**ITS IMPORTANT TO NOTE THAT LENDERS WILL NEED TIME TO FIGURE OUT THE DETAILS BEFORE THIS DECISION IS PUT INTO PRACTICE. CONTACT ME FOR DETAILS- THERE HAS NEVER BEEN A BETTER TIME TO BUY A HOME!**
In his speech at the National Association of REALTORS® Housing Summit on May 12, 2009, US Department of Housing and Urban Development (HUD) Secretary Shaun Donovan announced a program that allows borrowers to use the first-time homebuyer tax credit for a down payment or closing costs on a FHA-insured mortgage. The Secretary said “We think the policy is a real win for everyone, ensuring that borrowers can tap into the numerous organizations that are already part of the FHA network to receive this additional benefit.”
The details of the program were announced today in Mortgagee Letter 2009-15. A government entity and instrumentalities of government may provide a second mortgage. Currently, 10 state housing finance agencies offer a product buyers can use that will effectively monetize the tax credit for down payment purposes. These states are Colorado, Delaware, Idaho, Kentucky, Missouri, New Jersey, New Mexico, Ohio, Pennsylvania, and Tennessee. State Associations are encouraged to work with their respective housing finance agency to implement similar programs. The 3.5 percent down payment may also be a gift from a family member, employer or nonprofit, charitable organization.
The original guidance permitted lenders and HUD-approved nonprofits and lenders to offer bridge loans via second lien financing or short term loans. Guidance released today allows lenders to offer the monetized tax credit for down payments in excess of 3.5 percent, closing costs and interest rate buy downs. Mortgage industry leaders have indicated that this type of product may not be immediately available to consumers. Lenders will need some time to develop documentation for what will effectively be personal loans to the home buyer.
Read the HUD Mortgagee Letter
Wednesday
Raleigh featured on the Today Show on NBC!
Visit msnbc.com for Breaking News, World News, and News about the Economy
Tuesday
Balanced Solutions to Workforce Housing
The Triangle Community Coalition recently hosted a forum on Affordable Housing for the Triangle’s Workforce. The luncheon was held on May 19. The program, “Balanced Solutions for Workforce Housing”, explored creative and functional affordable housing solutions for the Triangle’s workforce, particularly during the economic downturn.Featured Speakers included ... and Zach Schabot, a broker with Garman Realty and member of the City of Raleigh's Fair Housing Hearing Board."
-Podcast (audio)
Monday
One for One.
I am so often inspired by other people. The story of TOMS shoes is definitely an inspriring one. I have no real connection to this company, other than an absolute belief in giving back. At Garman Realty, we believe in giving back too. It is one of the core values of our company.
Our tagline is "Give it Back." Their tagline is "One for One." Welcome to the revolution.
Thursday
My New House
I have said it time and time again...I truly believe now is a GREAT time to buy a home. So guess what? We did! We just bought a new home in Renaissance Park, a Wakefield Development community just south of Downtown Raleigh. The home was built by Standard Pacific Homes and the whole experience was great...from the sales agent Scott, to the construction manager Frank, to the lender Michelle. Top notch!
Tuesday
What's the deal with the $8000 tax credit?
Disclaimer: While this post should, in no way, replace the sound advice of a tax advisor or CPA...it should answer some of your initial questions about the $8000 first time home buyer tax credit. Enjoy!
1. What’s this new homebuyer tax incentive for 2009?
The $7,500 repayable credit introduced in 2008 is increased to $8,000 and the repayment feature is eliminated for 2009 purchasers. Any home that is purchased for $80,000 or more qualifies for the full $8,000 amount. If the house costs less than $80,000, the credit will be 10 percent of the cost.
2. Who is eligible?
Only first-time homebuyers are eligible. A person is considered a first-time buyer if he/she has not had any ownership interest in a home in the three years previous to the day of the 2009 purchase.
3. Is there an income restriction?
Yes. The income restriction is based on the tax filing status the purchaser claims when filing his/her income tax return. Individuals filing Form 1040 as single (or head of household) are eligible for the credit if their income is no more than $75,000. Married couples who file a Joint return may have income of no more than $150,000.
4. Do individuals with incomes higher than the $75,000 or $150,000 limits lose all the benefit of the credit?
Not always. The credit phases out between $75,000-$95,000 for singles and $150,000- $170,000 for those married and filing jointly. The closer a buyer comes to the maximum phase-out amount, the smaller the credit will be. The law provides a formula to gradually withdraw the credit. Thus, the credit will disappear after an individual’s income reaches $95,000 (single return) or $170,000 (joint return).
5. Are there restrictions on the location of the property?
Yes. The home must be located in the United States. Property located outside the U.S. is not eligible for the credit.
6. Are there restrictions related to the financing for the mortgage on the property? In 2009, most financing arrangements are acceptable and will not affect eligibility for the credit. Congress eliminated the financing restriction that applied in 2008.
7. How do I apply for the credit?
There is no pre-purchase authorization, application or similar approval process. All eligible purchasers simply claim the credit on their IRS Form 1040 tax return. The credit will be reflected on a new Form 5405 that will be attached to the 1040. Form 5405 can be found at http://www.irs.gov/.
8. So I can’t use the credit amount as part of my downpayment?
No. Congress tried hard to devise a mechanism that would make the funds available for closing costs, but found that pre-funding would require cumbersome processes that would, in effect, bring the IRS into the purchase and settlement phase of the transaction.
