One of the number one questions I hear is what happens after the short sale? At The Dallas Home Team we make sure that your lender cancels the debt or that you are aware if it will not be canceled so you can make an informed decision. Here is an example: You borrow $10,000 and default on the loan after paying back $2,000. If the lender is unable to collect the remaining debt from you, there is a cancellation of debt of $8,000, which generally is considered as taxable income to you. You will receive a 10-99 for the forgiven debt amount however, it may not be taxable income.
Confused? In 2007 George Bush approved “The Mortgage Forgiveness Debt Relief Act and Debt Cancellation”. What this means to you, the home seller, is that until 2012 there are certain instances where you will be able to fill out IRS Form 982 and file it within the same year that the debt was forgiven by the lender and the IRS will also forgive you the taxes you would have normally had to pay. Some of the reasons that you may not have to pay taxes on a forgiven debt include:
* Qualified principal residence indebtedness: This is the exception created by the Mortgage Debt Relief Act of 2007 and applies to most homeowners.
* Bankruptcy: Debts discharged through bankruptcy are not considered taxable income.
* Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you. You are insolvent when your total debts are more than the fair market value of your total assets.
* Certain farm debts: If you incurred the debt directly in operation of a farm, more than half your income from the prior three years was from farming, and the loan was owed to a person or agency regularly engaged in lending, your cancelled debt is generally not considered taxable income.
* Non-recourse loans: A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral. That is, the lender cannot pursue you personally in case of default. Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income. However, it may result in other tax consequences.
(this information was taken directly from www.irs.gov )
So, in plain English if you short sale your home and it is your primary residence, the cancelled debt that you are 10-99’d for should be tax free once you file your Form 982. To read the act in its entirety visit http://www.irs.gov/pub/irs-pdf/p4681.pdf .
If you would like to comment on this blog please feel free or for more information about short sales please contact me at Tanyashomes@sbcglobal.net or at 469-452-7071.
Wednesday, November 18, 2009
Friday, October 30, 2009
Put your car keys beside your bed at night
If you hear a noise outside your home or someone trying to get in your house, just press the panic button for your car. The alarm will be set off, and the horn will continue to sound until either you turn it off, or the car battery dies. This tip came from a neighborhood watch coordinator.
Next time you come home for the night and you start to put your keys away, think of this: It's a security alarm system that you probably already have and requires no installation. Test it. It will go off from most everywhere inside your house and will keep honking until your battery runs down or until you reset it with the button on the key fob chain. It works if you park in your driveway or garage. If your car alarm goes off when someone is trying to break into your house, odds are the burglar/rapist won't stick around. After a few seconds all the neighbors will be looking out their windows to see who is out there and sure enough the criminal won't want that. And remember to carry your keys while walking to your car in a parking lot. The alarm can work the same way there. This is something that should really be shared with everyone. Maybe it could save a life or prevent a sexual abuse crime.
This would also be useful for any emergency, such as a heart attack, where you can't reach a phone, or with elderly folks in case they fall outside, or around the house, and need medical attention.
Next time you come home for the night and you start to put your keys away, think of this: It's a security alarm system that you probably already have and requires no installation. Test it. It will go off from most everywhere inside your house and will keep honking until your battery runs down or until you reset it with the button on the key fob chain. It works if you park in your driveway or garage. If your car alarm goes off when someone is trying to break into your house, odds are the burglar/rapist won't stick around. After a few seconds all the neighbors will be looking out their windows to see who is out there and sure enough the criminal won't want that. And remember to carry your keys while walking to your car in a parking lot. The alarm can work the same way there. This is something that should really be shared with everyone. Maybe it could save a life or prevent a sexual abuse crime.
This would also be useful for any emergency, such as a heart attack, where you can't reach a phone, or with elderly folks in case they fall outside, or around the house, and need medical attention.
Thursday, October 29, 2009
To Extend Or Not To Extend...That Is The Question!
The U.S. Senate’s chief Democrat, Majority Leader Harry Reid (Nevada), said Wednesday that his party has reached a consensus to extend the first-time homebuyer tax credit, which is set to expire November 30.
Senate Banking Committee Chairman Christopher Dodd (D-Connecticut) has voiced the same sentiment to the media today, as well.
But the party support isn’t one-sided. Reuters reported that the chamber’s foremost Republican, Sen. Mitch McConnell (Kentucky), acknowledged that most senators support the measure, quoted by the news agency as saying he shares Reid’s view.
Reid summed it up on the Senate floor when he said, “There has been general agreement by a significant number of senators, Democrats and Republicans, to get this done.”
As DSNews.com reported Tuesday, the proposal gaining the most favor among Senators was an amendment offered up by Reid and Senate Finance Committee Chairman Max
Baucus (D-Montana), which would extend the tax incentive until the end of 2010, but reduce the credit amount with each quarter.
Take two: The tax break measure has gotten yet another makeover. The latest version reduces the credit to 10 percent of the sale price, with a cap of $7,290 – as opposed to the $8,000 maximum currently in place. The benefit could be applied to home sales signed – not closed – by April 30, 2010, allowing 60 days beyond that date for closing.
It would also be opened up to buyers who have lived in their current residence for at least five years, so-called step-up buyers. The income limits for first-time homebuyers would stay the same – $75,000 for individuals, $150,000 for couples – but increase for step-up buyers to $125,000 for individuals and $250,000 for couples.
Andrew Parmentier, a managing partner at Height Analytics, a research firm in Washington, told Bloomberg News that the demand for new homes and condominiums may more than double with step-up buyers as part of the equation. “You just opened up a whole new pool of people who can buy into those empty homes and empty condos that were built out,” Parmentier said – a move that would aid the existing-home market as well, as overall inventory levels are reduced.
A Senate vote on the credit extension was expected to come last night, but reportedly got entangled in legislative procedural issues. The tax credit amendment did not get attached to an insurance benefit bill, which did pass Tuesday night, as intended. Despite the red-tape roadblock, senators say a decision will be made sometime this week.
Senate Banking Committee Chairman Christopher Dodd (D-Connecticut) has voiced the same sentiment to the media today, as well.
But the party support isn’t one-sided. Reuters reported that the chamber’s foremost Republican, Sen. Mitch McConnell (Kentucky), acknowledged that most senators support the measure, quoted by the news agency as saying he shares Reid’s view.
Reid summed it up on the Senate floor when he said, “There has been general agreement by a significant number of senators, Democrats and Republicans, to get this done.”
As DSNews.com reported Tuesday, the proposal gaining the most favor among Senators was an amendment offered up by Reid and Senate Finance Committee Chairman Max
Baucus (D-Montana), which would extend the tax incentive until the end of 2010, but reduce the credit amount with each quarter.
Take two: The tax break measure has gotten yet another makeover. The latest version reduces the credit to 10 percent of the sale price, with a cap of $7,290 – as opposed to the $8,000 maximum currently in place. The benefit could be applied to home sales signed – not closed – by April 30, 2010, allowing 60 days beyond that date for closing.
