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.
Tuesday, April 21, 2009
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.
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