3/18/09 Feds announced a significant increase in the amount of Mortgage Backed Securities that they intend to buy. In addition to the earlier pledge to buy $500 billion between now and June, they indicated that they are intending to purchase an additional $750 billion in MBS. Moreover, the Feds also indicated their plan to buy $300 Billion in Long Term Government Treasuries (something that they have been hinting at for 2 months)
On the news, MBS prices improved 125 basis points. Given this improved pricing, watch for improved rates thisafternoon and tomorrow. In my opinion, once this action has been fully priced in during the next couple of days, you or your clients will want to seek your rate and have me lock it in. I believe this is the final push that we have been hoping for.
Of EQUAL importance is this caution...
This will totally overwhelm all areas of the mortgage industry. Please take this into consideration when establishing closing dates and financing commitment dates.
As part of the American Recovery and Reinvestment Act of 2009, the IRS has officially released Form 5405-- better known as the First-Time Homebuyer Credit Form.
True to tax code standards, the 10-field form is accompanied by 3 pages of instructions.
Form 5405 is a helpful, go-to resource for home buyers with questions about the tax credit.
For example, the form distinguishes tax consequences for homes bought in 2008 versus 2009, and clearly defines the term "first-time home buyer".
In addition, Form 5405 highlights the math behind the tax credit. In general, the First-Time Homebuyer Credit is equal to the lesser of:
$8,000 for homes bought in 2009
10 percent of the home's purchase price
Married couples filing separately are entitled to half of the expected credit, and homes sold within 3 years are subject to a credit repayment in the year the home ceases to be the "main home".
Form 5405 is a comprehensive reference. However, be sure to check with your accountant for specific questions about your personal returns and how the First-Time Homebuyer Credit may impact your finances. There is no substitute for professional, paid advice.
Having done a lot of questioning and research on why "Short Sales" are taking soooo long, I have discovered the following that may prove helpful as you consider the opportunities available to your buyers or sellers.
A. With real estate prices currently at 2005 levels, many homeowners find themselves needing to sell, BUT discover they owe more than the homes current value. Reason's for selling can vary from a job transfer, to a homeowner no longer able to make mortgage payments due to job loss, recent divorce, business failure, or a Sub-prime ARM reset.
If the reason for selling can be documented and attributed to a distressed situation, a homeowner may qualify for debtforgiveness. To do so, requires the homeowner to prove that they do not have, or will not have the money now or in the near future to pay back the difference between the homes value and the mortgage balance.
Q: How is the process initiated?
A: Before any conversation with the lender, the home is listed for sale. While the home is listed for sale, the homeowner and their agent should prepare a "short sale" packet, including the seller's financials and a "hardship letter". Upon receipt of an offer, the seller can sign off on the terms of sale, but terms are not official without the lender's approval. The sale status now becomes "Pending: Back-Up Offers Requested", as most lenders will require listing agents to submit all offers until approved by the lender. In the meantime, the short sale packet is place in a que and awaits review by the lender. An initial response from the lender usually takes between one to three months, but can take longer as we have all discovered.
Q: When does the bank become involved?
A: Lenders typically do not talk to the seller or listing agent until there is a purchase offer in hand. The list price may be far less than the bank is willing to initially accept, which could cause confusion with the buyer. When a purchase offer is received by the lender, a Broker's Price Opinion is ordered, and the lender assigns a negotiator to work with the lender, investor (eg. FNMA) and the buyer to help them come to terms. Once the lender approves a price, they send an approval letter with an end date by which the transaction must close. The timeframe for an inspection and financing contingency typically begin upon lender approval. Because of the lengthy wait, or because of negotiations involving the lender's higher BPO, it is not unusual for the first buyer to walk away. Many agents have found that the price the lender is willing to accept, decreases as the foreclosure date draws closer. It is the BUYER'S agent's job to research the seller's financial situation to determine the likelihood of the bank accepting the desired price. It is essential to explain the process to both buyers and sellers to manage expectations and eliminate last minute confusion. It's important to know that lenders will negotiate, so start an offer below your walk away price. Today, lenders are beginning to realize that losses are greater with a foreclosure, than with a short sale. Because of the large number of pending foreclosures, lenders are more inclined to work with interested buyers before the process reaches foreclosure.
Q: Do most short sale require the buyer to skip an inspection?
A: Because homes in distressed situations are often not cared for, it is highly recommended to get an inspection. The inspection can be done upon mutual acceptance with the seller, to avoid waiting the 1-4 months for lender approval. Obviously this could put the $400-$500 at risk, should the transaction not close. Should the inspection uncover needed repairs, you may find that the seller is not in a position to make those repairs. In this case, it may be possible to re-negotiate the price with the lender, but it is more likely that that the investment in an inspection will do little more than alert the buyer as to the condition the home and what items need to be addressed in the future.
Q: Some say that only 10% of the short sales come to sale and the rest become bank owned. Is this a realistic success ratio?
A: Short Sale Buyers need to be flexible!!! They are wise to look at other options while waiting on the lender response. And because of this, the numbers are skewed because so many short sale buyers walk away when they find a better opportunity. When worked properly, your success ratio will dramatically increase.
With Congress reaching agreement on a $789 billion stimulus package for Americans, the clock is ticking for this year's home buyers and homeowners.
The package contains important benefits related to housing.
One provision gives first-time home buyers an $8,000 tax credit provided they purchase a home between January 1, 2009 and December 1, 2009.