It would also be opened up to buyers who have lived in their current residence for at least five years, so-called step-up buyers. The income limits for first-time homebuyers would stay the same – $75,000 for individuals, $150,000 for couples – but increase for step-up buyers to $125,000 for individuals and $250,000 for couples.
Andrew Parmentier, a managing partner at Height Analytics, a research firm in Washington, told Bloomberg News that the demand for new homes and condominiums may more than double with step-up buyers as part of the equation. “You just opened up a whole new pool of people who can buy into those empty homes and empty condos that were built out,” Parmentier said – a move that would aid the existing-home market as well, as overall inventory levels are reduced.
A Senate vote on the credit extension was expected to come last night, but reportedly got entangled in legislative procedural issues. The tax credit amendment did not get attached to an insurance benefit bill, which did pass Tuesday night, as intended. Despite the red-tape roadblock, senators say a decision will be made sometime this week.
Monday, October 26, 2009
Don't Let A Little Bit Of Rain Stop You!
With all of the rain we have been having I thought it important to talk about showings in the rain. Very few sellers will stop showings from happening just because it is raining outside. As a matter of fact a seller needs to sell their home as badly in the rain as they do in the sunshine. It may be an optimal time for a buyer to steal a house that has just entered the market because other buyers want to wait for a more comfortable day to go out house hunting.
Here is some advice for a buyer who is committed enough to house hunt in the rain. Be prepared!
* Sellers may ask you to slip off your shoes at the front door to avoid tracking so be sure to wear shoes that you can slip on and off easily.
* Wear shoes you don’t mind getting wet or muddy…especially if you are looking at acreage.
* Bring a flashlight. Some houses, especially foreclosures or short sales, may not have electricity and with a day darkened by rain it will be hard to see no matter what time it is.
* Trade in umbrellas for raincoats. An umbrella is something you have to open and close, open and close so a raincoat with a hood is a better choice to speed up the time spent getting in and out of vehicles…or spent in the rain.
* Have your agent with The Dallas Home Team give sellers plenty of notice for the showing. A seller cannot go walk the dog on a rainy day during your showing so they will need to make other arrangements while you are viewing their home.
So, bring your goulashes and good house hunting!
Here is some advice for a buyer who is committed enough to house hunt in the rain. Be prepared!
* Sellers may ask you to slip off your shoes at the front door to avoid tracking so be sure to wear shoes that you can slip on and off easily.
* Wear shoes you don’t mind getting wet or muddy…especially if you are looking at acreage.
* Bring a flashlight. Some houses, especially foreclosures or short sales, may not have electricity and with a day darkened by rain it will be hard to see no matter what time it is.
* Trade in umbrellas for raincoats. An umbrella is something you have to open and close, open and close so a raincoat with a hood is a better choice to speed up the time spent getting in and out of vehicles…or spent in the rain.
* Have your agent with The Dallas Home Team give sellers plenty of notice for the showing. A seller cannot go walk the dog on a rainy day during your showing so they will need to make other arrangements while you are viewing their home.
So, bring your goulashes and good house hunting!
Thursday, October 22, 2009
Do You Want $8,000 and a Home?
This credit should really be called "it's been a while" home buyer credit. You qualify for this money if you have not owned a principal residence at any time during the 3 years prior to your purchase date and meet some other guidelines
Frequently asked questions:
You only have until November 10th to have your loan submitted into underwriting if you want the $8,000 tax credit! I really don't want you to be one of the people that funds your loan on December 1st and you missed out on $8,000! Our team is working double time to help people find their dream homes quickly. Our lenders are ready to submit you into underwriting quickly so that you will not miss out! **If you are getting a USDA loan, your deadline is even sooner!
That means you quickly need to do the following if you want this money:
* qualify for a loan
* find the perfect home
* put in your offer
* negotiate your offer
* make sure you have enough money for down payment, closing costs, etc.
* do your home inspection
* have your home appraised
* submit to underwriting
* get loan documents
* sign documents at the title company
* loan needs to fund prior to November 30th
If all the items above do not happen prior to November 30th, you will not get the tax credit. Realtors, lenders and people just like you are trying to get this deadline extended! There have been 5 bills introduced to Congress to extend the first time home buyer credit.
* S.1230: Home Buyer Tax Credit Act of 2009 was introduced on June 10, 2009
* H.R.2801: Home Ownership Moves The Economy (HOME) Act of 2009 was introduced on June 10,2009
* H.R.2606: Home Buying Credit Expansion Act was introduced on May 21, 2009
* H.R.2619: To amend the Internal Revenue Code of 1986 to temporarily expand the credit for the 1st time was introduced on May 21, 2009
* H.R.2655 - To amend the Internal Revenue Code of 1986 to expand and extend the first time homebuyer credit was introduced June 2, 2009
For now, we can either wait and see if the intense lobbying of groups such as the National Association of Realtors and National Association of Home Builders can sway the lawmakers to believe this is a high priority or we can contact our local senator or representatives' offices ourselves!
Senate Look-up
Representative Look-up
I wouldn't wait around hoping that the extension goes through. Contact our team now and let's get started finding you a home! Call us at 469-452-7071 for any questions or to get starting on your home search!
Frequently asked questions:
You only have until November 10th to have your loan submitted into underwriting if you want the $8,000 tax credit! I really don't want you to be one of the people that funds your loan on December 1st and you missed out on $8,000! Our team is working double time to help people find their dream homes quickly. Our lenders are ready to submit you into underwriting quickly so that you will not miss out! **If you are getting a USDA loan, your deadline is even sooner!
That means you quickly need to do the following if you want this money:
* qualify for a loan
* find the perfect home
* put in your offer
* negotiate your offer
* make sure you have enough money for down payment, closing costs, etc.
* do your home inspection
* have your home appraised
* submit to underwriting
* get loan documents
* sign documents at the title company
* loan needs to fund prior to November 30th
If all the items above do not happen prior to November 30th, you will not get the tax credit. Realtors, lenders and people just like you are trying to get this deadline extended! There have been 5 bills introduced to Congress to extend the first time home buyer credit.
* S.1230: Home Buyer Tax Credit Act of 2009 was introduced on June 10, 2009
* H.R.2801: Home Ownership Moves The Economy (HOME) Act of 2009 was introduced on June 10,2009
* H.R.2606: Home Buying Credit Expansion Act was introduced on May 21, 2009
* H.R.2619: To amend the Internal Revenue Code of 1986 to temporarily expand the credit for the 1st time was introduced on May 21, 2009
* H.R.2655 - To amend the Internal Revenue Code of 1986 to expand and extend the first time homebuyer credit was introduced June 2, 2009
For now, we can either wait and see if the intense lobbying of groups such as the National Association of Realtors and National Association of Home Builders can sway the lawmakers to believe this is a high priority or we can contact our local senator or representatives' offices ourselves!
