$7500 tax credit for First Time Homebuyers, replaced with $8,000 TAX CREDIT to First Time Home Buyers
Washington has been busy lately. In one of the most rapidly approved bills in memory, the Housing and Economic Recovery Act was passed into law, and could have significant implications on the housing and mortgage industry. When Congress passed the housing rescue bill (The Housing Assistance Act of 2008) this past July, it included a new $7,500 tax credit for first time homebuyers. This has since been replaced with a NEW bill providing for an $8000 first time homebuyer tax credit!
In its efforts to stimulate the economy and revive the housing market, Congress has enacted legislation providing a tax credit of up to $8,000 for first-time home buyers.
The tax credit is for first-time home buyers only.
The tax credit does not have to be repaid.
The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
The credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009.
Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.
Frequently Asked Questions About the Home Buyer Tax Credit
The American Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009.
The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.
Who is eligible to claim the tax credit? First-time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and before December 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner.
What is the definition of a first-time home buyer? The law defines "first-time 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. However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.
How is the amount of the tax credit determined? The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
Are there any income limits for claiming the tax credit? The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.
What is "modified adjusted gross income"? Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine "adjusted gross income" or AGI. AGI is total income for a year minus certain deductions (known as "adjustments" or "above-the-line deductions"), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.
To determine modified adjusted gross income (MAGI), add to AGI certain amounts such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs.
If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit? Possibly. It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose MAGI exceeds the phaseout limits.
Can you give me an example of how the partial tax credit is determined? Just as an example, assume that a married couple has a 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 amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 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 $8,000 by 0.5. The result is $4,000.
Here’s another 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. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.
Please remember that these examples are intended to provide a general idea 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.
How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008? The most significant difference is that this tax credit does not have to be repaid. Because it had to be repaid, the previous "credit" was essentially an interest-free loan. This tax incentive is a true tax credit. However, home buyers must use the residence as a principal residence for at least three years or face recapture of the tax credit amount. Certain exceptions apply.
How do I claim the tax credit? Do I need to complete a form or application? Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on Line 69 of their 1040 income tax return. No other applications or forms are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests.
What types of homes will qualify for the tax credit? Any home that will be used as a principal residence will qualify for the credit. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.
I read that the tax credit is "refundable." What does that mean? The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.
For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).
I purchased a home in early 2009 and have already filed to receive the $7,500 tax credit on my 2008 tax returns. How can I claim the new $8,000 tax credit instead? Home buyers in this situation may file an amended 2008 tax return with a 1040X form. You should consult with a tax advisor to ensure you file this return properly.
Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the 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 after January 1, 2009 and before December 1, 2009.
In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.
Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program? Yes. The tax credit can be combined with the MRB home buyer program. Note that first-time home buyers who purchased a home in 2008 may not claim the tax credit if they are participating in an MRB program.
I am not a U.S. citizen. Can I claim the tax credit? Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of "nonresident alien" in IRS Publication 519.
Is a tax credit the same as a tax deduction? No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS.
A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $8,000 in income taxes. If the taxpayer receives an $8,000 deduction, the taxpayer’s tax liability would be reduced by $1,200 (15 percent of $8,000), or lowered from $8,000 to $6,800.
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. Prospective home buyers who believe they qualify for the tax credit 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. 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.
Further, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. Some state housing finance agencies, such as the Missouri Housing Development Commission, have introduced programs that provide short-term credit acceleration loans that may be used to fund a downpayment. Prospective home buyers should inquire with their state housing finance agency to determine the availability of such a program in their community.
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.
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.
But time is of the essence for buyers who want to take advantage of this opportunity. Only homes purchased on or after January 1, 2009 and before December 1, 2009 are eligible
BEST RATE or LOWEST COST A common mistake shoppers make is to ask: "What's your best rate?" or "What are your closing costs?" Both logical questions to ask, but they do not give the response most borrowers need to make a proper decision. Borrowers must understand both rates and fees. Rates are only half the answer to getting the best deal. It is possible end up with the lowest rate but not necessarily the best deal.
