledgeable you are just by the questions you ask. Least knowledgeable person's most often asked first question? "What are your interest rates?"

Thanks!

-Ken

Ken Cook 866-946-0120 extension 101

TWITTER - UTTERLI - Twitter Tuesday Radio - EZINE ARTICLES - KEN@NOVATION

-----

SEO SERP and Content Creation for your real estate related online success.

THE OPINIONS IN THIS COMMENTARY ARE STRICTLY KEN COOK's PERSONAL OPINION AND NOT REFLECTIVE ON ACTIVE RAIN, NOVATION MORTGAGE, or ANY SPONSOR OF THIS WEBSITE.

EDUCATION BEATS LEGISLATION EVERY TIME. Get your clients, friends and family members to a LENDER RUN home mortgage seminar as soon as possible.

Copyright©2008 Ken Cook. Georgia and Florida real estate investment loans, FHASecure and FHA Home Loans, nationwide commercial hard money and small business loans, non-recourse loans for real estate investors

Novation Mortgage, 2501 E Piedmont Road, Suite 201, Marietta, GA 30062 Georgia Residential Mortgage Licensee 20014. Florida Mortgage Broker Business MBB 0703760 FHA Lender - Equal Housing Lender