Senate Look-up
Representative Look-up
I wouldn't wait around hoping that the extension goes through. Contact our team now and let's get started finding you a home! Call us at 469-452-7071 for any questions or to get starting on your home search!
Wednesday, October 21, 2009
Halloween Tips
Here are some tips from the The Dallas Home Team to keep you, your guests, and all your little goblins safe as you create your own “Monster Ball” or get ready for a night of trick-or-treating:
1. Keep candles and jack-o-lanterns away from curtains, decorations, and other combustibles.
2. Never leave candles unattended.
3. Make sure indoor or outdoor lights have been tested for safety by a recognized testing laboratory. Check wiring and extension cords for broken or cracked sockets, frayed or bare wires, or loose connections.
4. Don't overload extension cords or electrical sockets.
5. Keep candles and jack-o-lanterns away from high traffic areas to avoid being knocked over.
Other safety tips include:
• Look for “Flame Resistant” labels on costumes.
• Make sure masks do not hamper the visibility of the wearer.
• Choose costumes made with bright colors to make them visible to motorists.
• Give Trick-or-Treaters flashlights to help them see better at night.
• Costumes should be well fitting to prevent tripping or falling.
• Children should use crosswalks and not run into the street from between parked cars.
• Parents or other responsible adults should accompany children.
• Parents should closely examine the treats collected by the children to ensure that they are safe to eat.
1. Keep candles and jack-o-lanterns away from curtains, decorations, and other combustibles.
2. Never leave candles unattended.
3. Make sure indoor or outdoor lights have been tested for safety by a recognized testing laboratory. Check wiring and extension cords for broken or cracked sockets, frayed or bare wires, or loose connections.
4. Don't overload extension cords or electrical sockets.
5. Keep candles and jack-o-lanterns away from high traffic areas to avoid being knocked over.
Other safety tips include:
• Look for “Flame Resistant” labels on costumes.
• Make sure masks do not hamper the visibility of the wearer.
• Choose costumes made with bright colors to make them visible to motorists.
• Give Trick-or-Treaters flashlights to help them see better at night.
• Costumes should be well fitting to prevent tripping or falling.
• Children should use crosswalks and not run into the street from between parked cars.
• Parents or other responsible adults should accompany children.
• Parents should closely examine the treats collected by the children to ensure that they are safe to eat.
Thursday, October 15, 2009
MILITARY HAS THE TAX CREDIT EXTENDED...
The House of Representatives voted unanimously Monday to extend the deadline for the home buyers’ tax credit for one group of Americans.
HR 3590 will allow eligible military personnel and foreign service and intelligence officers to apply for the $8,000 tax credit for one year beyond its current November 30 deadline. Those meeting the underlying requirements for the credit must also be serving overseas or have spent at least 90 days deployed outside of the country during the current calendar year. It is expected that about 350,000 military personnel and an unknown number of federal employees may be affected by the new law.
The bill, introduced by Representative Charles Rangel (D-NY) because it was thought that families serving overseas were being passed over for this one-time opportunity to purchase a home. It passed the Housed passed with 416 votes and 16 abstentions.
There is currently a battle being waged over extending the popular credit for all eligible persons and possibly even removing the requirement that the home be a qualified first-time purchase. Many credit the current tax break for a recent surge in the housing market after months of rising inventories and falling prices. Such an extension is strongly supported by the National Association of Realtors, the National Association of Homebuilders, and other major players in the housing industry, however, many argue against it on the basis of cost.
The Rangel bill will also prohibit the Internal Revenue Service from pursuing payback of the credit if the homeowner is deployed after receiving it. Under the original law a homeowner was required to occupy the home for 36 months or the credit would be recaptured. Because the military, the State Department and intelligence agencies frequently relocate their personnel and their families, some have been reluctant to apply for the credit even if they did purchase a home.
The bill must still be considered by the Senate but similar easy passage is expected.
HR 3590 will allow eligible military personnel and foreign service and intelligence officers to apply for the $8,000 tax credit for one year beyond its current November 30 deadline. Those meeting the underlying requirements for the credit must also be serving overseas or have spent at least 90 days deployed outside of the country during the current calendar year. It is expected that about 350,000 military personnel and an unknown number of federal employees may be affected by the new law.
The bill, introduced by Representative Charles Rangel (D-NY) because it was thought that families serving overseas were being passed over for this one-time opportunity to purchase a home. It passed the Housed passed with 416 votes and 16 abstentions.
There is currently a battle being waged over extending the popular credit for all eligible persons and possibly even removing the requirement that the home be a qualified first-time purchase. Many credit the current tax break for a recent surge in the housing market after months of rising inventories and falling prices. Such an extension is strongly supported by the National Association of Realtors, the National Association of Homebuilders, and other major players in the housing industry, however, many argue against it on the basis of cost.
The Rangel bill will also prohibit the Internal Revenue Service from pursuing payback of the credit if the homeowner is deployed after receiving it. Under the original law a homeowner was required to occupy the home for 36 months or the credit would be recaptured. Because the military, the State Department and intelligence agencies frequently relocate their personnel and their families, some have been reluctant to apply for the credit even if they did purchase a home.
The bill must still be considered by the Senate but similar easy passage is expected.
Wednesday, July 1, 2009
Have A Safe 4th Of July!
July 3rd
- Kaboom Town (Addison) www.addisontexas.net
- Annual Farmers Branch Independence Day Celebration (Farmers Branch) www.farmersbranch.com
- Light Up Arlington (Arlington) www.arlingtontx.gov
- Lone Stars & Stripes Firework Celebration (Grand Prairie) www.lonestarpark.com
- Dr. Pepper Snapple Group FAIR PARK FOURTH (Dallas) www.fairpark.org
- 44th Annual 4th of July Parade (Arlington) www.arlington4th.com
- Fort Worth Fourth (Fort Worth) www.streamsandvalleys.org
- Totally Groovin 4th Fest Independence Day Celebration (Bedford) www.ci.bedford.tx.us
- Annual Independence Day Celebration (Flower Mound) www.flower-mound.com
- City Of Frisco's 8th Annual Frisco Freedom Fest (Frisco) www.friscofreedomfest.org
- 27th Annual Fireworks Extravaganza Over Lake Grapevine (Grapevine) www.grapevinetexasusa.com
- Red, White & Lewisville (Lewisville) www.cityoflewisville.com
- Red, White & Boom 2009 (McKinney) www.downtownmckinney.com
- All-American Fourth Fireworks Show (Plano) www.planoparks.org
Thursday, May 14, 2009
Everybody Likes Free Food!!
Arby's is offering the following deals this month with no coupon required:
May 20th - Free Chocolate Malt Swirl Shake with sandwich purchase.
May 27th - Free Regular Roast Beef with soft drink purchase.
June 3rd - Free FruiTea with sandwich purchase.
June 10th - Free Roast Chicken Club with soft drink purchase.