Simply put, the lowest rate & the lowest fees do not go hand-in-hand. NO LENDER can offer both together. I can give you rock bottom rates, but it will cost you in fees. I can give you the lowest fees, but it will cost you in interest rate. Most lenders quote their best rate in combination with covering all third party fees (appraisal, credit report, title company, state taxes, county recording fees, etc) with 1% origination. See the example below
Here is an example of Rate vs. Costs on a $150,000 - 30 year fixed loan. These rates are NOT accurate for today - just samples.
Lower Rate
Normal Quote
No Lender Cost
Full NO Cost
Rate
6.5%
6.75%
7.00%
7.75%
Origination
1%
1%
None
None
Points
1%
None
None
None
Total Closing Costs
$5347
$4130
$2346
None
Monthly P & I Payment
$948.10
$972.90
$997.95
$1,074.62
10 Years of Interest
$93,963
$96,227
$98,502
$109,853
20 Years of Interest
$164,069
$169,752
$175,489
$197,451
30 Years of Interest
$194,345
$201,768
$209,295
$236,861
WHICH LOAN WOULD YOU LIKE? I can offer you all four options on all of our loans.
"As your Mortgage Consultant, I will show you your different options. You tell me what you really want, and then I will advise you on what I think is best based on your needs and financial goals. I'm proud to provide solutions to each of my customers, no matter what their financing needs!" - Joe Metzler
Our GOOD FAITH ESTIMATE is GUARANTEED NOT TO CHANGE once you lock your loan!
The combination of rate & fees can be very confusing. One lender is screaming "No Closing Costs." A second lender may quote you 7.00% with $2246 in fees, while another lender is offering 6.75%% with $4130 in fees. So are closing costs and fees bad? Well if you ask everyone's brother who has a real estate license and knows everything about mortgages, then the answer you will most likely hear is yes. I am here to tell you everyone's brother is probably wrong.
Good enough answer? I didn't think so...
Begin by asking yourself "How long am I going to be in this property?" This is the single most important question to determine which option is best for you. Now look at the chart above. It becomes very obvious based on how long you are going to be in the home if 'Best Rate or Lowest Cost' makes the most sense for you and your family.
Congratulations, you are now smarter than everyone's brother, mother and sister with a real estate license.
You Are Entitled To A Second Opinion Even If You Have Already Been Pre-Approved For Your Mortgage!
Imagine you have just found out that you have to have surgery and the procedure will be pretty extensive! Most people just wont take the doctors word any more. They seek out another doctor for a second opinion.
Thats the way it should be with your mortgage too! If you have already been pre-approved or pre-qualified for a mortgage on your next home, are you absolutely sure you are getting the best deal?
I'm not talking about interest rates either! I am talking about the structure of the deal itself! Donald Trump, in his book called The Art of the Deal said, The price that you pay is the least of his worries in a transaction. Its how the deal is structured is what matters most. You could have been quoted a wonderful interest rate, but if your financial house is not in order, the best interest rate could be absolutely the worst loan for you.
Im not saying that interest rates are NOT important, they are! But, here are some of the things you need to consider and why you need a second opinion from me:
Should you decrease your down payment and use your cash to pay off your high credit card debts?
Should you pay points or loan origination fees?
Does a no-cost mortgage make more sense for you?
Are you better off with an adjustable rate or a fixed rate?
and did your lender show you how to save thousands of dollars and take 5 years off the mortgage term?
If they did not talk to you about any of these issues then you definitely need a Second Opinion from us.
It wont hurt to see if your mortgage has been structured correctly. You have everything to gain and nothing to lose. You can simply walk away knowing that your lender has done a good job for you. Or, you will find out that they havent. Either way, you win.
