Passaic, NJ

The Housing Market might finally have some Good News. Just a few days ago, the House and the Senate passed H.R. 3081. This extension allows Fannie, Freddie, and FHA to loan in High Cost areas without charging extremely high rates, formerly known as jumbo or super jumbo mortgages depending on the size of the loan amounts.

So what is this good news? The conforming loan limits for Fannie, Freddie, and FHA remain at $417,000. Any loan over $417,000 would fall into the next category, which many just call Jumbo loans. Because of the new extension, these loans can still be sold on the secondary market up to $729,750. Which means that the loan guarantee and insurance programs can continue backing these loans in markets with the highest cost of living. Without the extension, these loan amounts would fall under such terms as true non-conforming loan limits which in recent years have come with a much higher cost to the borrower. The conforming loan amount of $417,000 would also have reverted back to the 2009 limits. The impact of that would mean a $400,000 loan would have been more expensive and sometimes not allowed by FHA depending on the state and the county limits.

Conclusion: With a struggling economy, this opens up borrower access to affordable long term fixed rates. The cap of $729,750 is extended to September 30th, 2011. Without going through, it would have expired at the end of this year, and resulted in increased interest rates. How much of an increase you ask?

Example : On a FHA loan right now, you are looking at about an extra 1.5 points more for any loan over $417,950 to $729,750. If one didn’t want to pay the extra 1.5 points, the rate would be about another 1/2 percent higher. In many cases, the higher the loan amount, the more points or rates would drop. Why? It’s called “profit margin”. If we were to keep the playing field leveled, that each loan has the same profit margin, then as mentioned, the cost of the rate should decrease some.

If these loan limits weren’t extended, rates could climb through the roof and the guidelines could become additionally strict. I base this opinion from 2007 when we didn’t have these loan limits extended. It was a much larger risk on the secondary market for private investors. Another impact was the fact that there was no funding from the government to back such risks and higher loan limits. In 2007 and 2008, the rates on such loan amounts in these higher rate ranges were about 1.25% to 1.75% higher. This could have definitely made the process of home ownership more cumbersome for the average person living in high cost areas such as New York City, San Francisco, and similar markets.

For such loan limits, here are some links:

• FHA maximum mortgage loan limits
• Loan limits for Fannie and Freddie

Topic : $8,000 tax credit for first time homebuyers - And no, I am not trying to beat a dead horse. This post is timely and very important because of the comments and e-mails that I have been receiving. I want to share with you a list, the legal ways that the borrower can receive these monies.

As many of us know, you can't use the actual $8,000 tax credit for your downpayment. The IRS even lists this in their instructions. Please read what happened to the Tax Credit : The $8,000 tax credit as a downpayment - GONE -

The second issue? It is fraud to use the tax credit monies as your downpayment. Please read : FRAUD ALERT : Advice on the $8,000 first time homebuyers tax credit.

Here is the basic issue about whether or not you can use the tax credit as your down payment. You can't get the money ahead of time from the IRS to use it for your downpayment. You can get other monies ahead of time from other sources to use as your downpayment, and then apply for the $8,000 tax credit. But you can only apply for the credit after you buy the house. The IRS states this on their web site and in their instructions. The instructions and form 5405 for the IRS Tax Credit Here is what the IRS says in a questions & answers section :

Q. I am in the process of buying a home. I expect to close the deal before December 1, 2009. Can I claim the first-time homebuyer credit now? That would allow me to use the refund for a down payment.

A. No. You may not claim the credit in anticipation of a purchase that has yet to happen. Until you have finalized the purchase of your home, which for most purchasers occurs at the time of the closing, you do not qualify for the credit. IRS news release 2009-27, First-Time Homebuyers Have Several Options to Maximize New Tax Credit, contains details for filing options if the home is purchased after April 15, 2009.

So, how can I get the monies before I purchase the home? Here is a list of your legal options. And keep in mind, the IRS says that you can't claim the tax credit before you buy your home. But read below, there is one way to get part of your tax credit monies before you buy, LEGALLY.

• Saving monies to purchase
• up to 100% of a gift from a relative/family member (FHA loans only)
• From the Federal, state, and local governmental agencies and nonprofit instrumentalities of government (I will spell this out more below. This is about those certain states that will give loans upfront, to be used as your downpayment. This has been the main confusion of discussion.)
• FHA approved non-profits
• monies from their employer in a form of employee contribution (for FHA loans only)
• monies from secured borrowed funds... IE. borrowing equity from your home to buy another home or borrowing against your car that is free and clear or borrowing from your 401-k, etc, etc
• Reducing your tax withholdings which will allow you more monies back in your pay check. (please read more about this below.) But this is the only way to legally get some of your tax credit upfront.

(please consult a CPA, tax accountant, or real estate laywer with further questions & specifics)

Are you in the blues, because you are still so confused? Here is the breakdown of two main issues that people have been confused about.