June 17th - Free Regular Side Kicker with sandwich purchase.
June 24th - Free Regular Roast Beef with soft drink purchase.
July 1st - Free Regular Beef and Cheddar with soft drink purchase.
July 8th - Free Orange Cream Shake with sandwich purchase.
July 15th - Free Regular Roast Beef with soft drink purchase.
July 22nd - Free RoastBurger with soft drink purchase.
July 29th - Free FruiTea with sandwich purchase.
August 5th - Free Regular Roast Beef with soft drink purchase.
August 12th - Free Roast Chicken Club with soft drink purchase.
August 19th - Free FruiTea with sandwich purchase.
August 26th - Free Roast Beef ‘n Cheddar with soft drink purchase
May 20th - Free Chocolate Malt Swirl Shake with sandwich purchase.
May 27th - Free Regular Roast Beef with soft drink purchase.
June 3rd - Free FruiTea with sandwich purchase.
June 10th - Free Roast Chicken Club with soft drink purchase.
June 17th - Free Regular Side Kicker with sandwich purchase.
June 24th - Free Regular Roast Beef with soft drink purchase.
July 1st - Free Regular Beef and Cheddar with soft drink purchase.
July 8th - Free Orange Cream Shake with sandwich purchase.
July 15th - Free Regular Roast Beef with soft drink purchase.
July 22nd - Free RoastBurger with soft drink purchase.
July 29th - Free FruiTea with sandwich purchase.
August 5th - Free Regular Roast Beef with soft drink purchase.
August 12th - Free Roast Chicken Club with soft drink purchase.
August 19th - Free FruiTea with sandwich purchase.
August 26th - Free Roast Beef ‘n Cheddar with soft drink purchase
Tuesday, April 21, 2009
Why Should You Invest In Texas?
Texas cities dominate a new list of the best places for jobs, with the top five large metropolitan areas for job growth all located in the Lone Star State, according to Forbes magazine.
Nine of the top 20 cities on Forbes' overall list are in Texas, with Odessa ranked No. 1.
Dallas-Plano-Irving ranked No. 5 in the magazine's list of the best large-size cities and 32nd overall.
The study is based on job growth in 333 regions across the U.S. The analysis looked not only at job growth in the last year but also at how employment figures have changed since 1996.
Given the current state of the economy, Forbes says that "this year perhaps we should call the rankings not the 'best' places for jobs, but the 'least worst.' "
Dallas, for example, has actually seen total jobs decline by 0.1 percent since 2007, according to Forbes.
Forbes said the reasons for the state's relative success are varied: "A healthy energy industry is certainly one cause. Many Texas highfliers, including Odessa, Longview, Dallas and Houston, are home to energy companies that employ hordes of people – and usually at fairly high salaries."
Texas also experienced a less-severe housing crisis than other parts of the country. Other factors include lower costs and taxes.
In Dallas, the biggest gains came from government (3.4 percent) and education and health services (4.6 percent). The big losses for Dallas employment came from manufacturing and wholesale industries.
But natural resources, mining and construction in Dallas saw the biggest downward trend. That sector reversed from 18.1 percent cumulative growth between 2003 and 2007 to a 3.4 percent decline in 2008.
Nine of the top 20 cities on Forbes' overall list are in Texas, with Odessa ranked No. 1.
Dallas-Plano-Irving ranked No. 5 in the magazine's list of the best large-size cities and 32nd overall.
The study is based on job growth in 333 regions across the U.S. The analysis looked not only at job growth in the last year but also at how employment figures have changed since 1996.
Given the current state of the economy, Forbes says that "this year perhaps we should call the rankings not the 'best' places for jobs, but the 'least worst.' "
Dallas, for example, has actually seen total jobs decline by 0.1 percent since 2007, according to Forbes.
Forbes said the reasons for the state's relative success are varied: "A healthy energy industry is certainly one cause. Many Texas highfliers, including Odessa, Longview, Dallas and Houston, are home to energy companies that employ hordes of people – and usually at fairly high salaries."
Texas also experienced a less-severe housing crisis than other parts of the country. Other factors include lower costs and taxes.
In Dallas, the biggest gains came from government (3.4 percent) and education and health services (4.6 percent). The big losses for Dallas employment came from manufacturing and wholesale industries.
But natural resources, mining and construction in Dallas saw the biggest downward trend. That sector reversed from 18.1 percent cumulative growth between 2003 and 2007 to a 3.4 percent decline in 2008.
Wednesday, April 15, 2009
How To Come Up With Your Downpayment
Not long ago, no-down-payment loans were the height of fashion for homebuyers.
But now that lenders have tightened their standards, borrowers once again are expected to "put some skin in the game," to use the industry's favorite catchphrase. That "skin" refers to the borrower's own cash, and it means down payments are definitely back in style.
The chief advantage of a down payment today is simply that it allows a person to qualify for a loan, since very few so-called "zero-down" loan programs still exist. Yet down payments have other benefits, too.
The more money you put down to buy a home, the smaller your monthly payments will be, explains Greg Gwizdz, national sales manager at Wells Fargo Home Mortgage in Des Moines, Iowa.
A buyer's down payment becomes a homeowner's instant equity when the purchase closes, and that equity can be borrowed against with a home equity loan or line of credit. However, guidelines to qualify for these loans have become much stricter. Gwizdz adds that many first-time homeowners are "surprised by the true cost of owning and maintaining their home" and thus should keep some reserves rather than allocate every dollar to their down payment. Some loan programs require cash reserves for this very reason.
Many homebuyers have difficulty coming up with a down payment. Here are a dozen ways to do it:
* Set up an automatic saving plan.
* Get a gift from your parents, grandparents, other relatives or friends.
* Sell a car, boat, motorcycle, collectibles or other assets.
* Liquidate stocks, mutual funds, savings bonds or other investments.
* Allocate your income tax refund.
* Take a loan from your 401(k) retirement plan and repay yourself with interest.
* Withdraw funds from your 401(k) plan, subject to taxes and penalties.
* Collect on a loan that you made to someone else.
* Get a bonus from your employer.
* Explore homebuyer programs for teachers, police officers, firefighters and other public servants, if you qualify.
* Apply for a state or local government homebuyer down payment program.
* Use a private down payment assistance program.
A down payment needs to be "sourced and seasoned," Gwizdz says. That means the lender needs to know how you obtained the funds and that you've had control of those funds for at least several months. Gifts and seller's concessions are acceptable, up to the percentage allowed by the loan program, but borrowed money can't be used as a down payment because it is debt that has to be repaid.
Two government-run programs are designed to aid homebuyers who haven't saved much for a down payment. The Federal Housing Administration, or FHA, offers mortgage insurance that allows qualified buyers to purchase a home with a 3-percent down payment, all of which may be a gift. The U.S. Department of Veterans Affairs offers a home-loan guarantee program that helps military veterans buy a home with no down payment.