Applying is easy, takes only minutes, and is absolutely FREE of charge!
The law firm Hagens Berman Sobol Shapiro is investigating Wells Fargo and its appraisal subsidiary Rels Valuation based on reports the companies engaged in a rigged appraisal process.
The firm is looking into claims that Wells Fargo forces homeowners to use its appraisal firm, Rels Valuation, which then turns around and subcontracts the work to independent appraisers while charging homeowners an inflated fee for the work.
Reports say independent appraisers are forced to work for below market value while Rels Valuation significantly inflates the cost of the work for homeowners, generating profits for itself and its parent, Wells Fargo.
HBSS believes the practice may affect homeowners throughout the country.
HBSS is looking for homeowners who purchased or refinanced their home through Wells Fargo and Rels Valuation.
You snooze, you may lose. Helping you avoid costly mortgage mistakes
The Fed's been at it again, offering words that sound encouraging at first blush, confirming that their buying program of Mortgage Backed Securities is in full swing and will continue as needed. Of course, the media will pick this up and offer their own interpretation, saying "Good news, the Fed's words on continuing their purchasing program mean that rates will continue to drop lower, and remain low into the summer..." But is this really what that means? Not so.
So why is the Fed buying these Bonds? Well if you think about it, it's very smart of the Fed...and maybe even a little sneaky...because 5.5% Bonds actually represent outstanding mortgages with rates of 6 - 6.50%, which are precisely the loans being refinanced at today's great interest rates.
Stay with me here...
With rates at present low levels, many of the mortgages in these FNMA 5.5% pools being bought up by the Fed will be refinanced and paid, thus giving the Fed a quick recoup on some of their investment. And this is likely a big reason why the Fed said they could continue this purchasing program beyond June, if necessary. Bottom line, the Fed buying these higher rate coupons will not necessarily help rates to move lower, as their actions do not impact the loans being originated at today's low rates.
Here's the most important part.
Sometimes I talk to clients who are in a situation where it makes sense to refinance right now, and save $250 per month for example. But when they hear the media throwing around teases of lower rates ahead, they decide to hold off on making the decision to save the $250 per month right now, in the hopes of gaining another $30 per month in additional savings with a lower rate than where we stand presently. Now clearly, rates could turn higher, and this window of opportunity could pass them by entirely.
Even if those clients ultimately are correct in timing the market, and eventually grab that lower rate and save another $30 per month - think of what they have lost by waiting. While they delayed, they lost the savings they could have gained by taking action sooner - or in the example used, $250 - for every single month they waited. So even if they got lucky and obtained the rate they were looking for, it could take years to make up what they lost by waiting.
The clincher is this:
I don't want anyone to miss an opportunity by either waiting, or not understanding what is at stake. Let's talk further on this - call or email me and let's discuss what this might mean for you.
Better yet, apply online right now. You'll be closed and safely enjoying these current and REAL low rates next month!
How Does It Work? Simple Just qualify for a traditional FHA loan, then you MUST select a home to buy from the list of available HUD foreclosed properties, and put just $100 down payment.
What about closing costs? Closing costs can be rolled into the transaction, up to 3% of the loan amount.
How do I get started? It all starts with a no obligation online loan application or a call to (651) 552-3681, where one of our specially trained Loan Officers will assist you.
Rural Development, formerly known as the Farmers Home Administration (FmHA), administers a mortgage loan guaranty program - also called the Section 502 Program -- designed to provide rural home financing for first-time homeowners or those who don't own structurally sound or adequate housing. Funds can be used to build, repair, renovate or relocate a home, or to purchase and prepare home sites, including providing water and sewage facilities. Prospective borrowers can apply with participating lenders like us, who process and close the loans. The Rural Development organization, an office of the U.S. Department of Agriculture (USDA), underwrites the loan packages.
