Last Time about Tax Credit

Bringing the Dream of Homeownership Within Reach

As part of its plan to stimulate the U.S. housing market and address the economic challenges facing our nation, Congress has passed new legislation that: Extends the First-Time Home Buyer Tax Credit of up to $8,000 to first-time home buyers until April 30, 2010.
Expands the credit to grant up to $6,500 credit to current home owners purchasing a new or existing home between November 7, 2009 and April 30, 2010.
Here is more information about how the Extended Home Buyer Tax Credit can help prospective home buyers become part of the American dream. If you have specific questions or need additional information, please contact a tax professional or the Internal Revenue Service at 800-829-1040.


Who Qualifies for the Extended Credit?

First-time home buyers who purchase homes between November 7, 2009 and April 30, 2010.
Current home owners purchasing a home between November 7, 2009 and April 30, 2010, who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight.
To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.
If you or your client purchased a home between January 1, 2009 and November 6, 2009, please see: 2009 First-Time Home Buyer Tax Credit.


Which Properties Are Eligible?

The Extended Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.


How Much Is Available?

The maximum allowable credit for first-time home buyers is $8,000.
The maximum allowable credit for current homeowners is $6,500.
How is a Buyer's Credit Amount Determined?
Each home buyer’s tax credit is determined by two additional factors:
The price of the home.
The buyer's income.

Price
Under the Extended Home Buyer Tax Credit, credit may only be awarded on homes purchased for $800,000 or less.

Buyer Income
Under the Extended Home Buyer Tax Credit, which is effective on November 7, 2009, single buyers with Incomes up to $125,000 and married couples with incomes up to $225,000—may receive the maximum tax credit. These income limits have changed from the 2009 First-Time Home Buyer Tax Credit limits.

If the Buyer(s)’ Income Exceeds These Limits, Can He/She Still Get a Credit?
Yes, some buyers may still be eligible for the credit.
The credit decreases for buyers who earn between $125,000 and $145,000 for single buyers and between $225,000 and $245,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit. Home buyers earning more than the maximum qualifying income—over $145,000 for singles and over $245,000 for couples are not eligible for the credit.

Can a Buyer Still Qualify If He/She Closes After April 30, 2010?
Under the Extended Home Buyer Tax Credit, as long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close.

Will the Tax Credit Need to Be Repaid?
No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during this three-year period, the full amount credit will be recouped on the sale.

Homebuyer Tax Credit Extended!

Are you a first time home buyer with income of no more than $75,000 ($150,000 for couples)?

You can still qualify for last year's $8,000 tax break, assuming you are in contract by April 30 and close before July 1.


Owned the same home for at least 5 years?

You can now get $6,500 tax credit if you buy another within the deadline.

Mortgage Programs:

Fannie Mae HOMEPATH Loan


- Minimum 660 middle FICO score required
- Appraisals are NOT required
- Great for first time homeowners AND Investors
- 97% LTV Primary Residence
- 90% LTV Investor (5 plus properties financed limited to 75% LTV)
- No monthly Mortgage Insurance payments
- Owner Occupied AND Investment Property
- Down payment can be 100% gifted
- Property must be listed for sale with the Fannie Mae HOMEPATH program
- NO declining market restrictions


Federal Housing Administration Loans - OK to 580 scores

- Minimum 580 minimum middle FICO score required
- Great for first time homeowners
- 30 Year Fixed Rates Only
- Low, government sponsored, monthly Mortgage Insurance payments
- Owner Occupied Only
- 12 months verified rent history required
- Down payment MUST come from borrowers own funds
- Gifts allowed for all closing costs
- Compensating factors required for 580 scores
- NO declining market restrictions

Federal Housing Administration Loans - 100% Gifts Allowed for Down Payment

- Minimum 620 FICO score required
- Great for first time homeowners
- 3.5% Down Payment can be a gift from relatives, employer, city grant
- VERY LOW 30 Year Fixed Rates
- Low, government sponsored, monthly Mortgage Insurance payments
- 1 Day out of Chapter 13 OK with re-establish credit (2 years with Chapter 7)
- Owner Occupied 1-4 unit only
- NO declining market restrictions

USDA Loans - 100% No Money Down for Qualified Properties

- Minimum 620 FICO Score - buyer(s) must have “reasonable” credit history
- Great for low to moderate income and first time homeowners
- Household Area Median Income Limits Apply
- LOW 30 Year Fixed Rates
- No monthly Mortgage Insurance payments
- Owner Occupied Only
- Property must be located in a USDA defined market