Down-payment programs run by state and local housing authorities offer grants and low-interest deferred-payment loans to homebuyers, though the restrictions can be "pretty severe," says Ed Craine, CEO of Smith-Craine Finance, a mortgage company in San Francisco. Some programs require borrowers to live in a disadvantaged neighborhood. Others have income limitations, for example.
"The biggest problem tends to be that if you make enough money to qualify for a loan, you probably make too much money to get the down-payment assistance," Craine says.
Down-payment assistance programs offered by private organizations -- Nehemiah Corp. and AmeriDream are two of the largest -- convert money contributed by the seller into the buyer's down payment."They are using the seller's equity to fund a grant which allows the buyer to buy with no money down," says Peter Thompson, a senior loan officer with Professional Mortgage Partners in Downers Grove, Ill.
These programs "serve a need for people who struggle to save a down payment, if the seller is motivated to contribute," Gwizdz says. But these programs are not without controversy. The down payment is of value only if the homebuyer can afford the monthly payments, he says, and whether someone who didn't have the discipline to save a down payment would have that discipline to make the payments may be questionable.
The FHA has tried, so far unsuccessfully, to ban the use of private down-payment programs in conjunction with FHA loans. That's because FHA-insured loans that used these programs had a significantly higher incidence of default and foreclosure than loans that didn't use such assistance, according to an FHA study.
But now that lenders have tightened their standards, borrowers once again are expected to "put some skin in the game," to use the industry's favorite catchphrase. That "skin" refers to the borrower's own cash, and it means down payments are definitely back in style.
The chief advantage of a down payment today is simply that it allows a person to qualify for a loan, since very few so-called "zero-down" loan programs still exist. Yet down payments have other benefits, too.
The more money you put down to buy a home, the smaller your monthly payments will be, explains Greg Gwizdz, national sales manager at Wells Fargo Home Mortgage in Des Moines, Iowa.
A buyer's down payment becomes a homeowner's instant equity when the purchase closes, and that equity can be borrowed against with a home equity loan or line of credit. However, guidelines to qualify for these loans have become much stricter. Gwizdz adds that many first-time homeowners are "surprised by the true cost of owning and maintaining their home" and thus should keep some reserves rather than allocate every dollar to their down payment. Some loan programs require cash reserves for this very reason.
Many homebuyers have difficulty coming up with a down payment. Here are a dozen ways to do it:
* Set up an automatic saving plan.
* Get a gift from your parents, grandparents, other relatives or friends.
* Sell a car, boat, motorcycle, collectibles or other assets.
* Liquidate stocks, mutual funds, savings bonds or other investments.
* Allocate your income tax refund.
* Take a loan from your 401(k) retirement plan and repay yourself with interest.
* Withdraw funds from your 401(k) plan, subject to taxes and penalties.
* Collect on a loan that you made to someone else.
* Get a bonus from your employer.
* Explore homebuyer programs for teachers, police officers, firefighters and other public servants, if you qualify.
* Apply for a state or local government homebuyer down payment program.
* Use a private down payment assistance program.
A down payment needs to be "sourced and seasoned," Gwizdz says. That means the lender needs to know how you obtained the funds and that you've had control of those funds for at least several months. Gifts and seller's concessions are acceptable, up to the percentage allowed by the loan program, but borrowed money can't be used as a down payment because it is debt that has to be repaid.
Two government-run programs are designed to aid homebuyers who haven't saved much for a down payment. The Federal Housing Administration, or FHA, offers mortgage insurance that allows qualified buyers to purchase a home with a 3-percent down payment, all of which may be a gift. The U.S. Department of Veterans Affairs offers a home-loan guarantee program that helps military veterans buy a home with no down payment.
Down-payment programs run by state and local housing authorities offer grants and low-interest deferred-payment loans to homebuyers, though the restrictions can be "pretty severe," says Ed Craine, CEO of Smith-Craine Finance, a mortgage company in San Francisco. Some programs require borrowers to live in a disadvantaged neighborhood. Others have income limitations, for example.
"The biggest problem tends to be that if you make enough money to qualify for a loan, you probably make too much money to get the down-payment assistance," Craine says.
Down-payment assistance programs offered by private organizations -- Nehemiah Corp. and AmeriDream are two of the largest -- convert money contributed by the seller into the buyer's down payment."They are using the seller's equity to fund a grant which allows the buyer to buy with no money down," says Peter Thompson, a senior loan officer with Professional Mortgage Partners in Downers Grove, Ill.
These programs "serve a need for people who struggle to save a down payment, if the seller is motivated to contribute," Gwizdz says. But these programs are not without controversy. The down payment is of value only if the homebuyer can afford the monthly payments, he says, and whether someone who didn't have the discipline to save a down payment would have that discipline to make the payments may be questionable.
The FHA has tried, so far unsuccessfully, to ban the use of private down-payment programs in conjunction with FHA loans. That's because FHA-insured loans that used these programs had a significantly higher incidence of default and foreclosure than loans that didn't use such assistance, according to an FHA study.
Don't Buy A Home Without It!!
Since 1984, California real estate agents have been required to disclose known defects to a buyer, as well as defects they could have known about by using reasonable due diligence. Many other states have followed suit and require real estate agents to disclose material defects.
Even though the law favors the buyer in disclosure disputes, buyers can reasonably be expected to protect themselves by having qualified professionals inspect the property before they buy it.
The home inspection business came alive in the 1980s for buyers, sellers and agents to competently deal with disclosing property defects. Texas was the first state to license home inspectors. In many states, including California, home inspectors are not required to be licensed.
There are, however, two major home inspection industry trade associations that require their members to comply with a certain standard of care. They are the American Society of Home Inspectors (ASHI) and the National Association of Home Inspectors (NAHI). States also have trade organizations, like the California Real Estate Home Inspector Association (CREIA).
HOUSE-HUNTING TIP: To make sure that you get a thorough home inspection, use the best home inspector you can find in your area. Your real estate agent can give you recommendations. It's also a good idea to ask recent buyers in your area who they used for a home inspection. Find out if they were satisfied with the inspection. Or, did they later discover problems that were missed?
It's important that buyers be present for the inspection. A home inspection can take several hours depending on the age and size of the house. If you can't attend the entire inspection, plan to show up at the end of the inspection. This way you can walk through the property with the inspector for a recap of the findings.
Keep in mind that home inspectors aren't hired to comment on aesthetical issues. It's the home inspector's job to point out defects. All homes have defects, even new ones.
What you need to know before you go through with a purchase is (1) the seriousness of the defect; (2) how much it will cost to repair; and (3) how soon it needs to be done. Ask the inspector to prioritize the findings so that you can evaluate the cost consequences.
Your goal is to have a complete inspection report on the property. For this to happen, your agent should ask the listing agent to make sure that the sellers provide easy access to attic and crawl spaces. Also, the utilities need to be turned on.