9. What if I purchase later this year but can’t get to settlement before Dec. 1?
The credit is available for purchases before Dec. 1, 2009. A home is considered as “purchased” when all events have occurred that transfer the title from the seller to the new purchaser. Thus, closings must occur before Dec. 1, 2009, for purchases to be eligible for the credit.
10. I know there is no repayment requirement for the $8,000 credit. Will I ever have to repay any of the credit back to the government?
One situation does require a recapture payment back to the government. If you claim the credit but then sell the property within 3 years of the date of purchase, you are required to pay back the full amount of any credit, including any refund you received from it. A few exceptions apply. Note that this same 3-year recapture rule applies, as well, to the $7,500 credit available for 2008. This provision is designed as an anti-flipping rule.
11. What if I die or get divorced or my property is ruined in a natural disaster within the 3 years?
The repayment rules are eased for many circumstances. If the homeowner who used the credit dies within the first three years of ownership, there is no recapture. Special rules make adjustments for people who sell homes as part of a divorce settlement, as well. Similarly, adjustments are made in the case of a home that is part of an involuntary conversion.
Have a question of your own? Email me at zachschabot@garmanrealty.biz!
1. What’s this new homebuyer tax incentive for 2009?
The $7,500 repayable credit introduced in 2008 is increased to $8,000 and the repayment feature is eliminated for 2009 purchasers. Any home that is purchased for $80,000 or more qualifies for the full $8,000 amount. If the house costs less than $80,000, the credit will be 10 percent of the cost.
2. Who is eligible?
Only first-time homebuyers are eligible. A person is considered a first-time buyer if he/she has not had any ownership interest in a home in the three years previous to the day of the 2009 purchase.
3. Is there an income restriction?
Yes. The income restriction is based on the tax filing status the purchaser claims when filing his/her income tax return. Individuals filing Form 1040 as single (or head of household) are eligible for the credit if their income is no more than $75,000. Married couples who file a Joint return may have income of no more than $150,000.
4. Do individuals with incomes higher than the $75,000 or $150,000 limits lose all the benefit of the credit?
Not always. The credit phases out between $75,000-$95,000 for singles and $150,000- $170,000 for those married and filing jointly. The closer a buyer comes to the maximum phase-out amount, the smaller the credit will be. The law provides a formula to gradually withdraw the credit. Thus, the credit will disappear after an individual’s income reaches $95,000 (single return) or $170,000 (joint return).
5. Are there restrictions on the location of the property?
Yes. The home must be located in the United States. Property located outside the U.S. is not eligible for the credit.
6. Are there restrictions related to the financing for the mortgage on the property? In 2009, most financing arrangements are acceptable and will not affect eligibility for the credit. Congress eliminated the financing restriction that applied in 2008.
7. How do I apply for the credit?
There is no pre-purchase authorization, application or similar approval process. All eligible purchasers simply claim the credit on their IRS Form 1040 tax return. The credit will be reflected on a new Form 5405 that will be attached to the 1040. Form 5405 can be found at http://www.irs.gov/.
8. So I can’t use the credit amount as part of my downpayment?
No. Congress tried hard to devise a mechanism that would make the funds available for closing costs, but found that pre-funding would require cumbersome processes that would, in effect, bring the IRS into the purchase and settlement phase of the transaction.
9. What if I purchase later this year but can’t get to settlement before Dec. 1?
The credit is available for purchases before Dec. 1, 2009. A home is considered as “purchased” when all events have occurred that transfer the title from the seller to the new purchaser. Thus, closings must occur before Dec. 1, 2009, for purchases to be eligible for the credit.
10. I know there is no repayment requirement for the $8,000 credit. Will I ever have to repay any of the credit back to the government?
One situation does require a recapture payment back to the government. If you claim the credit but then sell the property within 3 years of the date of purchase, you are required to pay back the full amount of any credit, including any refund you received from it. A few exceptions apply. Note that this same 3-year recapture rule applies, as well, to the $7,500 credit available for 2008. This provision is designed as an anti-flipping rule.
11. What if I die or get divorced or my property is ruined in a natural disaster within the 3 years?
The repayment rules are eased for many circumstances. If the homeowner who used the credit dies within the first three years of ownership, there is no recapture. Special rules make adjustments for people who sell homes as part of a divorce settlement, as well. Similarly, adjustments are made in the case of a home that is part of an involuntary conversion.
Have a question of your own? Email me at zachschabot@garmanrealty.biz!
Little Moments...BIG magic!
Zach, I am so glad to hear of your continued passion for the mission of Big Brothers Big Sisters. Andie and I conferred this morning after your email and she spoke very highly of you. I am sending this response as her regards as well. If you have taken a good walk through our website (as it appears you have) you will notice a lot has changed over the recent years.
Just six years ago we were serving less than 100 children such as Torian. Today we serve over 1,100 each year and are on target to serve approximately 2,000 annually in the next 3-5yrs. We currently see more and more of our community’s vulnerable children and their families reaching out to us for help – guidance – and the caring support of a mentor. Today we have over 200 children on our waiting lists and in challenging economic times more single moms and struggling families are reaching out to us for support. Your continued support and pledge of $100 for every transaction this year will go a long way to help our efforts to reach these children and provide a variety of activities for them through out the year. If we could help you further your efforts in anyway please do not hesitate to ask. I would love to talk to you further to explore if there are any opportunities to encourage similar efforts throughout Garman Realty and partner with Garman on a larger level.
Again thank you very much for your role as a Big in Torian’s life, and for your support of our on-going efforts to reach more children in need.
- John Tedesco, VP of Development
Big Brothers Big Sisters of the Triangle
Subscribe to:
Posts (Atom)