IMPORTANTLY, THE FINE PRINT CONTAINS THE FOLLOWING FEATURES THAT COULD MAKE A BIG DIFFERENCE WITH YOUR FIRST TIME BUYERS!!
1. Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 tax return? Yes. Qualified prospective home buyers who believe they are going to purchase are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment when they eventually buy within the time period allowed.
Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.
2. If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return? Yes. The law allows taxpayers to choose ("elect") to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.
Taxpayers buying a home who wish to claim it on their 2008 tax return, but who have already submitted their 2008 return to the IRS, may file an amended 2008 return claiming the tax credit. You should consult with a tax professional to determine how to arrange this.
3. For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest? Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.
Be sure to discuss your plans with a qualified accountant before committing to a plan.
If you are looking to improve your credit score quickly, now is the time to get started. Here are some great strategies you can utilize right away to give your score a little boost.
Create Some Balance: While paying down installment debt (car, school, mortgage, etc.) will definitely boost your credit score, paying down or paying off revolving debt, such as credit cards, can cause a quick jump in your credit score. The trick is to get and keep your balances below 30% of your credit limit on each card. For faster results, attack those cards with balances closer to their respective credit limits first, as opposed to those cards with simply the highest debt. Remember, if you pay off any credit cards completely, do not close your accounts without discussing it with your mortgage professional first. Cancelling those cards may inadvertently undo all of your hard work.
Know Your Limits: Make sure that your credit card issuers are reporting the correct limits on your accounts to the three major credit bureaus. Without an available limit, your account will appear to be maxed out at its highest reported balance each month. This could cost you up to 80 points in certain instances. Some creditors, such as American Express® and certain cards issued by Capital One®, actually have a policy of not reporting available credit. However, most companies will report your credit limits if you ask them in writing.
Take Some Credit: If you have a credit card account in very good standing, make sure that all three credit bureaus know about it. Just like your credit limits, some creditors don’t report your information to all three credit companies - this is why credit scores often vary between bureaus. If this is the case, give them a call to find out why. Correcting this oversight could provide a significant boost to your score. Also, if you’re in very good standing, ask your creditor for a lower rate or higher credit limit. This will increase the gap in the debt you owe versus the credit you have available. Sometimes hinting about closing an account can suddenly bring out the generous spirit of certain card issuers. Give it a try. The worst they can say is no.
Protect Your Interests: Your credit is calculated based solely on the information available to your creditors. If you have a HELOC, make sure it’s listed as a mortgage or an installment account on your credit reports and not a revolving debt. If you had a bankruptcy, be sure that all items associated with the bankruptcy are being reported correctly, that is with a zero balance. This action could increase your score by 50-100 points. Because simple mistakes like these can wreak havoc on your credit score, it’s important to monitor your credit every four to six months.
Even the Score: If you find information on your credit report that you believe is inaccurate or incomplete, then you have the right to dispute it free of charge. For the fastest results, visit the appropriate credit bureau’s website and file a complaint online. If supporting documents are necessary, you have to file your dispute by mail.
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While the proposed $15,000 home-buyer tax credit died in negotiations between the House and the Senate, the $787 billion stimulus bill that President Barack Obama signed into law Tuesday includes a similar--albeit smaller--measure designed to help revive our real estate market. Here are six things you need to know about the freshly-enacted $8,000first-time home buyer tax credit.
1. $8,000 for new buyers: The tax credit included in the economic stimulus legislation is much narrower than the $15,000.00 proposal. This credit is equivalent to 10 percent of the purchase price of the home--although it's capped at $8,000--and applies only to first-time home buyers and principal residences. But unlike an earlier $7,500 home buyer tax credit, this one doesnot have to be repaid.
2. First time buyers defined: For the purpose of this legislation, a "first-time home buyer" is someone who hasn't owned a principal residence for three yearsbefore buying a house. (The date of purchase is considered the day that the title is transferred.) That means if you've owned a vacation home--but not a principal residence--within the past three years, you wouldstill qualify for the credit.
3. 2009 buyers only: Only those who purchase a home on or after January 1 and before December 1, 2009 are eligible for the credit. Anyone who bought a home last year won't be able to take advantage of it.
4. Income limits: The tax credit is subject to income limitations. Single buyers need a modified adjusted gross income of $75,000or less to qualify for the full credit, that's $150,000 for married couples. Those earning more than these thresholds may be eligible for reduced credits.
5. Refundable: Because the tax credit is "refundable," qualified buyers can take advantage of it even if they don't have much tax liability. In other words...unlike the $15,000 tax credit, this tax credit will be refunded to a buyer, if his year end tax liability is less than the credit.
6. Recapture: Buyers have to own the home for at least three yearsin order to capitalize on the credit. If they sell the home before then, they will have to return the credit to the government. (Exceptions will be made in certain cases, such as death or divorce.)
7. Click Hereto start searching homes to take advantage of this credit now! It Free,Easy,No Obligation!
How much are you spending on your commute to work? Whether moving, considering a new job, weighing the benefits of tele-commuting, or just curious what you're spending given the current cost of gas, you'll probably be interested to see how expensive simply getting to work actually is.
It's more expensive than you think!
Getting to work is far more costly than you think. If you're commuting more than 15 miles a day to work, you're losing thousands of dollars a year. There's a solution, and it's not a gas station boycott, cutting off the A/C, or even trading in your "Hummer" for a hybrid. Those are just band-aids to the problem.
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