Also, request that the sellers and their agent not attend the inspection. This way you can talk freely with your inspector. If it's inconvenient for sellers to leave, reschedule the appointment.
The home inspection should cover the major systems from roof to foundation and everything in between. However, home inspectors usually aren't licensed to inspect for wood-destroying pests. The report will be limited to what is visible. It probably won't cover environmental hazards or irrigation systems, spas, swimming pools, septic systems and other components that should be inspected.
For this reason, it's a good idea to start the inspection process as soon as possible after you have an accepted offer. The home inspector might recommend further inspections of systems that he inspects, like the furnace.
THE CLOSING: Don't make the mistake of ignoring an inspector's recommendation for a further inspection. It could lead to serious trouble later.
Even though the law favors the buyer in disclosure disputes, buyers can reasonably be expected to protect themselves by having qualified professionals inspect the property before they buy it.
The home inspection business came alive in the 1980s for buyers, sellers and agents to competently deal with disclosing property defects. Texas was the first state to license home inspectors. In many states, including California, home inspectors are not required to be licensed.
There are, however, two major home inspection industry trade associations that require their members to comply with a certain standard of care. They are the American Society of Home Inspectors (ASHI) and the National Association of Home Inspectors (NAHI). States also have trade organizations, like the California Real Estate Home Inspector Association (CREIA).
HOUSE-HUNTING TIP: To make sure that you get a thorough home inspection, use the best home inspector you can find in your area. Your real estate agent can give you recommendations. It's also a good idea to ask recent buyers in your area who they used for a home inspection. Find out if they were satisfied with the inspection. Or, did they later discover problems that were missed?
It's important that buyers be present for the inspection. A home inspection can take several hours depending on the age and size of the house. If you can't attend the entire inspection, plan to show up at the end of the inspection. This way you can walk through the property with the inspector for a recap of the findings.
Keep in mind that home inspectors aren't hired to comment on aesthetical issues. It's the home inspector's job to point out defects. All homes have defects, even new ones.
What you need to know before you go through with a purchase is (1) the seriousness of the defect; (2) how much it will cost to repair; and (3) how soon it needs to be done. Ask the inspector to prioritize the findings so that you can evaluate the cost consequences.
Your goal is to have a complete inspection report on the property. For this to happen, your agent should ask the listing agent to make sure that the sellers provide easy access to attic and crawl spaces. Also, the utilities need to be turned on.
Also, request that the sellers and their agent not attend the inspection. This way you can talk freely with your inspector. If it's inconvenient for sellers to leave, reschedule the appointment.
The home inspection should cover the major systems from roof to foundation and everything in between. However, home inspectors usually aren't licensed to inspect for wood-destroying pests. The report will be limited to what is visible. It probably won't cover environmental hazards or irrigation systems, spas, swimming pools, septic systems and other components that should be inspected.
For this reason, it's a good idea to start the inspection process as soon as possible after you have an accepted offer. The home inspector might recommend further inspections of systems that he inspects, like the furnace.
THE CLOSING: Don't make the mistake of ignoring an inspector's recommendation for a further inspection. It could lead to serious trouble later.
Credit Scores
When a lender evaluates a buyer's creditworthiness, they consider several factors about the buyer's past credit-usage behaviors. These behaviors have been systematized into what is called a “Tri-Merged Residential Credit Report” (T.M.R.C.R.) and is quantified with a scoring system called F.I.C.O. (Fair Issac Company). The score is essentially a merger of reports from three major credit repositories known as:
* Experion/T.R.W.
* Equifax
* Transunion
While F.H.A. and V.A. are not officially F.I.C.O. driven in their credit-approval processing, many lenders are still giving heavy weighting to the scores on these loans. Conventional (F.N.M.A. & F.H.M.L.C.) lenders have been using this scoring system for years.
Listed below is how the F.I.C.O. scores are generally interpreted:
* Scores range from 300 to 850.
* Score under 600 - will most likely need to use loan programs that are not F.I.C.O. driven. Represents extreme concern for underwriting and may result in additional fees, higher rates and/or points, additional down payment required, or even non-approval.
* Score 600 - 620: The underwriter will need to carefully review the application and may result in more fees, points and/or lower loan-to-value ratio.
* Score 620 - 660: This is considered a cautious risk although the buyer does stand a good chance of getting the loan provided he/she can explain any derogatory notations (i.e. late payments) in a plausible manner.
* Score 660 - 680: This is a standard automated approval score.
* Score 680 - 699: This is considered a very good risk by the lender.
* Score 700 - 719: This is considered an excellent risk by a lender and is pretty much a “slam dunk” for approval.
* Score 720 & above: This is considered “Accept Plus” for automated underwriting.
To determine the borrower's credit score, most lenders apportion weights as indicated to the following factors:
* Timely payments - 35%
* Total debt - 30%
* Length of credit history - 15%
* New credit inquiries - 10%
* Amount/type of credit - 10%
A buyer/borrower can get a free copy of their credit report from each repository by mail or online at: www.myFICO.com. They are entitled to one free credit report from each agency once a year. Consumers should review their credit reports once a year, as they often have inaccuracies and old derogatory notations that should be removed from the report.
Here are some methods that a borrower may use to improve their credit score:
* Dispute incorrect information by directly contacting the credit reporting agency.
* If the borrower/buyer has any past-due debt, they can contact the creditor directly and settle the debt. Creditors are often willing to settle past-due debt for less than what is owed and sometimes are even willing to remove the derogatory notation about the debt. If the debt has been sold to a collection agency, the borrower would have to contact the agency.
* Pay down credit card balances, if possible, to less than 1/3 of the available limit.
* Work to show that they have maintained 12 consecutive months of timely payments on ALL of their financial obligations. If they have gone into foreclosure and/or bankruptcy, this will take longer; perhaps three to four years.
* Experion/T.R.W.
* Equifax
* Transunion
While F.H.A. and V.A. are not officially F.I.C.O. driven in their credit-approval processing, many lenders are still giving heavy weighting to the scores on these loans. Conventional (F.N.M.A. & F.H.M.L.C.) lenders have been using this scoring system for years.
Listed below is how the F.I.C.O. scores are generally interpreted:
* Scores range from 300 to 850.
* Score under 600 - will most likely need to use loan programs that are not F.I.C.O. driven. Represents extreme concern for underwriting and may result in additional fees, higher rates and/or points, additional down payment required, or even non-approval.
* Score 600 - 620: The underwriter will need to carefully review the application and may result in more fees, points and/or lower loan-to-value ratio.
* Score 620 - 660: This is considered a cautious risk although the buyer does stand a good chance of getting the loan provided he/she can explain any derogatory notations (i.e. late payments) in a plausible manner.
* Score 660 - 680: This is a standard automated approval score.
* Score 680 - 699: This is considered a very good risk by the lender.
* Score 700 - 719: This is considered an excellent risk by a lender and is pretty much a “slam dunk” for approval.
* Score 720 & above: This is considered “Accept Plus” for automated underwriting.
