$8,000 tax credit is for first-time home buyers only. For the tax credit program, the IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase.
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 tax credit applies only to homes priced at $800,000 or less.
The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.
For homes purchased on or after January 1, 2009 and on or before November 6, 2009, the income limits are $75,000 for single taxpayers and $150,000 for married couples filing jointly.
For homes purchased after November 6, 2009 and on or before April 30, 2010, single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.
The $6,500 Move-Up / Repeat Home Buyer
To be eligible to claim the tax credit, buyers must have owned and lived in their previous home for five consecutive years out of the last eight years.
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 $6,500.
The tax credit applies only to homes priced at $800,000 or less.
The credit is available for homes purchased after November 6, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, the home purchase qualifies provided it is completed by June 30, 2010.
Single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.
Locking your rate means committing to a specific loan program and structure at a specific interest rate for a specific period of time. As long as you close your loan before the expiration of that lock, we are committed to honoring the terms of that loan regardless of market activity. Rates can generally be locked anytime after the loan application has been made but no later than five business days before the scheduled closing date of your loan. Rates can be locked for varying periods of time.
Typical lock periods are 15, 30, 60, 90, 120, 150, and 180 days. As a general rule, the longer period of time you are locking in the loan for, the more expensive the loan will be either in terms of higher fees and/or a higher interest rate. Extended locks, typically used for new construction, often have some type of up front lock fee attached to them.
Rates are subject to change at anytime without notice and do tend to move up and down from day to day based on market activity so the big question everyone asks is "When is the best time to lock?"
The best time for you to lock depends on a couple of different variables including when you are scheduled to close on your loan, the affect a changing interest rate could have on your approval, and your tolerance for risk.
It is important to lock your loan for a period of time long enough to safely cover your closing date. In fact, we encourage you to lock for a period of time longer than your closing date in the event it is delayed for any reason. This is especially true with new construction. We typically recommend a lock that exceeds your expected closing date by 7-10 days.
We recommend that you think about and discuss with your loan officer what your lock strategy is going to be. Because an increase in rates will result in an increase in payment, you have to decide if the risk of waiting for a lower rate and having the rates go up is worth the reward of a lower payment if rates go down or ask your lender do they offer a float down on your lock. Most experts will tell you it is virtually impossible to time the market.
Because a shorter lock generally means a lower costs in a typical market where rates are not moving up or down significantly, a minor increase in rates will likely be offset by a shorter lock period. If rates stay the same or go down the shorter lock will also work in your favor, so the only risk in waiting to lock in for a shorter period of time is in an environment where rates go up dramatically. That is the environment where a bail out strategy makes sense.
Lenders are happy to share with you some historical data on rate movement and the rates and costs on various lock options so you can make a locking decision with confidence. Once your loan is locked the lender will send you a lock confirmation for your signature. That lock confirmation, signed by both parties, is their commitment to you to honor the lock and terms of the loan you locked and for the period of that lock.
The latest Senate proposal would drop the requirement that the credit be available only to first-time buyers, broadening the reach of the program but also adding to its cost, estimated by congressional analysts at $16.7 billion.
The backers of that idea, Sens. Johnny Isakson, R-Ga., and Christopher Dodd, D-Conn., chairman of the Senate's banking committee, have suggested that their measure be attached to another pending bill aimed at throwing a lifeline to people hit by the recession, an extension of federal assistance to the millions in danger of exhausting unemployment insurance benefits.
The stimulus-package credit allows first-time homebuyers to reduce their federal income taxes by 10 percent of the price of a home, up to a maximum of $8,000 is set to expire Dec. 1.
The Isakson-Dodd proposal would extend the credit to June 30, 2010. It would also remove the first-time homebuyer requirement and raise the eligibility income limit to $150,000, or $300,000 for a couple. That's double the current phase-out limits.
Brookings Institution economist Ted Gayer wrote in a recent report that the tax credit is "very poorly targeted." He calculated that of the 2 million or more people who would make use of the credit if it were extended for a year and expanded to cover all buyers, only about 383,000 would be additional sales motivated by the credit. He estimated that the real cost of the credit would thus be more than $40,000, rather than $8,000, per buyer.
"Homebuyers for the past two years have been sitting on the fence and we needed something to move them into the market," said Lucien Salvant, managing director for public affairs at the National Association of Realtors. With more foreclosures coming next year, "to knock the props out of the housing market at this point would not be a wise move."
The NAR, together with the NAHB and the Mortgage Bankers Association, have been running ads in the Washington area urging Congress to extend the homebuyer tax credit.