Veterans Administration Loans - 100% No Money Down for Active and Veteran Military

- Minimum 620 FICO score required - buyer must demonstrate ability to pay
- True No Money Down Financing for qualified buyers
- Low 30 Year Fixed Rates
- NO Monthly Mortgage Insurance payments
- No Income Limitations
- Loan Amounts from $75,000 to over $417,000
- Owner Occupied Only
- No declining market restrictions

Conventional Loans (Fannie Mae and Freddie Mac) - 100% Gifts Allowed for Down Payment

- Minimum 700 FICO Required
- Great for the established buyer looking to leverage through financing
- 3% Down Payment can be a gift from relatives, employer or city grant
- LOW 30 Year Fixed Rates
- Median income limits apply (only income from borrower on loan used to qualify)
- Loan amounts up to $417,000
- Owner Occupied Only
- Monthly Mortgage Insurance payments required
- Declining market restrictions apply

common misconceptions about the federal government's tax credit for first time home buyers:

Real estate agent Michael Maher joined FOX 4 Wednesday morning to clarify the most common misconceptions about the federal government's tax credit for first time home buyers:

1. It's only for people who've never bought a home. False! If you sold a home in the past and rented for the last three years, you may qualify.

2.It has to be paid back. False, this is a tax credit. You will receive a check from the federal government four to six weeks after you complete the form at the closing of your home purchase.

3.It's a lengthy and difficult process to get the tax credit. Fase, it's just one form you have to fill out for the IRS.

4. You can use the tax credit for your down payment. False. Some lenders offer some programs which require you to sign over your credit to them, but be very cautious about these. Read all the fine print! Technically, the way the program is structured, the money is not for your down payment.

Again, you do not receive the money at closing. You will receive it four to six weeks after closing.

5. There's plenty of time left to buy. False. You must close on or before November 30th, 2009, to take advantage of the tax credit. Remember that closing on a house takes 30 to 60 days. Leave yourself plenty of time for the inspection, title search and document preparation.

You can find out if the tax credit will work for you at a free seminar, Friday, Aug. 14, at 4 p.m., at the Overland Park Convention Center. To register, call 1-800-441-7699, EXT. 4664

Copyright © 2009, WDAF-TV

You might be ablt to use tax credit ($8,000) IMMEDIATELY!

The American Recovery and Reinvestment Act of 2009 offers homebuyers a tax credit of up to $8,000 for purchasing their first home. Families can only access this credit after filing their tax returns with the IRS. Today's announcement details FHA's rules allowing state Housing Finance Agencies and certain non-profits to "monetize" up to the full amount of the tax credit (depending on the amount of the mortgage) so that borrowers can immediately apply the funds toward their down payments. Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5 percent of appraised value or their closing costs, which can help achieve a lower interest rate. To read the FHA's new mortgagee letter, visit HUD's website.

example of how the partial tax credit is determined...

just as an example, assume that a married couple has modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this limit. Diving $10,000 by $20,000 yeilds 0.5 When you substract 0.5 from 1.0, the result is 0.5 To determine the amount of the partial first time home buyer tax credit that is available to this couple, multiply $7,500 by 0.5. And, the result is $3,750

Here is one more example: assume that an individual home buyer has a modified adjusted gross income of $88,000. The buyer's income exceeds $75,000 by $13,000. Diving $13,000 by $20,000 yields 0.65. When you substract 0.65 from 1.0, the result is 0.35. Multiplying $7,500 by 0.35 shows that the buyer is eligible for a partial tax credit $2,625

Please remember that these examples are intended to provide a general idea only of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.

I construct my own home...Do I still qualify for first home buyers' tax credit?

let's say instead of buyering a new home from a home builder, you have hired a contractor to construct a home on a lot that you already own. Do you qualify for this tax credit?

Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been "purchased" on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or before April 9, 2008 and before July 1, 2009.

In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.

What type of home qualifies for the first home buyers' tax credit?

Any home purchased by an eligible first home buyer will qualify for the credit, provided that the home will be used as a principal residence and the buyer has not owned a home in the previopus three years. This includes single family detached homes, attached homes like townhouses and condominiums, manufcatured homes (also known as mobile homes) and houseboats.

how to claim first home buyers' credit?

