New Housing Tax Credit Q & A's

It’s time to let everyone know! There is a new Tax Credit for First Time Homebuyers. I’m sure a lot of you have questions about it. Who does it benefit? What does the fine print say? How long will this last? Have no fear… I have the simple answers! Know that this is a phenomenal deal for those who qualify.

Here are some popular Q & A’s:

1)Who is eligible?
A: First time homebuyers are eligible. To qualify, the purchase must be made between January 1, 2009 and before December 1, 2009. In this case, the purchase date means the date of closing.

2)Who is a first time buyer?
A: To qualify, the purchaser must not have owned a principal residence during the 3 year period prior to the purchase. For married persons, the law tests the homeownership history of both people, however unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first time buyer.

3)How is the tax credit amount determined?
A: The amount is equal to 10% of the purchase price, up to a maximum of $8,000.

4)Are there income limits for claiming the tax credit?
A: The credit is reduced for buyers with a modified adjusted gross income of more than $75,000 for single taxpayers and $150,000 for married couples filing a joint return. For those singles making $95,000 and married couples making $170,000, the tax credit is reduced to zero.

5)How does this tax credit differ from the last homebuyer tax credit?
A: The main difference is that this credit does NOT have to be repaid! Remember, the buyer must use the home as their principal residence for at least 3 years or face recapture of the tax credit.

6)How do I claim the tax credit?
A: This is easy! You claim the credit on your federal income tax return. Complete IRS form 5405 to determine your credit amount. Then, claim this amount on line 69 of your 1040 tax form. That is it!

7)Is there any way for a homebuyer to access the tax credit money sooner than waiting for their 2009 tax return?
A: Yes. Prospective homebuyers who qualify are permitted to reduce their income tax withholding. Reducing their withholding (up to the amount of the credit) will enable buyers to accumulate cash by raising his/her take home pay. This extra cash can be used as a down payment if the buyer budgets well. Contact your tax advisor if you are interested in this plan.

Oh By the way... I'm never too busy for any of your referrals!

Buy First or Sell First?

This is a great topic for the current market conditions. The answer, of course, depends on the situation in which each homeowner is involved. Most markets are seeing high inventory and not enough buyers to lower those levels. So what do you do? Some sellers choose to carry a bridge loan. This will help them to buy before they sell. A bridge loan helps borrowers by halting payment on their new home until their old home sells.

While this is an option, the old home may not sell. Some research shows less than 50% of homes listed do NOT sell. In a buyer's market such as the one we are in, It is wise to sell before you buy. In a seller's market, it may be a smarter choice to find your new home before you sell because the amount of buyers outweigh the number of homes on the market. This fosters competition and quick turnaround for listings.

I would advise my clients in our current market to do a few things before they decide to make any decisions. Sellers should find out what they owe on their current house. They should get prequalified for a home loan to see how much they can afford for a new home. They could also find out if they qualify for a bridge loan. Their lender should give them a good faith estimate of settlement costs. This will show them what their payments and settlement costs will be for their new home purchase. Sellers will also incur some closing costs on the sale of their current home. When we perform a market analysis, we always provide our prospective sellers an estimated costs to sell sheet. This will give them a pretty good idea what they can expect to net from the sale of their home.

Oh By the way... I'm never too busy for any of your referrals!

10 Questions to ask your lender

10 Questions to Ask Your Lender:

These questions came directly from the real estate checklist online and realtor.org. I think it's a great list to take with you to a home mortgage meeting.

Be sure you find a loan that fits your needs with these comprehensive questions.
1. What are the most popular mortgage loans you make? Why?
2. Which type of mortgage plan do you think would best for us? Why?
3. Are your rates, terms, fees, and closing costs negotiable?
4. Will I have to buy private mortgage insurance? If so how much will it cost and how long will it be required? NOTE: Private mortgage insurance is usually required if you make less than a 20-percent downpayment, but most lenders will let you discontinue the policy when you’ve acquired a certain amount of equity by paying down the loan.
5. Who will service the loan? Your bank or another company?
6. What escrow requirements do you have?
7. How long is your loan lock-in period (the time that the quoted interest rate will be honored)? Will I be able to obtain a lower rate if they drop during this period?
8. How long will the loan approval process take?
9. How long will it take to close the loan?
10. Are there any charges or penalties for prepaying the loan?

Some of these questions are more important than others, but they are all good questions to ask. I think it is important to make sure you are getting good terms on your loan, and it is also important that your lender communicates with you (the buyer), the escrow agent (who handles the closing), and me (the realtor). Also, for you first time buyers out there... Be sure to ask about the new tax credit!

Oh By the way... I'm never too busy for any of your referrals!