Closing Costs are the fees incurred when you close on your transaction. A good way to look at them is as the cost of borrowing money. Generally they are fees paid to different people for something they provided that was a requirement for the loan's approval or set up.
Here is a list of common closing costs and a brief description of what they represent:
Loan Origination Fee The loan origination fee is the fee the lender charges to originate the loan, generally 1% of the loan amount. In some markets it is customary to not charge a loan origination fee. That generally means that the rate the lender is charging has been adjusted so they can generate the same income on the loan. Just as additional income can be paid to reduce the rate on the loan (see discount points below), a slightly higher rate will yield a premium the lender can use to cover the origination fee without charging the borrower out of pocket for it.
Discount Points Mortgage loans when they are pooled into mortgage backed securities require specific yields or rates of return. If you want a rate lower than the prevailing rate you can obtain it by paying additional money up front to have the lender discount the note rate. Discount points, expressed as a percentage of the loan amount, are delivered with the loan to the investor as prepaid interest to offset the lower note rate on the loan and give them the same yield on the loan. Discount points are not a requirement and you are encouraged to talk to your loan officer about whether or not it makes sense to pay them to lower the rate on a loan.
Appraisal The appraisal is an independent opinion of the value of the property by a licensed professional and is used to help determine the property's suitability as collateral for the loan.
Credit Report A credit report is a detailed history of how all borrowers have handled their credit obligations including type, amount, payment, and payment history from all three major credit repositories. The credit report is used to make a lending decision.
Administrative Fee This fee represents miscellaneous charges (like overnight delivery) the lender might incur while processing your loan.
Final Inspection In new construction, the property is often appraised before construction has been completed. A final inspection is done by an independent third party to ensure that the property has in fact been completed to the plans and specifications for construction.
Attorney Fee The attorney fee is the cost charged for the review of your closing documents by a licensed attorney.
Title Insurance Title insurance is an insurance policy that protects the title of ownership on the property once you've bought it. In other words, it guarantees that subject only to your mortgage, there are no other claims against the property.
Settlement Fee A settlement fee is the charge a title company or a settlement attorney would charge for presiding over a closing; making sure all the documents are signed correctly, all closing conditions of the loan are met, and the loan is appropriately recorded.
Recording Fees Recording fees are the charge by the government recording entity for recording the change in ownership and the encumbrance of a mortgage on the property you purchase to make it of record.
Survey The survey determines the physical boundaries of your property as well as identifies any encumbrances or easements that may create title issues.
Flood Certification The flood certification is the certification by an independent third party that your property has been checked against the current federal flood zone maps and whether or not it is located in a flood zone.
The annual percentage rate (APR) is an interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account points and other credit costs. The APR allows homebuyers to compare different types of mortgages based on the annual cost for each loan. The APR is designed to measure the "true cost of a loan." It creates a level playing field for lenders. It prevents lenders from advertising a low rate and hiding fees.
The APR does not affect your monthly payments. Your monthly payments are strictly a function of the interest rate and the length of the loan.
Because different lenders calculate APRs differently, a loan with a lower APR is not necessarily a better rate. The best way to compare loans is to ask lenders to provide you with a good-faith estimate of their costs on the same type of program (e.g. 30-year fixed) at the same interest rate. You can then delete the fees that are independent of the loan such as homeowners insurance, title fees, escrow fees, attorney fees, etc. Now add up all the loan fees. The lender that has lower loan fees has a cheaper loan than the lender with higher loan fees.
The following fees are generally included in the APR:
Points - both discount points and origination points
Pre-paid interest. The interest paid from the date the loan closes to the end of the month.
Loan-processing fee
Underwriting fee
Document-preparation fee
Private mortgage-insurance
The following fees are sometimes included in the APR:
Loan-application fee
Credit life insurance (insurance that pays off the mortgage in the event of a borrowers death)
The following fees are normally not included in the APR:
Title or abstract fee
Escrow fee
Attorney fee
Notary fee
Document preparation (charged by the closing agent)
"Our best days often start out as our worst days. And our greatest opportunities are often disguised as our biggest problems. You can land in a pit with a lion on a snowy day, and it will seem like the end of the road.
You will look back longingly on risks not taken, opportunities not seized, and dreams not pursued. Stop running away from what scares you most and start chasing the opportunities that cross your path.
