Tax Credit for Homebuyers First-time homebuyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit. Remember a tax credit is very different than a tax deduction - a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income.
The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit if they sell their homes within three years.
Tax Credit Versus Tax Deduction
It's important to remember that the $8,000 tax credit is just that... a tax credit. The benefit of a tax credit is that it's a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a homebuyer were to owe $8,000 in income taxes and would qualify for the $8,000 tax credit, they would owe nothing.
Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little income tax liability. For example, if a homebuyer is liable for $4,000 in income tax, he can offset that $4,000 with half of the tax credit... and still receive a check for the remaining $4,000!
Phaseout Examples
According to the plan, the tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000.
To break down what this phaseout means to homebuyers who are over those amounts, the National Association of Homebuilders (NAHB) offers the following examples:
Example 1: 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 homebuyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.
Example 2: Assume that an individual homebuyer 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.
Remember, these are general examples. You should always consult your tax advisor for information relating to your specific circumstances.
Homes that Qualify
The tax credit is applicable to any home that will be used as a principle residence. Based on that guideline, qualifying homes include single-family detached homes, as well as attached homes such as townhouses and condominiums. In addition, manufactured or homes and houseboats used for principle residence also qualify.
Higher Loan Amounts
More good news - there is an extension on the additional tier of conforming loan amounts which had been first established in 2008. This tier of home loans are those greater than $417,000, and with a maximum that depends on the area, but is not greater than $729,750. These loans will again be eligible for rates that are slightly higher than conforming loan rates, but less expensive than the standard "jumbo" loan rates.
Additional Housing-Related Provisions
Tax Incentives to Spur Energy Savings and Green Jobs - This provision is designed to help promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation.
Landmark Energy Savings - This provision provides $5 Billion for energy efficient improvements for more than one million modest-income homes through weatherization. According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills.
Repairing Public Housing and Making Key Energy Efficiency Retrofits To HUD-Assisted Housing-This provision provides a total of $6.3 Billion for increasing energy efficiency in federally supported housing programs.Specifically, it establishes a new program to upgrade HUD-sponsored low-income housing (for elderly, disabled, and Section 8) to increase energy efficiency, including new insulation, windows, and frames.
Expanding Housing Assistance-This provision increases support for several critical housing programs. It includes $2 Billion for the Neighborhood Stabilization Program to help communities purchase and rehabilitate foreclosed, vacant properties.
More Help for Homeowners in the Future Another thing to keep an eye on in the coming weeks is President Obama's plan to help struggling borrowers before they are faced with a default on their mortgage.
According to reports, the Obama administration is discussing plans to help borrowers who are struggling to stay afloat, but who have not yet fallen behind on their payments. At this point, details are scarce; however, reports indicate that President Obama is looking to spend approximately $50 Billion to directly help homeowners before they face foreclosure and financial disaster.
While this is good news for individual homeowners, it will likely be good for the housing industry as a whole. That's because, assisting struggling borrowers before they default should help stop the wave of foreclosures, which are estimated to top two million this year. That, in turn, will help stabilize home prices.
Top 10 Most Promising Housing Markets Housing Predictor, which provides housing forecasts in 250 markets, has identified 10 markets where the regional economies are healthy and have strong potential for increasing prosperity.
These housing markets have bucked the national trend in 2008 and avoided the subprime crisis, the consultancy says.
Whatever the future holds for the housing market as a whole, Housing Predictor forecasts that these cities will continue to see steady, dependable growth.
Top cities and the percentage sales prices have increased so far in 2008.
First-time home buyers -the government enacted a benefit to help you make your first home purchase? The incentive gives first time home buyers a federal income tax credit up to $7,500. Part of the "Housing and Economic Recovery Act of 2008″, creates a temporary, federal tax credit to provide incentive for first-time home buyers to purchase a home.
Rob Dietz, economist for the National Association of Home Builders (NAHB) points out, the effects of the credit may extend far beyond the first-time home buyer; as first-time home buyers purchase homes, many home sellers will be able to move up and invest their sales profits into new homes as well.
Since the money must eventually be paid back, the tax credit essentially acts as a no-interest loan that reduces your tax liability for the year it is claimed. For instance, home buyers who close on a new home purchase in 2008 (after April 9) can claim the credit on their 2008 tax return. If their tax liability for the year is $5,000, applying the $7,500 tax credit would cover their tax bill and provide a $2,500 refund. Any taxpayers already due a refund would still receive the full amount, plus the $7,500 tax credit for buying a home.