Participating in the tax credit program is easy. You can claim the tax credit on your federal income tax return. No other applications or forms are required. No pre-approval is necessary; however, prospective home buyers will want to be sure they qualify for the credit under the income limits and first home buyer's test (covered yesterday)...I will cover income limits the next several days...

Tomorrow, I will explain what kind of homes do qualify for the tax...

Who is first home buyer?

The law defines "first home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase.

For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.

For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first time home buyer tax credit.

Ownership of a vacation hom e or rental property not used as a principal residence does not disqualify a buyer as a first home buyer.

Tomorrow, I will cover how to claim this tax credit...

First Time Home Buyer Tax Credit: Who is eligible?

First time home buyers purchasing any kind of home - new or resale- are eligible for the tax credit. Top qualify for the tax credir, a home purcvhase must occur on or after April 9, 200+8 and before July 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs.

Tomorrow, I will cover who first home buyer is...

First Time Home Buyer Tax Credit

For aspiring home owners who find their goal stubbornly elusive, newly enacted legislation proving a tax credit of as much as $7,500 for first time home buyers might just be the opportunity of a lifetime.

but like so many of the good things in left, time is of the essence for buyers who want to take advantage of this outstanding opportunity. Only homes purchased on or after April 9, 2008 and before July 1, 2009 are eligible.

Please read on about detailes of this legislature the next feww days...

First-Time Buyer Tax Credit: A Reason to Buy Now

Daily Real Estate News | October 8, 2008
First-Time Buyer Tax Credit: A Reason to Buy Now

The homeownership tax credit that the federal government created earlier this year is a hard-won tool at your disposal to encourage your customers to jump off the fence and get into the home buying market.

When you combine the tax credit with today’s continuing low interest rates, large selection of for-sale inventory, and low home prices, many of the pieces are in place for your customers to buy now.

How the Tax Credit Works

The First-time Home Buyer Tax Credit was passed this year as part of the Housing and Economic Recovery Act (H.R. 3221) on July 30 and targets any individual or household that hasn’t owned a home for at least three years. Taxpayers can take the credit on their 2008 tax return if they bought their house this year after April 9.

It’s worth up to $7,500 and can be taken in a single tax year. Authorization for the credit ends July 1, 2009, so if your customers wait to buy in the first half of 2009 they can take the credit on their 2009 tax return.

The actual credit amount is set as a percentage of the home purchase amount. That percentage amount is 10 percent, so your customers can get 10 percent of the home price credited against their tax liability, up to a maximum $7,500.

Income limits are $75,000 for individuals and $150,000 for households. Individuals whose income exceeds the $75,000 limit but isn’t more than $95,000 can still take the credit but on a reduced basis. The same thing applies to households earning up to $170,000.

Any house is eligible as long as it’s a primary residence and is in the United States.

Buyers Have 15 Years to Pay Back

To help keep the program cost effective for taxpayers, the federal government requires the tax credit to be paid back in small, 6.67-percent increments over 15 years. For that reason, some analysts have likened the credit to a 15-year, interest-free loan to help make home buying affordable.

There’s one restriction on the type of financing that your customers can use if they plan to take the credit. That restriction is on tax-exempt mortgage financing. That only applies if your clients are using below-market interest-rate financing from a public agency or nonprofit that’s funding the loan using proceeds from a tax-exempt mortgage-revenue bond issue. For most buyers, this won’t be an issue. It’s mainly an issue for low-income buyers using special mortgage financing.

Be a Resource for Clients

NAR Government Affairs has created two helpful documents that you can share with your clients to help them learn more about how the tax credit works. The documents are on downloadable and printable PDFs:
First-time home buyer tax credit chart
First-time homebuyer tax credit FAQ

The IRS Web site also offers tax-credit guidance in an article that provides answers to many frequently asked questions.

And don't forget about REALTOR.org, which is a great source for more information on all aspects of the Economic Stimulus Bill passed July 30.

How the New First-Time Buyer Tax Credit Works

How the New First-Time Buyer Tax Credit Works
Under the new housing bill, home buyers who have not owned a home in the last three years will be eligible for a tax credit equal to 10 percent of the property up to a maximum of $7,500. Here’s how it works:

* The credit is $3,750 for married couples filing separately. Unmarried people who jointly purchase a home will be able to divide the $7,500 credit.