In a Pit with a Lion on a Snowy Day is inspired by one of the most obscure yet courageous acts recorded in Scripture, a blessed and audacious act that left no regrets:
"Benaiah chased a lion down into a pit. Then, despite the snow and slippery ground, he caught the lion and killed it". How many of us would follow a 500 pound lion into pit- if you ever find yourself in a pit with a LION, I'm guessing your having a bad day. And it's likely that would be your last day.
But what if the life you really want, is hiding right now in your biggest problem, your worst failure... your greatest fear ?
Benaiah's encounter with the lion explore's seven skills:
It's never fun to be turned down for a loan, but before you think you won't be able to get credit anywhere, there are some steps you can take.
Lenders are required by a federal law, The Equal Credit Opportunity Act, to tell you in writing when you've been turned down for credit. Two important pieces of information must be included in the letter you receive when you are denied credit:
The specific reasons why you were denied credit (or information on how to obtain those reasons); and
If a credit report was used in making that decision, the name and address of the credit reporting agency that supplied it.
If you don't understand the reasons given for turning down your application, ask for more information. Sometimes it can be hard to determine exactly why your application was not approved, because these decisions involve a lot of different factors. Don't be shy about asking, though, since the information you receive may help you improve your credit so you can qualify in the future.
You may be denied credit for various reasons, If your loan application was rejected because of insufficient income to afford the house you want or you have insufficient funds for closing costs and a down payment, you could consider loan programs for low- to moderate-income borrowers with lower down payment requirements, such as an FHA loan or VA loan.
If you requested the loan amount which is larger than the appraised property value, the loan will be denied. In this situation:
You can try re-negotiate with the seller for the purchase price to lower the loan amount
Make an additional down payment to cover the difference between the appraised value and purchase price
If you think the appraiser undervalued the property suggest that the lender re-examine the appraisal
If your loan is turned down because of a poor credit report, you are entitled to a free copy of that report. You must request it within 60 days, so don't wait to order it. Read your report carefully to make sure it is accurate and complete.
Once you have a copy of your credit report, you should check for errors and fix any errors by disputing them with the credit report agency. If you believe that mistakes on your report led to the rejection of your application, you can ask the credit bureau to send a corrected copy to the lender. Follow up with the lender to find out if your application can be reevaluated.
Finally, you can try again. All lenders have different approval standards. Just because you didn?t get a loan from one financial institution doesn't mean you can't get one somewhere else. Try again with another company. Just don't apply for more than four or five loans in a six-month period.
Sometimes the message is not clear... like the ad above. Is this ad for pro drinking or anti drinking.
Changing jobs while thinking about buying house you can get a lot of mixed messages.
For most people, changing employers will not really affect your ability to qualify for a mortgage loan, especially if you are going to be earning more money. However, for some homebuyers, the effects of changing jobs can be a problem when attempting to qualify for a mortgage.
Salaried Employees Switching employers should not create a problem if you are a salaried employee who does not earn additional income from commissions, bonuses, or over-time. The switch has less impact if you remain in the same line of work. You will hopefully be earning a higher salary, which will help you better qualify for a mortgage.
Hourly Employees If your income is based on hourly wages and you work a straight 40 hours a week without over-time, changing jobs should not create any problems.
Commissioned Employees Because of the way that mortgage lenders calculate your income, you should not change jobs before buying a home if a substantial portion of your income is derived from commissions.
Mortgage lenders average your commissions over the last two years. Changing employers creates an uncertainty about your future earnings from commissions; there is no track record from which to produce an average. Even if you are selling the same type of product with essentially the same commission structure, the underwriter cannot be certain that past earnings will accurately reflect future earnings.
In this situation, changing jobs would negatively impact your ability to buy a home.
Bonuses If a substantial portion of your income on the new job will come from bonuses, you may want to consider delaying an employment change. Mortgage lenders rarely will consider future bonuses as income unless you have been on the same job for two years and have a track record of receiving those bonuses. In calculating your income, mortgage lenders will average your bonuses over the last two years.
Changing employers means that you do not have the two-year track record necessary to count bonuses as income.
Part-Time Employees You should not change jobs if you earn an hourly income but rarely work forty hours a week. Because there would be no way to tell how many hours you will work each week on the new job, there would be no way to accurately calculate your income. If you remain on the old job, the lender must average your earnings from part-time income over the last two years. You must have a 2-year work history of part-time income to count as income for a mortgage.
Over-Time Your overtime income cannot be determined if you change jobs since all employers award overtime hours differently. If you stay on your present job, your lender will give you credit for overtime income. The mortgage lender will determine your total overtime earnings over the last two years to calculate a monthly average.