'Rural' is defined by the organization as being outside a Standard Metropolitan Statistical Area (SMSA). The property that the borrower wishes to buy must be on a publicly-maintained road, though it can be located in a development with private roads. And, as with the mortgage revenue bond authority loan, it must be a single-family owner-occupied home from which no income can be derived. The loan amount can be up to 100% of the lesser of the property's cost or its appraised value. The seller is allowed to pay all closing costs, making it a true 'no money down' transaction for the buyer. Additionally, if the property appraises for more than the purchase price, the borrower can finance in the closing costs and the guaranty fee (which is 2% of the loan). The guaranty fee can be financed as long as the property appraises for at least the amount of the purchase price plus the fee. Anything above that amount can be used to finance closing costs. The maximum loan term under the 502 program is 30 years. (USDA Property Eligibility Check web site)
The program sets limits on the maximum adjusted gross income that a qualified borrower is allowed to have, as well as maximum loan amounts based on the area's current FHA loan limits. Allowable income adjustments include amounts for minor children, child-care expenses, and elderly family members. For the most part, these limitations are not placed so low as to preclude a large segment of moderate-income borrowers from qualifying for the program. Perhaps the most stringent limit of the program, however, is the requirement that the borrower be unable to obtain the financing necessary to buy a home without Rural Development's assistance. In other words, the borrower must be rejected by or be unable to qualify for any other available loan program, such as conventional, FHA, or VA loans. But although unable to qualify for other funding sources, borrowers must still have an OK credit record that shows a history of meeting their financial obligations.
Rural Development also offers a subsidized payment program for borrowers who don't have sufficient income to qualify for the standard plan. A portion, or all of the loan, may be subsidized. A formula is used to determine the parameters that the borrower fits into. Nevertheless, this loan also requires that the applicant have acceptable credit.
This program is, in my humble opinion, the best mortgage available to help many areas increase sales, over come the negative effects of the mortgage mess, and truly help buyers and sellers.
Now the Rural Development Home Loan highlights:
100% of sales price up to 102% of APPRAISED value, which may include ALL closing costs and pre paid items and even refund escrow deposit in many cases.
NO PMI--- this means lower payments, means more people fit into the debt to income limits
It is NOT just for "rural" areas. The agency's (USDA) definition of rural, and what most of us consider rural, are two different things. If you check the maps for your area you'll be delighted in what qualifies as rural.
All homes, condos and town homes qualify if there are in a "eligible area".
With a 620 score, the buyer needs no explanation for prior derogatory credit nor do they have to pay off collections.
There are NOT nearly as many credit "gray" areas as there are in FHA lending.
There are NOT any loan limits.
Sales concessions are NOT needed in most cases (seller paid closing costs).
We can pre approve buyers in under 15 minutes for this program and close as fast as 10 working days. NOT every bank or broker is able to offer or knows how to do these loans, make sure you deal with an RD Loan expert (like us!).
Everything you ever wanted to know, the facts not the myths can be found at the USDA web site
Please PASS THIS INFORMATION ALONG TO EVERYONE YOU KNOW WHO MAY BENEFIT
There is no need to fill out an application to qualify for the tax credit. First-time homebuyers merely claim the credit when filing the tax return for that year.
NO PRE-APPROVAL REQUIRED, but if you are relying on this program to purchase a home you may want to check your eligibility.
HERE ARE SOME BASIC FACTS: The credit is available only to first-time home buyers defined as buyers who have not owned a principal residence for three-years prior to the subject purchase. The ownership test applies to both partners in a marriage; i.e. if a husband has not owned a home in the past three years but the wife has, neither spouse qualifies for the first-time home buyer tax credit. (It appears that this would be the case even if the husband is purchasing the property only in his own name.) A buyer can still be eligible for the credit even if he owns a vacation home or rental property not used as a principal residence.
Single taxpayers with "modified adjusted gross income" up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit. Individuals and couples with incomes above the thresholds may still qualify for a lesser credit, however, taxpayers with adjusted gross income above $95,000/ $170,000 phase out of the program completely.
