Susan Rossi

Pick a house, any house, and if you're a first-time buyer that means 10% of the home value up to $8,000 will be added to your federal tax refund.


Millions of young adults who purchased their first home in 2009 will receive this money when they file income tax returns shortly. Millions more who purchase between January 1, 2010 and the deadline of April 30 will receive it in the months ahead. Many more, however, are sure to miss it.


First-time buyers, especially those already paying rent, hesitate for a variety of reasons but mostly because they don't understand the process, don't feel their down payment is large enough, or don't believe they would be approved for financing. So we'd like to share some first-time buyer basics.


Because FHA mortgage loans are insured by the Federal Housing Administration, the down payment requirements are established by HUD, the Deparment of Housing and Urban Development. Currently, FHA mortgages require a first-time buyer to have 3.5% down payment. HUD also permits family members to give the 3.5% down payment to the first-time buyer as a gift and permits lender fees, title charges and other closing costs to be paid by the seller on behalf of first-time buyers at the discretion of the individual seller.


A two-year job history, two years in the same field of work or first job out of college ordinarily satisfy employment requirements together with a minimum credit score of 620 and no history of a bankruptcy or foreclosure.


FHA uses debt to income ratios which take the buyer's current obligations such as auto loans, student loans or credit cards into consideration when calculating the buyer's maximum purchase price. With today's low interest rates, most first-time buyers find that their maximum purchase price falls between 2X-3X their annual income.


So what would you do with a check for $8,000? Pay off student loans? An auto loan balance? Several month's home payments?


If you or someone you know is currently renting but would rather own a home, your RE/MAX 2000 professional strongly encourages you to consult a local, reputable lender to determine your maximum purchase price in today's market. Please don't let this opportunity pass by without even trying. There's less than 100 shopping days left.



Limitations: Individual purchasers with income exceeding $125,000 or married couples with combined household income of $250,000 may not receive full credit. Home purchased cannot currently be owned by a blood relative, must be intended for use as the purchaser's primary residence. First time buyers are defined as anyone who has not owned or had an ownership interest in their primary residence in the past 3 years. If purchaser has an outstanding unpaid tax obligation to the IRS, the $8,000 will first reduce that obligation with the balance refunded.

Senior Citizens and Today's Market

Today's market conditions present unique challenges to senior citizens or those looking to retire. Monthly cash flow, annual real estate tax bills, unexpected medical expenses or outstanding debt raises stress levels and causes fear among seniors. At the same time, many adult children who could previously help seniors in their families have realized their own personal challenges in today's environment and find it harder to help.


While many seniors own their residence outright and have little or no mortgage balance, traditional home equity loans result in a monthly payment and qualifying criteria for these loans has tightened. So home equity lines of credit previously used by seniors for annual real estate taxes or emergencies are in many cases no longer an option.


Selling the home means moving. And with the market drop in pricing, many seniors may not see selling the home as an option, unless there is sufficient equity to pay any outstanding mortgage balance, taxes on the property, other outstanding debts and have enough left over for another residence. This can be overwhelming.


However, through the market downturn there have been changes made to the FHA Reverse Mortgage program, a safe, federally insured mortgage program specifically for those 62 and over. These changes have been broadly overlooked but have provided the answer for many seniors.


Today's FHA Reverse Mortgage gives a person aged 62 or over two options:

1) An HECM (Home Equity Conversion Mortgage) is a product which is similar to a refinance, but there is no mortgage payment due on the loan. Depending on the level of equity, any outstanding mortgage is first paid off in full, then the borrower can choose to take the balance in one lump sum, receive monthly payments from the HECM, or tap into the balance when needed. The loan (or as much as is used) is repaid when the home is sold, but the senior may continue to live in the property as long as they like, with no monthly payments. The borrower does not have to "qualify" financially as they would for a traditional home equity loan. Eligibility is determined by the amount of equity in the home and the borrower's age, not by traditional methods such as income or credit.


2) FHA Reverse Mortgages can be used to purchase a new home. In some cases, the senior has a home which is too large to care for or too far from family. They may choose to sell the home and use an FHA Reverse Mortgage for the purchase of a different or smaller home. This option requires a down payment which is calculated based on the purchase price of the home and the borrower's age. There are no monthly mortgage payments, the senior may reside in the property for as long as they like and the indebtedness is satisfied upon the future sale of the property.


Much more information, FAQ's, calculators, loan limits and more are available at www.hud.gov. Additional brochures and information is available at the National Council of Aging (NCOA) website www.ncoa.org. The AARP has an in-depth education series on Reverse Mortgages for Seniors and can be found at www.aarp.org.


Reverse mortgages are not for everyone and require seniors to complete telephone counseling before making a mortgage application, and this newsletter is intended only to provide an overview on this program. Not all lenders are approved for FHA Reverse Mortgage lending, so if you or someone you know thinks this program could help please call Sue Rossi for the name of a local, reputable, approved FHA Reverse Mortgage lender to get all your questions answered.