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Using First-Time Homebuyer Tax Credits for the Downpayment - It's GONE !!!! - The story of the $8,000 tax credit

 

The $8,000 first time homebuyers TAX CREDIT - HUD has saved the day. Well, okay, it saved it for a day. It's gone now, recinded, at least for now. Everything that you have been reading about yesterday, about FHA/HUD putting out mortgagee letter 2009-15, it's no longer there. Tom Burris had noticed this yesterday and I just got off the phone this morning with the HUD office. For reasons unknown, this letter, ML 09-15, has been taken off the self. Besides, I have my reasons to this and also felt that many of the blogs posted yesterday were incorrect. Here is why....

 

 

 

 

In regards to FHA loans, a borrower can only obtain monies for their actual downpayment of 3.5% by the following :

• Their own funds
• up to 100% of a gift from a relative/family member
• From the Federal, state, and local governmental agencies and nonprofit instrumentalities of government
• FHA approved non-profits 
• monies from their employer in a form of employee contribution
• monies from secured borrowed funds... IE. borrowing equity from your home to buy another home or borrowing against your car that is free and clear or borrowing from your 401-k, etc, etc

 

 

 

Here is the major confusion that was put out yesterday both HUD, NAR, and many realtors and loan officers that wrote about this.  In the body of the mortgagee letter, ML 09-15, at the bottom, it stated :

The Tax Credit: Short-Term Loan: 

Entities that can offer the tax credit advance with short-term loans:

• Federal, state, and local governmental agencies and nonprofit instrumentalities of government, FHA-approved nonprofits, and FHA-approved mortgagees may provide short-term or "bridge loans" secured only by the anticipated tax credit due the homebuyer as collateral.

 

The confusion : It states, As collateral and not as a secured lien against the home, but as a secured loan against the collateral. Which in this case would be the $8,000 tax credit, which would be secured against.

Because of this, HUD does not allow for monies to be borrowed or given to in any form that I did not mention above, to be used for the down payment.  The reality of it all, basically everything that was stated in the mortgagee letter, that has been revoked for now, is old school FHA. When it comes to FHA loans / FHA mortgages, you could get monies for your down payment from the items that mentioned above, which is mentioned in the mortgagee letter.  Well, was mentioned...  One caveat to all of this is that HUD was going to allow for lenders to secure a short term loan or bridge loan against the $8,000 to be used to purchase a home. But again, that can't be used for the actual down payment, because it goes against the basic FHA guidelines of downpayment monies of 3.5%. Now, unless HUD changed this, it does not clearly state this in the mortgagee letter, even though that letter is no longer valid.

 

 

Summary : When I read the ML 09-15 the other day, all of this jumped into my head. But I didn't have time to dissect all of this, yet I wanted to get this out to the public. After seeing many blogs written with inaccurate information, because NAR stated certain things from a HUD spokesperson, it was never clear, in which this gave me large goose bumps. My advice, consult an FHA Expert, even if you hear it from others that are high up, such as the NAR. And be careful on those that call themselves Experts also. I personally think that this was immature of several agencies for putting this information out there without verifying it's accuracy and intentions. And I would have to assume that HUD feels the same way since they took this mortgagee letter off their site and off the HUD clips site.  Thanks

 

 

 

EXTREMELY IMPORTANT REMINDER : Just because HUD or any other source puts information out there, doesn't mean it will happen. Keep in mind that most lenders have overlays and can add to certain rules and or guidelines.   

 

And just for the fact that HUD says it's fraud to obtain the tax credit prior to closing. This question has been asked to HUD by many of us and their response is FRAUD.  Why?  You are receiving the monies before you are buying the house. Yes, you can give the IRS the address prior and a potential closing date. But I smell shit hitting the fan very soon, since a lot of this is still new. And remember those lender overlays?  I know some lenders and underwriters that won't allow this type of loan to go to closing.

 

Ken Cook wrote a very short and brief blog about all of this. It's very clear. FALSE info flying around about the first time tax credit used as a downpayment.

 

 

For real, updated information on the First time Homebuyer's Tax Credit, please read :  $8,000 first time homebuyers tax credit.

 

 

TAX FRAUD - Are you getting your tax credit before you go to settlement, and it's not from a non-profit agency or from a Federal, State, or Local agency?  Then you might be committing FRAUD.  Please read : The $8,000 first time homebuyers tax credit - FRAUD ALERT

 

 

 

05/15/09 - 11:59 pm UPDATE : Hey everyone – Please read this comment by Gerry Suarez – It’s very important -

http://activerain.com/blogsview/1075899/using-first-time-homebuyer-tax-credits-for-the-downpayment-it-s-gone-the-story-of-the-8-000-tax-credit#4663332

 

 

My Series on the First time homebuyers $8,000 tax credit - Everything you need to now, from start to finish - What's allowed and what's not allowed :

• The $8,000 tax credit for first time home buyers - The basics - What to know about it  - Understanding what the tax credit is all about.

• Use a 6 month gift from a relative to buy a home, thanks to the Tax Credit - How to get creative in using the tax credit and some FHA mortgage guidelines in helping you use this tax credit to your advantage.

• Using First-Time Homebuyer Tax Credits for the Downpayment - It's GONE !!!! - The story of the $8,000 tax credit - The bottom line, you can't use the actual tax credit as your downpayment.. for your downpayment, unless you get it from other sources prior to buying the house and receiving the tax credit.

• FRAUD ALERT - Advice on the $8,000 first time homebuyers Tax Credit - Do you chance it??? - This explains to you that it's fraud if you directly obtain the money from the IRS before you actually purchase the house. Even HUD and many lenders/investors acknowledge this also.