To determine the borrower's credit score, most lenders apportion weights as indicated to the following factors:
* Timely payments - 35%
* Total debt - 30%
* Length of credit history - 15%
* New credit inquiries - 10%
* Amount/type of credit - 10%
A buyer/borrower can get a free copy of their credit report from each repository by mail or online at: www.myFICO.com. They are entitled to one free credit report from each agency once a year. Consumers should review their credit reports once a year, as they often have inaccuracies and old derogatory notations that should be removed from the report.
Here are some methods that a borrower may use to improve their credit score:
* Dispute incorrect information by directly contacting the credit reporting agency.
* If the borrower/buyer has any past-due debt, they can contact the creditor directly and settle the debt. Creditors are often willing to settle past-due debt for less than what is owed and sometimes are even willing to remove the derogatory notation about the debt. If the debt has been sold to a collection agency, the borrower would have to contact the agency.
* Pay down credit card balances, if possible, to less than 1/3 of the available limit.
* Work to show that they have maintained 12 consecutive months of timely payments on ALL of their financial obligations. If they have gone into foreclosure and/or bankruptcy, this will take longer; perhaps three to four years.
Tuesday, April 14, 2009
I'm Still Confused... What $8,000???
Further details about the $8000 First Time Homebuyer Tax Credit (Economic Stimulus Package)
$8000 By now you have probably read something about the $8000 First Time Homebuyer Tax Credit (Economic Stimulus Package). I wanted to take some time to provide some common questions and answers about this Tax Credit. The below Q&A pertains to any new home buyer regardless of whether you live in Texas or anywhere else within the United States.
First, the basics about the program that you may have read before:
* 1st-Time Homebuyers that purchased between 1/1/09 and 11/30/09
* The Tax Credit is equal to 10% of the purchase price, not to exceed $8,000
* Principal Residence only (includes SFR, Condos, Co-ops, and Townhomes)
* Refundable Credit which means any unused credit will be issued to you in a check.
* Annual Income not to exceed $75K (single) or $150K (couple).
* No Repayment due for the $8,000 - True Tax Credit (as long as home is kept for at least 3 years. If home is sold within 3 years, repayment for tax credit is required)
Now for the things you may not have read about:
What defines a First-Time Homeowner? Buyers who purchase any home which is utilized as their primary residence (new or resale) between January 1st and November 30th. As defined, the Frist-Time Homeowner could not have owned a primary residence within the last 3 years. For married couples, if one of the spouses has owned property within the last 3 years, they are both disqualified. Ownership of a vacation home or rental property not used a Principal Residence does not disqualify a buyer as a first-time homeowner.
Income Clarification: What is the Income Limitation to claim the Tax Credit? The homeowners annual income can not exceed $75,000 to receive the full tax credit or $150,000 per couple to receive the full tax credit. Are you automatically disqualified because your income is above these limits mentioned? You are still qualified for the reduced refund if your MAGI (modified adjusted gross income) is above $75,000 (single) or $150,000 (married), but not above $95,000 (single) or $170,000 (married). If your income is above $95,000 (single) or $170,000 (married) then you no longer qualify. What is MAGI? This term is defined by the IRS and is not your Adjusted Gross Income (AGI). It's a calculation of your AGI and personalized deductions. It is best to seek an accountant for a clear understanding.
How is this tax credit different from the tax credit originally passed in July 2008? The biggest difference is that this is a true tax CREDIT, not a deduction. It is also no longer a loan, which means you will not need to pay it back over a period of time. The only exception for this credit is that you must keep your home for at least 3 years. If you sell your home before your third year, the refund would need to be paid back.
What does it mean that the tax credit is 'refundable'? Plain and simple, this is a credit and not a loan nor a deduction. Any unused portion from your 2008 or 2009 taxes will be refunded to you in the form of a check or wire. For example, if you owe the IRS $5000 in taxes, and your expected tax credit is $8000 then your net difference of $3000 will be refunded to you. If you owe $10,000 in taxes, then the $8000 will be applied so that you only have to pay the IRS $2000. And finally, if you are to receive a credit from your taxes of $3000, then the $8000 will be added to it for a total credit of $11,000.
What type of home qualifies? Any home used as a primary residence. This obviously includes single-family residence, but also includes attached homes like townhomes, condo's, manufactured homes, and even houseboats.
I am building a home. Would I still qualify for the credit? If you purchase the home from a home builder, then the 'settlement' date on the contract must be between 1/1/09 and 11/30/09. If you have hired a contractor to build your home, then the tax code defines the purchase date as the 1st date the homebuyer occupies the home. This date must be between 1/1/09 and 11/30/09.
My home was purchase in 2008, would I still qualify for this tax credit? Not if your home was purchased prior to 12/31/08. However, if you purchased between 4/9/08 and 12/31/08 then you would possibly qualify for the $7500 tax credit which was approved during the Bush Administration.
How do I claim the $8000 first-time homebuyer tax credit? The claim is made on your federal income tax return. The first step is to complete form 5406 which helps determine the amount of your credit. The amount is then placed on line 69 of the 1040 form. No other approval is necessary, however, you will want to be sure you qualify based on the First Time Home Buyer guidelines and Income limitations.
What if I already filed my 2008 taxes and claimed the $7500 tax credit? Home buyers need to file an amended return on a 1040X form. It's always best to consult an accountant prior to filing your return.
Do I have to claim the tax credit in 2009 or can I claim it in 2008? The law was written in a way that homebuyers could claim this credit in either year. Someone with an adjustable income may 'elect' to claim the credit in 2008 because they know their current MAGI for 2008 where as in 2009 the MAGI may be above allowable limits. If the 2008 tax returns have been filed, see an accountant for further assistance and suggestions.
Does a homeowner have to wait to file their 2009 tax returns in order to utilize their tax credit? Yes. There is not a current program which allows you to utilize this credit prior to filing your tax returns. Some homeowners may choose to drop their deductions within their paychecks weekly knowing a credit will be received. My suggestion is to wait for the full return at the end of the year or file an amended 2008 tax return. Should you choose to adjust your deductions, consultant an accountant.
There are a few more items that could disqualify a First-Time Homebuyer from this tax credit:
* Income exceeds the MAGI of $95,000 (single) and $170,000 (married)
* Homebuyer stop using the home as a primary residence
* Non-resident alien (see the definition in the IRS Publication 519)
* If you have utilized any state or city bond program
* If the homeowner sells the home before the completion of the third year.
* Homebuyer purchase the home from a close relative which including but not limited to: parent, spouse, grandparent, child, or grandchild (arms length transaction)
Should you have any additional questions about this program, feel free to contact me directly by phone or email. I'll be happy to answer any questions you may have.
$8000 By now you have probably read something about the $8000 First Time Homebuyer Tax Credit (Economic Stimulus Package). I wanted to take some time to provide some common questions and answers about this Tax Credit. The below Q&A pertains to any new home buyer regardless of whether you live in Texas or anywhere else within the United States.