Your tax advisor may be able to help you with this. The credit is available even to those with little or no federal income tax liability to offset. This usually means that the government will send a check for part or all of the credit. Otherwise the credit is used to offset any unpaid taxes or increase a refund.
The credit is available for homes purchased between April 9, 2008 and July 1, 2009 and applies to both new and existing homes whether attached or detached, condominiums, mobile homes, or houseboats. A homebuyer contracting for a custom built home can qualify for the credit as long as the home is first occupied between the April 2008/June 2009 dates. (For newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.) The $7,500 credit represents 10 percent of the purchase price of a low cost home.
That the tax credit is not a gift or a grant but essentially a 15 year loan to the homebuyer and, while it is interest free, will require filing a tax return and will carry the same IRS penalties for non-payment as accrue to delinquent taxes. Most who use the program will be able to claim this full amount, however, in the event a home is purchased for a lesser amount, the 10 percent cap will apply. That would mean that a $65,000 purchase would result in a $6,500 credit.
There are other refinements to the program. For example, if it is to his benefit, a taxpayer can apply for the credit in a different year than the home is purchased. There is also a possible forgiveness of debt for homeowners who sell the home before the loan is repaid and do not received sufficient gain from the sale to cover the loan balance.
I am ready to help you. Call or apply online to make your home buying dream come true.
"For families struggling to keep up with their mortgage payments, this program will be another resource to refinance into a loan they can afford," said HUD Secretary Steve Preston. "FHA remains a safe and affordable alternative to the high-priced mortgage loans that threaten homeowners' ability to retain their homes. We strongly encourage borrowers to work with their lenders to determine if HOPE for Homeowners is the right program for them."
Unfortunately, THIS PROGRAM IS NOT WHAT PEOPLE THINK it is. It has been called "HopeLESS for Homeowners" by many in the mortgage industry, as the combination of getting your existing lender to cooperate, and a new lender willing to take on the previous lenders "problem" loan will result in few of these actually being done. Furthermore, while any FHA lender is technically able to do the loan, very few as of today have actually agreed to do it!
Just 111 Hope For Homeowner Applications were received for the ENTIRE Country the first month of the program!
The HOPE for Homeowners program was authorized by the Economic and Housing Recovery Act of 2008. Since the President signed this vital legislation into law on July 30, 2008, the HOPE for Homeowners Board of Directors has worked diligently to develop and implement the program as directed by Congress. The Board was charged with establishing underwriting standards to ensure borrowers, after any write-down in principal, have a reasonable ability to repay their new FHA-insured mortgage.
YOUR FIRST STEP IS TO CONTACT YOUR EXISTING LENDER. Your EXISTING lender must agree to accept 85% of TODAY'S appraised value as payment in full to use the Hope for Homeowners program.
Once your existing lender agrees, you can contact lenders to APPLY for the actual new loan.
To be eligible, you must also meet these requirements: - The home is your primary residence, and you have no ownership interest in any other residential property, such as second homes. - Your existing mortgage was originated on or before January 1, 2008, and you have made at least six payments. - Prove you are not able to pay their existing mortgage without help. - As of March 2008, your total monthly mortgage payments due was more than 31 percent of their gross monthly income. - You must certify you have not been convicted of fraud in the past 10 years, intentionally defaulted on debts, and did not knowingly or willingly provide material false information to obtain their existing mortgage(s).
HOPE for Homeowners also includes the following provisions:
The loan amount may not exceed a maximum of $550,440.
The new mortgage will be no more than 90 percent of the new appraised value including any financed Upfront Mortgage Insurance Premium.
The Upfront Mortgage Insurance Premium is 3 percent and the Annual Mortgage Insurance Premium is 1.5 percent.
The holders of existing mortgage liens must waive all prepayment penalties and late payment fees.