First-time home buyers who claim the tax credit are expected to begin repayment starting in the second tax year after they close on their home and continue the pro-rata payback on their federal taxes for a 15-year period. For home buyers who claim the full $7,500 credit, the payments would amount to $500 a year.
If the buyer sells the home before the 15-year period, the remaining credit would be due from whatever profit was made on the sale. In cases where profits from the sale were less than what was owed for the credit repayment, the remainder would be forgiven.
Consider this illustration given by the NAHB: at 7% interest, a $7,500 loan would cost the borrower about $4,200 in interest over a 15-year period. To finance the $7,500 through your 30-year mortgage at a 7% interest rate, a homeowner would pay $8,100 in interest over the life of the loan. If you have already closed on a new home since April 9, 2008, the tax credit is retroactive back to that date, so you may be eligible to take the tax credit this year.
Here are some quick facts to determine if you qualify for the first-time home-buyers tax credit:
First Time Home Buyers - to be eligible, an individual must not have owned a primary home for the past three years, but may have owned a home prior to that.
Taypayers - U.S. citizens and resident aliens who file income taxes qualify for the tax credit. Non-resident aliens are not eligible.
Income Range - to qualify for a full tax credit of $7,500 (or 10% of the cost of the home), someone filing their taxes as single or head of household can earn no more than $75,000. Couples who file a joint return must earn $150,000 or less.
Individuals whose incomes fall between $75,001 and $94,999, or married couples who file jointly with incomes from $150,001 and $169,999, are still eligible for partial credit.
Taypayers earning more than $95,000 (single) or $170,000 (joint) are not eligible for this credit.
What do you have to do to claim the tax credit?If you meet the criteria, you have to do is request the credit on either your 2008 or 2009 federal tax return that will be amended for that purpose.
Home buyers who close in 2008 can take the credit on their 2008 return. First-time home buyers who purchase a new home in 2009 before the July 1 cut-off can choose to file an amended 2008 return or request the credit on their 2009 tax return. Please not this is not tax advise. consult your on tax person for all the details of the bill and how it relates to you.
No one likes to hear about people losing their homes, but industry analysts predict that real estate markets across the country will see home foreclosures through 2008 and into 2009. When banks foreclose, the properties will go back on the market, and buyers ready to purchase new homes will be able to find some good deals out there.
Mortgage and Renovation Costs Bundled into One Loan Package
So what happens if you find a home in the perfect location that meets your family's basic needs but requires major improvements or repairs? The answer for that fixer-upper may lie in a renovation mortgage - a lender program that allows home buyers to finance the mortgage and fix-up or construction costs together in the same loan.
How do renovation mortgages work? There are several options available for renovation financing.
In a program available through the Federal Housing Administration, when new home buyers finds a house in need of renovation, they contact a lender that handles 203(k) mortgages. The buyer contracts with a HUD-approved contractor who evaluates the property and determines which improvement projects are most critical. The lender hires an appraiser to determine the value of the home after improvements, and the loan amount is then based on this post-renovation value. For example, if the purchase price of a home is $200,000, and the renovations recommended by the contractor will cost $40,000, the renovation mortgage can be written for the full amount of $240,000. The $40,000 allocated for home improvements is paid out in installments as the work is completed.
Renovation mortgages offer many benefits for borrowers:
They open up more affordable housing options for buyers.
They offer buyers the opportunity to add value to the property right away through the improvements they make.
Closing on one loan instead of two means buyers save time and money - there is no need to pay repeat costs for such expenses as double appraisals, title searches and other costs incurred at closing.
The money for renovations is available up-front so buyers can begin projects right away.
Interest rates on these renovation loan programs are also comparable to those for conventional mortgages.
Renovation mortgage's can help you take advantage of the real estate opportunities in your area.
The phrase "Buyer Beware" is appropriate when considering the purchase of a fixer-upper.You need to know exactly what you're getting into before buying.
It's commonly believed that fixer-upper properties represent easy money that is ripe for the taking - that you can buy it, do a little work on it in your spare time, and then resell quickly for a large profit.