First, the basics about the program that you may have read before:
* 1st-Time Homebuyers that purchased between 1/1/09 and 11/30/09
* The Tax Credit is equal to 10% of the purchase price, not to exceed $8,000
* Principal Residence only (includes SFR, Condos, Co-ops, and Townhomes)
* Refundable Credit which means any unused credit will be issued to you in a check.
* Annual Income not to exceed $75K (single) or $150K (couple).
* No Repayment due for the $8,000 - True Tax Credit (as long as home is kept for at least 3 years. If home is sold within 3 years, repayment for tax credit is required)
Now for the things you may not have read about:
What defines a First-Time Homeowner? Buyers who purchase any home which is utilized as their primary residence (new or resale) between January 1st and November 30th. As defined, the Frist-Time Homeowner could not have owned a primary residence within the last 3 years. For married couples, if one of the spouses has owned property within the last 3 years, they are both disqualified. Ownership of a vacation home or rental property not used a Principal Residence does not disqualify a buyer as a first-time homeowner.
Income Clarification: What is the Income Limitation to claim the Tax Credit? The homeowners annual income can not exceed $75,000 to receive the full tax credit or $150,000 per couple to receive the full tax credit. Are you automatically disqualified because your income is above these limits mentioned? You are still qualified for the reduced refund if your MAGI (modified adjusted gross income) is above $75,000 (single) or $150,000 (married), but not above $95,000 (single) or $170,000 (married). If your income is above $95,000 (single) or $170,000 (married) then you no longer qualify. What is MAGI? This term is defined by the IRS and is not your Adjusted Gross Income (AGI). It's a calculation of your AGI and personalized deductions. It is best to seek an accountant for a clear understanding.
How is this tax credit different from the tax credit originally passed in July 2008? The biggest difference is that this is a true tax CREDIT, not a deduction. It is also no longer a loan, which means you will not need to pay it back over a period of time. The only exception for this credit is that you must keep your home for at least 3 years. If you sell your home before your third year, the refund would need to be paid back.
What does it mean that the tax credit is 'refundable'? Plain and simple, this is a credit and not a loan nor a deduction. Any unused portion from your 2008 or 2009 taxes will be refunded to you in the form of a check or wire. For example, if you owe the IRS $5000 in taxes, and your expected tax credit is $8000 then your net difference of $3000 will be refunded to you. If you owe $10,000 in taxes, then the $8000 will be applied so that you only have to pay the IRS $2000. And finally, if you are to receive a credit from your taxes of $3000, then the $8000 will be added to it for a total credit of $11,000.
What type of home qualifies? Any home used as a primary residence. This obviously includes single-family residence, but also includes attached homes like townhomes, condo's, manufactured homes, and even houseboats.
I am building a home. Would I still qualify for the credit? If you purchase the home from a home builder, then the 'settlement' date on the contract must be between 1/1/09 and 11/30/09. If you have hired a contractor to build your home, then the tax code defines the purchase date as the 1st date the homebuyer occupies the home. This date must be between 1/1/09 and 11/30/09.
My home was purchase in 2008, would I still qualify for this tax credit? Not if your home was purchased prior to 12/31/08. However, if you purchased between 4/9/08 and 12/31/08 then you would possibly qualify for the $7500 tax credit which was approved during the Bush Administration.
How do I claim the $8000 first-time homebuyer tax credit? The claim is made on your federal income tax return. The first step is to complete form 5406 which helps determine the amount of your credit. The amount is then placed on line 69 of the 1040 form. No other approval is necessary, however, you will want to be sure you qualify based on the First Time Home Buyer guidelines and Income limitations.
What if I already filed my 2008 taxes and claimed the $7500 tax credit? Home buyers need to file an amended return on a 1040X form. It's always best to consult an accountant prior to filing your return.
Do I have to claim the tax credit in 2009 or can I claim it in 2008? The law was written in a way that homebuyers could claim this credit in either year. Someone with an adjustable income may 'elect' to claim the credit in 2008 because they know their current MAGI for 2008 where as in 2009 the MAGI may be above allowable limits. If the 2008 tax returns have been filed, see an accountant for further assistance and suggestions.
Does a homeowner have to wait to file their 2009 tax returns in order to utilize their tax credit? Yes. There is not a current program which allows you to utilize this credit prior to filing your tax returns. Some homeowners may choose to drop their deductions within their paychecks weekly knowing a credit will be received. My suggestion is to wait for the full return at the end of the year or file an amended 2008 tax return. Should you choose to adjust your deductions, consultant an accountant.
There are a few more items that could disqualify a First-Time Homebuyer from this tax credit:
* Income exceeds the MAGI of $95,000 (single) and $170,000 (married)
* Homebuyer stop using the home as a primary residence
* Non-resident alien (see the definition in the IRS Publication 519)
* If you have utilized any state or city bond program
* If the homeowner sells the home before the completion of the third year.
* Homebuyer purchase the home from a close relative which including but not limited to: parent, spouse, grandparent, child, or grandchild (arms length transaction)
Should you have any additional questions about this program, feel free to contact me directly by phone or email. I'll be happy to answer any questions you may have.
Wednesday, February 18, 2009
H.R. 214 and the Senate Amendments ( Federal Income Tax Credit for Home Purchases)
The credit would be 10% of the purchase price of the house, up to $8000. One Time only credit.
The credit would be spread over two years. For example, if you buy a house with a purchase price of $300,000, you would qualify for the maximum credit of $8000. The first year you claim the credit, you would receive $4000, and you would receive the remaining $4000 the next year.
Additionally the requirement to repay the tax credit over time will be waived unless home is resold within 3 years of purchase.
This credit is for a homebuyer who has not owned a principal residence in the past 3 years prior to purchase. The homebuyer must also meet the personal income restrictions as follows: The credit is available to joint filers with modified adjusted gross income below $150,000 and phases out once income exceeds $170,000. For single filers, the numbers are $75,000 and $95,000.
Dates of Purchase that qualify for this credit: After December 31st 2008 and before December 31st 2009.
Eligible Properties: Single Family, PUD, Condo
The credit would be spread over two years. For example, if you buy a house with a purchase price of $300,000, you would qualify for the maximum credit of $8000. The first year you claim the credit, you would receive $4000, and you would receive the remaining $4000 the next year.
Additionally the requirement to repay the tax credit over time will be waived unless home is resold within 3 years of purchase.
This credit is for a homebuyer who has not owned a principal residence in the past 3 years prior to purchase. The homebuyer must also meet the personal income restrictions as follows: The credit is available to joint filers with modified adjusted gross income below $150,000 and phases out once income exceeds $170,000. For single filers, the numbers are $75,000 and $95,000.
Dates of Purchase that qualify for this credit: After December 31st 2008 and before December 31st 2009.
Eligible Properties: Single Family, PUD, Condo
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