The existing first mortgage must accept the proceeds of the HOPE for Homeowners loan as full settlement of all outstanding indebtedness.
Existing subordinate lenders must release their outstanding mortgage liens.
The NEW FHA LOAn will HAVE A HIGHER RATE than NORMAL FHA
Standard FHA policy regarding closing costs applies, and they may be:
Financed into the new loan provided the value of the mortgage (including the Upfront Mortgage Insurance Premium) does not exceed 90 percent of the new appraised value of the home.
Paid from the borrowers' own assets.
Paid by the servicing lender or third party (e.g., federal, state, or local program).
Paid by the originating lender through premium pricing.
The borrower must agree to share with FHA both the equity created at the beginning of this new mortgage and any future appreciation in the value of the home.
The borrower cannot take out a second mortgage for the first five years of the loan, except under certain circumstances for emergency repairs.
The lender will disclose to the homeowner the benefits of the program including home retention, a new affordable mortgage based on the current appraised value, and 10 percent equity. The lender will also explain the prohibition against new junior liens against the property unless directly related to property maintenance, and a minimum of 50 percent equity and appreciation sharing with the Federal government.
If the home is sold or refinanced, the homeowner will share the equity with FHA on a sliding scale ranging from a 100 percent FHA share after the first year to a minimum of 50 percent after five years. The lien holder that previously held the highest priority will receive payment up to a proportion of its original interest, not to exceed the amount of available appreciation. This type of delayed payoff will take place until all prior lien holders are satisfied or the amount of available appreciation is exhausted. All remaining appreciation is remitted to FHA.
The Front Mortgage Broker ® (UMB ®) concept was conceived by Jack Guttentag, the nationally syndicated columnist and well-known expert on mortgage loans. Professor Guttentag developed the idea as a result of his experience as a mortgage advisor to consumers.
To be an UMB ®, the mortgage broker must operate under specific guidelines. The upFront Mortgage Broker Commitment® describes these guidelines.
I am one of the original founding members of the upFront Mortgage Brokers organization, and Minnesota's premier home loan lender. You can verify and view my profile and membership on the UMB web site.
Finding the right home starts with a great search tool
Saint Paul / Minneapolis (Twin Cities) MLS Only
How does a upFront (UMB ®) differ vs. a typical Mortgage Broker?
There are major differences between a UMB ® and a conventional mortgage broker:
UMBs ® disclose their fees to customers in advance and in writing, and disclose the wholesale prices (rates and points) passed through from lenders. Customers of UMBs ® pay the broker's fee plus wholesale loan prices. In contrast, conventional mortgage brokers (MBs) add a markup to the wholesale prices, and quote the resulting "retail prices" to customers. Most standard lenders reveal their markup only in required disclosures after an application has been submitted.
The UMB's Interests are fully aligned with their customers. They can thus represent borrowers in shopping for loans. In contrast, brokers shopping the market are often in a conflict situation with customers. For example:
The loan type that best meets the customer's needs may not be the one that allows the largest markup for the broker
Brokers may profit by ignoring customer requests to lock the rate/points, putting the customer at risk.
Brokers often increase their markup on customers who allow the rate/points to float by not giving them the best available rate (the float rate) when the loan is finally locked.
UMBs® credit customers with any rebates they receive from third parties. Mortgage brokers sometimes receive rebates from lenders or concessions from home sellers. UMBs® credit customers for any such payments that would otherwise increase the broker's fee beyond what was agreed upon. In contrast, brokers may or may not credit customers for payments from third parties, depending on the circumstances.
Why should a consumer choose a local, official upFront ® Lender?
Easy, transparency. For most people, a home is the biggest investment they will ever make. However, few people do the research necessary to make a good buying decision. The home-purchase o refinance process is extremely confusing for most people. With a little bit of homework, and some advice from dedicated true professionals, you can make this a little easier on yourself. There is no substitute for taking the time to educate yourself before you buy or refinance a house, which typically costs you 25% to 40% of your gross income!