With proper planning and foresight, good profits can be made by buying "distressed" properties at less than market value, making appropriate improvements and repairs, and then reselling. And for many first time buyers who intend to live in the house while working on it, buying a fixer-upper can be a good option.
It's less risky buying a fixer-upper when you can live in the house while fixing it. If this is your option look into 203k loans or Baby K' s that offers borrowers the resources to rehabilitate a home that may be in need of repair, either the home that they currently live in, or that special fixer-upper opportunity, without the extra cost or details as found in the regular 203k.
One single loan is used to pay for the purchase (or refinance) and the cost of renovating the home. .
But lenders selling properties often are just asset managers, not really owners. A deed may bear the lender's name, but because banks and other lenders sell loans into the secondary mortgage market, the real owner of both the loan and property is often hidden.
The lender "doesn't have to tell you who you're actually dealing with," They keep it a complete mystery to keep control. And if the loan carried private mortgage insurance, its guarantor may also need to sign off.
"Realtors are used to 24 to 48 hours to finalize an offer, and with the banks it can take 24 to 48 days," "A lot of buyers give up."
Foreclosures are mounting. Some 2.04% of loans -- the highest ever -- are in the process, according to the Mortgage Bankers Association.
Patience, Paperwork, Price
"Banks are not giving away properties," A serious buyer must "submit a reasonable offer.
Getting a loan can be tough. Foreclosed homes may have issues such as poor maintenance, missing appliances, and liens. A house may have so much damage that a lender may require a 150% reserve in the escrow for certain repair costs.
If you are looking to buy or sale a house in Mobile Alabama ,please use our EZ home search above.
Whether or not you can live comfortably with the amount of your suggested monthly mortgage payment is a decision best made by you, the buyer.
Housing Expense Ratio A general rule is that your monthly mortgage payment should be less than or equal to 25% of your gross monthly income. Depending on the type of mortgage you choose, this percentage may change. However, there are mortgage products available that focus specifically on the debt-to-income ratio, and more information on these types of mortgage products can be provided by your lender.
Debt-to-Income Factors such as your income, debt and credit history directly affect your buying power. Your debt includes things such as your credit card bills and car loans, and other expenses such as housing expenses, alimony and child support. Combined, these debt items should not be more than about 30-40% of your gross income.
Some hints to help you determine a mortgage amount that makes it possible for you reasonably to meet your long-term goals and needs:
• CRUNCH THE NUMBERS: Compose a budget including your estimated mortgage payment including taxes and insurance.
• MURPHY'S LAW: Utility costs should be included in your housing budget with an additional amount set for costs of future home maintenance and repairs.
LOOK AT THE BIG PICTURE: Be sure to take other financial goals into consideration such as paying for college tuition or saving funds for retirement.
Use our EZ and free real estate search link above to buy or sell your next home.
Hunting for a house can be an overwhelming experience. It is easy to forget one house after seeing so many. Don't become frustrated when you don't immediately find your dream home. On the other hand, the thrill of the hunt can distract you from essential wants and needs.
PICTURE IT: Take photos of the house to keep on file.
USE TIME WISELY: Don't make "spur-of-the-moment" decisions. Consider the decision carefully. Take your time in selecting your home.
GET IT IN WRITING: Take notes about what you see, like and don't like in the house.
COMPARE AND CONTRAST: Review your notes, and compare houses against your wants, needs and budget.
TWO HEADS ARE BETTER THAN ONE: Bring your spouse, a family member or friend. It's useful to get another person's feedback.
GET TO THE BOTTOM LINE: Determine the utility, maintenance costs, taxes, insurance, etc. How much have these costs increased in the past few years?
A home is one of the largest financial commitments that a person will make during their life, and many people view their home financing as meaning just another monthly payment. Not Benchmark or Gena !
Gena understands that it's not just a house, it's your home.
Gena is truly passionate about her profession, and a result that nearly 100% of her business is by referral from satisfied clients, trusted financial advisors and the most experienced realtors in Alabama. Her Team with many years and a wide range of experience in the mortgage industry, stand's ready to assist every step of the way.
She said her clients only think about home financing a few times during their lives ~ I think about it every single day. It's their home and their future. It's my profession and my passion. I am ready to work for their best interest.
Call Gena for your Mortgage needs and you will see why I GIVE A RECOMMENDATION WITHOUT RESERVATION
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.
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