Self-Employment Delay any change to self-employment before buying a new home. Buy the home first.
Lenders like to see a two-year track record of self-employment income when approving a loan. Plus, self-employed individuals tend to include a lot of expenses on the Schedule C of their tax returns, especially in the early years of self-employment. While this minimizes your tax obligation to the IRS, it also minimizes your income to qualify for a home loan.
If you have a score of 680 or above, you may be considered an A+ borrower. Your loan will involve basic underwriting, probably through a computerized automated underwriting system and could be completed within minutes. If you are in this category, you have a good chance of obtaining a low interest rate and closing your loan quickly.
If you have a score below 680 but above 620, an underwriter will probably take a closer look at your file to determine potential risks. If you are in this category, you may find the process and underwriting time no different than in the past. Supplemental credit documentation and letters of explanation may be required before an underwriting decision is made. You may still be able to obtain "A" pricing, but loan closing may take longer than if you had a higher score.
If you have a score below 620, you may not be eligible for the best loan rates and terms offered. Mortgage professionals may divert you to alternate funding sources other than Fannie Mae or Freddie Mac. You may find loan terms and conditions less attractive than "A" loans, and it may take some time before a suitable funding source is located.
If you do have negative information on your credit report, such as late payments, bankruptcy, or too many inquiries, your best strategy may be to pay your bills and wait. Time is often your best ally in improving credit.
The length of time to rebuild your score depends on the reason behind your low score. Most decreases in scores are due to the addition of a new element to your credit report such as a delinquency or an inquiry. These new elements will continue to affect your score until they reach a certain age. Delinquencies remain on your credit report for seven years. Most public record items remain on your credit report for seven years, although some bankruptcies may remain for 10 years and unpaid tax liens remain for 15 years. Inquiries remain on your report for two years.
While many lenders use these scores to help them make lending decisions, each lender has its own strategy, including the level of risk it will accept for a certain loan product. There is no single "cutoff score" used by all lenders and there are many other factors used to determine your eligibility and interest rate.
Keep copies of all earnest money checks and proof that the checks have cleared your bank. Provide this documentation to your lender so that you get proper credit on your closing documents.
Notify your mortgage company of the final sales price at least five days prior to your closing. If your sales price changes from the original contract, the lender will need copies of all addendums and change orders for the upgrades. The final closing documents cannot be prepared until both builder and buyer agree to the final sales price.
A final inspection is required on all new construction before the loan is closed. The appraiser must inspect the property to ensure that it was completed to the original plans and specifications. The mortgage company schedules this inspection. The home must be COMPLETE and READY TO MOVE-IN before the appraiser can perform the final inspection. The charge for the final inspection is $100 which will be included in your closing costs. If the home is not complete when the appraiser goes out, he will have to inspect it again which will be an additional $100 charge. Please consult with your lender as to the best date for the final inspection.
Your home must be completed before closing. This includes landscaping, pool, fence, etc. If you would like to arrange to escrow for these improvements and close before they are complete, notify us at the time of locking in your rate. Only a few investors will allow for escrow holdbacks.
Bring a cashier's check made out to the title company for your closing costs.
Tell your lender if your salary or other compensation has changed from what has been noted on your loan application.
Inform your lender if your address changes from what appears on your original loan application. They must complete rental and mortgage verification for all of your residences within the last two years.
Obtain homeowner's insurance with minimum coverage equal to the amount of your total loan or the replacement value of the house. Call your lender with your agent's name and phone number at least 10 days before closing.
Keep documentation (or a "paper trail") on any large deposits into your account. A "paper trail" should include copies of all paperwork necessary to prove a financial transaction: copies of all checks, deposit slips, loan paperwork, forms to liquidate assets, etc.
Notify your lender if you move funds from one account to another and provide a "paper trail" on any transactions.
Do not acquire any additional debt or make any large purchases on existing credit without first consulting your lender. For example: purchasing a car or buying appliances for your new home will change your debt to income ratios.
Do not change jobs without consulting your lender. A change in compensation may affect your ability to qualify. Buyers must have a two-year history of bonuses and/or commissions to be counted as income. Lenders may verify employment on the day of closing as a quality control check.
Do not co-sign with anyone to obtain a line of credit or make a purchase. The payment will show up on your credit report as an additional debt.
Do not negotiate your contract with an allowance and expect to get money back at closing. An allowance can be used only to pay closing costs or reduce the sales price.
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.
al Credit Opportunity Act, to tell you in writing when you've been turned down for credit. Two important pieces of information must be included in the letter you receive when you are denied credit:
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