1. Federal/State/Local programs- My state that I live in is offering a loan or monies for my downpayment. Yes, this is perfectly legal, because it is coming from a State or Local agency. You can also get this money upfront from a non-profit organization. No, not AmeriDream or Nehemiah, yet I am sure they are working on this. But there are other non-profit agencies out there that is not tied to the seller funded DPA's.

How does this work? Very simple..... you have to follow the state guidelines and use their financing programs. Yes, some lenders and banks are set up to do these state bond programs, in which the state has attached a second soft lien per se. Meaning if you sell or refinance the home in a certain period, that monies needs to be paid back. But keeping in mind, once in the house, you can then actually apply for the $8,000 tax credit, or what you are allowed to receive.

2. Partial Tax Credit monies upfront - You can actually reduce your tax withholdings with the IRS. This enables you to receive more monies in your pay check, because you are paying less taxes. You will just owe more at the end of the year. But wait, it can be applied towards the $8,000 tax credit that you can file for. Example :

You do qualify for the $8,000 tax credit. If you didn't reduce your tax withholdings, you would have had to pay $1,000 to the IRS. But now you do reduce your tax withholdings and you were able to save an additional $3,000 up until the day you bought your house, the day that you settled on it. But now you will owe the IRS $3,000, plus your normal $1,000. That equals $4,000. Hey, but you can apply that towards the $8,000, which means that you will still get $4,000 back when you do next years taxes. And keep in mind, you can amend your taxes to receive the monies sooner. Again, speak to a CPA or tax accountant.

CONCLUSION : So there you have it. In my first blog, you know that HUD rescinded the mortgagee letter, ML 09-15, which stated that some entities could do a bridge loan and give you your tax creditupfront, that you could use it for your downpayment. In my 2nd blog, I tell you that it's actually fraud to use any part of the tax credit as your downpayment, not unless you get it as I explained above. These are the basics and you need to be careful on who gives you what professional advice. Just because they say they are an expert or professional, doesn't always mean that they know what they are doing. Sorry, but it's the truth.

PS... and for those that say builders in their states are offering this and or that...??. Unless they are using a non-profit setup, it's illegal. Please read what Ken Cook had to say about this. Ken Cook's Comment

My Series on the First time homebuyers $8,000 tax credit - Everything you need to now, from start to finish:

• The $8,000 tax credit for first time home buyers - The basics - What to know about it - Understanding what the tax credit is all about.

• Use a 6 month gift from a relative to buy a home, thanks to the Tax Credit - How to get creative in using the tax credit and some FHA mortgage guidelines in helping you use this tax credit to your advantage.

• Using First-Time Homebuyer Tax Credits for the Downpayment - It's GONE !!!! - The story of the $8,000 tax credit - The bottom line, you can't use the actual tax credit as your downpayment.. for your downpayment, unless you get it from other sources prior to buying the house and receiving the tax credit.

• FRAUD ALERT - Advice on the $8,000 first time homebuyers Tax Credit - Do you chance it??? - This explains to you that it's fraud if you directly obtain the money from the IRS before you actually purchase the house. Even HUD and many lenders/investors acknowledge this also.

• The $8,000 tax credit for First Time Homebuyers - How & when to get it legally - So how can the tax credit be received legally for your downpayment? Just be careful of those that promise other ways not mentioned. I talk about what is illegal in the previous blog above. Please click the link.

• The First time homebuyer $8,000 tax credit has been AMENDED - May 29th, 2009 - Buyer, beware !!! You still need 3.5% of your own money for the down payment. It can't come way of an upfront loan through the tax credit.

- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages -

- Conventional Loans - 203 k loans -

- Mortgages -

Experience & Knowledge at its BEST !!!

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For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!

Copyright © 2009 by Jeff Belonger

Recently my friend and fellow Active Rain blogger - Lorrie Semler of Addison Texas - mentioned that her Mom, former Passaic NJ Mayor - Margie Semler, enjoyed writing opinion pieces on North Jersey life and politics. Seeing a natural tie in for my We Love North Jersey group here on Active Rain, I asked Lorrie if she might be able to convince her Mom to write some pertinent posts here on our blog pages. Well, apparently Margie is not a real big computer person, so she's allowed me the honor of posting her words here on my blog. So without further delay.....ladies and gentleman, I present the former Mayor of Passaic NJ,

Margie Semler

The Herald News 2/6/09 article "Assembly OKs budget delay" indicates that our representatives in the Trenton Assembly continue to dilly- dally about finalizing the state budget.

Their delay has a domino effect for all local cities that have fiscal year budgets. These communities have, therefore, been unable to pass their own budgets. Taxpayers in Passaic have again received another estimated tax bill for the third quarter and still do not know what the final amount will be for fiscal 2008-09.

These latest tax bills arrived so late that payments aren't due until the last week in February. That, in turn, means that later collections will not accrue the needed interest for the city.

If these legislators aren't up to making tough and timely decisions, then they don't belong in public office.

We look forward to future blog posts by Mayor Semler!

Brought to you by your North Jersey Real Estate Team

Jim Albano and Jean-Marie Vantuno

www.yourhomenorthjersey.com

39 East Main St.

Little Falls, NJ 07424

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