The basic nature of the mortgage process allows non-UMBs the opportunity to "mark up" the interest rate and/or increase the fees. The net result is many consumers end up paying more than they should for a mortgage loan. One of the reasons that conventional mortgage brokers conceal their fee as long as possible is a concern that consumers don't fully appreciate the value the brokers provide. Because consumers dealing with UMBs agree on a fee in advance, it is important that consumers also understand exactly what they are getting for their money, and what it might be worth.
When dealing with an UMB, you are assured of fair treatment because of pricing transparency, you get access to wholesale interest rates posted by lenders, you get the benefit of the broker's expertise and contacts in shopping multiple lenders for the best deal.
Commitment of an upFront Mortgage Broker
The broker will be the customer's representative or agent, and will endeavor to act in the best interest of the customer.
The broker will establish a price for services upfront, in writing, based on information provided by the customer.
The price may be a fixed dollar amount, a percentage of the loan, an hourly charge for the broker's time, or a combination of these.
The price or prices will cover all the services provided by the broker. This includes loan processing, for which customers always pay a broker or lender.
On third party services, such as an appraisal, ordered by the broker but paid for by the customer, the broker will provide the invoice from the third party service provider at the customer's request. Alternatively, the broker may have the payment made directly by the customer to the third party service provider.
Any payments the broker receives from third parties involved in the transaction will be credited to the customer, unless such payments are included in the broker's fee.
If the broker's fee is 1 point, for example, and the broker collects 1 point from the lender as a "yield spread premium", the broker either charges the customer 1 point and credits the customer with the yield spread premium, or charges the customer nothing and retains the yield spread premium.
The broker will use his best efforts to determine the loan type, features, and lender services that best meet the customer's needs and to find the best wholesale price for that loan.
The wholesale prices from which the broker's selection is made will be disclosed at the customer's request.
When directed by a customer who has met lender lock requirements, the broker will lock the terms (rate, points, and other major features) of the loan, and will provide a copy of the written confirmation of the rate lock as soon as it has been received from the lender. At the same time, the broker will guarantee all fee charged by the lender who locks the rate.
If a customer elects to float the rate/points, the broker will provide the customer the best wholesale float price available to that customer on the day the loan is finally locked
The broker will maintain a web site on which its commitment to its customers is prominently displayed, along with any other information the broker wishes to convey. If the web site displays mortgage prices, the broker will indicate whether the prices are retail or wholesale. If prices are retail, the markup will be shown. If prices are wholesale, a prominent note will indicate that the broker's fee will be an added charge.
A broker who displays mortgage prices on its web site must indicate whether the prices are retail or wholesale. If they are retail, the markup must be shown. If they are wholesale, the broker must indicate that the prices do not include the broker's fee
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
There is no need to fill out an application to qualify for the tax credit. First-time homebuyers merely claim the credit when filing the tax return for that year. 
The credit is available for homes purchased between April 9, 2008 and July 1, 2009 and applies to both new and existing homes whether attached or detached, condominiums, mobile homes, or houseboats. A homebuyer contracting for a custom built home can qualify for the credit as long as the home is first occupied between the April 2008/June 2009 dates. (For newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.) The $7,500 credit represents 10 percent of the purchase price of a low cost home. 
HOPE FOR HOMEOWNERS PROGRAM - TO HELP MORE STRUGGLING FAMILIES KEEP THEIR HOMES
Unfortunately, THIS PROGRAM IS NOT WHAT PEOPLE THINK it is. It has been called "HopeLESS for Homeowners" by many in the mortgage industry, as the combination of getting your existing lender to cooperate, and a new lender willing to take on the previous lenders "problem" loan will result in few of these actually being done. Furthermore, while any FHA lender is technically able to do the loan, very few as of today have actually agreed to do it!
How the HOPE for Homeowners program works
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