* This program is actually a loan, which home buyers must repay over 15 years at zero percent interest beginning in the second year after they purchase the home. A home buyer who qualified for the whole credit would pay $500 for 15 years or about $41.67 per month.

* The credit applies only to homes purchased on or after April 9, 2008, and before July 1, 2009.

* High-income home buyers don’t qualify: Eligibility begins phasing out for single filers with adjusted income of more than $75,000 and $150,000 for joint filers. It completely phases out at $95,000 for singles and $170,000 for married couples filing jointly.

End of the Week Market Projection

The “second” reading of GDP growth in the 4th quarter of last year was unchanged – a basically flat 0.6 percent growth rate. As we go forward, economic growth in the first half of this year will be essentially non-existent. But there is some light at the end of what many pundits view as a dark tunnel. By the second half of the year, the economy will expand at slightly higher than 2 percent. The 2008 fiscal stimulus package contains over $100 billion in tax rebates. Those checks should be in taxpayers’ mailboxes in early summer. This tax cut is more than twice as high as a similar rebate passed in 2001. Past research suggests that consumers’ propensity to spend out of those tax rebates is about 40 cents to 50 cents on the dollar. That translates into additional consumer spending of $60 to $80 billion in the second half of the year. Make no mistake – this stimulus is the key factor in helping move the economy in the second half of the year. Other Factors than Housing Involved in Economic Doldrums Seems like most people blame the housing downturn for our economic doldrums. But there are other factors. This tax rebate is needed to compensate for outrageously high oil prices and from falling stock market values. A $104 dollar per barrel oil price is a major drag on consumer spending – and something that virtually every consumer feels. Europeans are not paying as much because of their stronger currencies. The higher oil price, which is priced in U.S. dollars, is partly driven by the very weak dollar. The weaker dollar is caused in part by a higher inflation rate in the U.S. vis-à-vis the rest of the world’s advanced economies. If a currency is losing its purchasing power, why hold that currency? Recall, the oil price was under $20 per barrel just 10 years ago. When the price of oil rises, it is essentially a tax placed on consumers with less money available to spend on more enjoyable items and activities. This “oil tax” unfortunately does not even go into the U.S. Treasury. Rather it fills the coffers of the governments of Russia, Venezuela, Saudi Arabia, Nigeria, and Iran. In today’s world, it is a transfer of money from a democratic country to a non-democratic country. The housing market will also get some relief. A higher loan limit – up to $729,000 from $417,000 – in several local areas, including Los Angeles, Orange, and San Francisco counties, will have a big impact in bringing out the buyers. As a result, home sales in the second half of 2008 will no doubt be much stronger than in the first half. Look for existing-home sales to rise to a 5.7 million-unit pace in the second half versus 4.9 million in the first half.Pent-Up Demand Rising sales will also bring down inventory and help strengthen home prices. The national median price of an existing home will fall in the first half of the year and then rise in the second half. For the year as a whole, the median price will have fallen by 1 percent – after having fallen 1.4 percent last year. Of course, there will be tremendous local market variations. The Northeast region is likely to be first region to show signs of stabilizing and then strengthening housing market conditions. The West region will likely trail behind. The West region could, nonetheless, surprise us on the upside. What is unique about the current housing cycle is the pace of price declines in some local markets, which can significantly improve affordability conditions in a short time. Home prices are falling at or near a double-digit pace in California, Nevada, and Arizona. A sudden quick home price adjustment may be just the thing to quickly induce buyers back into these marketplaces. After all, as is the case in many parts of the country, jobs have been created in those Western states over the past two years even against the backdrop of a housing market slump, and hence, there exists significant pent-up demand. New home sales will take much longer to turn around. That is simply due to the fact that there are far fewer new homes being built. Single-family housing starts have fallen by more than 50 percent in the past two years. Based on housing permits – generally a reliable indicator of upcoming housing starts – new home construction will fall further for the remainder of the year. New home inventory has been trending down but more cutbacks are needed. Therefore, homebuilders need to further bite the bullet and hold back construction. Loan modifications and other foreclosure mitigation programs are all well intended and good, but the best policy assistance in our current market condition is to unleash the pent-up demand. Any measures that violate the sanctity of private contracts – such as permitting judges to reset interest rates – should be avoided as those can greatly harm home sales by raising the cost of borrowing on new loan originations. There is some discussion of a possible tax credit for first-time home buyers. Such a policy will be a great stabilizer for the housing market and the economy.