• The $8,000 tax credit for First Time Homebuyers - How & when to get it legally -  So how can the tax credit be received legally for your downpayment? Just be careful of those that promise other ways not mentioned. I talk about what is illegal in the previous blog above. Please click the link.

 

 

 

 

 

- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- Mortgages -

 

Experience & Knowledge at its BEST !!!

 

_________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!

Copyright © 2009 by Jeff Belonger

Gorgeous Home Waiting For You......Seattle, WA

FRAUD ALERT - Advice on the $8,000 first time homebuyers Tax Credit - Do you chance it???

 

 

Clarification before you read : Yes, you can use the tax credit as part of your downpayment. I have stated this before. If it comes from non-profit organizations or Federal, local, or state agencies. I mentioned this in my other blog, in the bullet points . But just from the few comments and some on facebook, you are missing the POINT. It’s fraud to apply for this tax credit through the IRS, prior to actually buying your home, if you receive the monies from the IRS DIRECTLY.  Please stop reading into HUD, downpayments, etc, etc and understand what is considered FRAUD by HUD and many lenders.

 

 

Do you take the plunge, possibly jeopardizing your career?  If a loan officer told you to jump off a bridge, would you?  You'll see my point below.

 

Who do you listen to?  Where do you get your information from? It's worse now than ever before. I once was able to tell a borrower or a realtor, if you didn't believe me, go call up 5 other loan officers. I would say this, because you would think that you would get at least 3 to 4 people giving you the same answer. PEOPLE.... this is not true anymore. I had two separate examples that took place that 3 out of 4 loan officers gave the same information that was 110% incorrect. Rut row... there goes my theory out the door.

What about all of this hype over the $8,000 first time homebuyers tax credit?  It's gotten way out of hand. I wrote this blog, Tax Credit for downpayment, it's GONE, the story of the $8,000 tax credit. You need to read many of the comments.  Here is a great example of what I am talking about.

 

 

 

Here are 2 examples from comments that I received by a realtor. Keeping in mind, I am not trying to throw them under the bus, but to help educate and bring awareness. How else do we learn and possibly not make mistakes that could be so costly.

 

Example 1 -

"From my understanding from 2 CPA's and mortgage lender that it CAN be done by applying for the credit prior to the closing with an accepted contract.  There are risks like not closing before November 30th.  But this can happen."

OUCH -  No, double ouch.  Okay, so she was able to talk to 2 CPA's and a loan officer that both confirmed this. Okay, so it might be legal from their standpoint. But what about HUD's standpoint and from many lenders and underwriters. Don't they actually have the final say in all of this?  YES, they do !!!

 

 

Example 2 -

"I just wrote up an offer and the loan officer told me that my buyer would be using some of the tax credit for the down payment. So I'm not rescinding my blog post just yet."

My question to this realtor...  What about your fiduciary responsibility to the buyer?  I received an e-mail from this person after asking the same question. Their response?  They know the letter was taken down, but they are looking for an official statement. Huh?  You think HUD or the NAR is going to say, "we screwed up."  ??? Why not call HUD yourself, be proactive.

 

 

In any case, let's study what the IRS says. Here is Form 5405 - The first time homebuyers tax credit form

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As you can see, letter be asks for the date aquired, but tells you to read the instructions. So let's go to that part of the instructions.

 

 

 

 

 

 

 

Wow... enter the date that you acquired the home.  Acquired?  Wouldn't that mean when you bought it and not when you are going to buy it? It states this right under the first sentence. So why are some CPA's, accountants, and loan officers stating that you can get the money before you buy, while still submitting this form. ???  Inquiring minds want to know.

 

Here is my opinion and some facts.  And you can ask such loan officers as Tom Burris and Gerry Suarez, because they have checked also with HUD and with several underwriters with different lenders. Who says what....

• HUD says that it's illegal and they recognize this. But wait, some lenders have allowed this and my buyer has already closed. Keep in mind that HUD still has to insure these loans, so maybe the "shit" will hit the fan in 6 months or so, since this is all still new.

• Underwriters - Gerry and myself have spoken to several underwriters at major lending institutions that have said they will not do this type of loan, if the buyer had received the monies from the IRS, if prior to closing on the home. Not unless it falls into another category. Those categories I have listed in the middle of this blog. Tax Credit - what is allowed prior to closing - Please go to my bullet points in this blog.  This is what is legal and how.

 

 

 

 

We need to stop the bad press. As you can see, this has gotten out of hand and everyone seems to be an expert. Yet, nobody is speaking to the correct experts. Be proactive. If not sure, call HUD yourself. Call a trusted loan officer/expert and not one that claims to be.

 

 

 

Lesson of the Day :   When you hear real estate related news stories, maybe you should check the sources and double check the stories. I could give you 10 examples of this just from what I have read in the last 5 months. As we say, "Buyer Beware"....  how about we say, Realtor/loan officer Beware !!!

 

 

 

 

 

- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- Mortgages -

 

Experience & Knowledge at its BEST !!!

 

_________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!

Copyright © 2009 by Jeff Belonger

Beautifully Remodeled And Waiting For You

Prayers for Duane Ranstrom's Family

3-2-1- LIFTOFF! Prevent Failure to Launch: Help Your Kid Buy A House This Year

It wasn't THAT long ago that we Baby Boomers worried a lot about our kids.

You know, those irrepressible Generation Y kids who were on the Internet at age 4 and who grew up clicking (my son says I grew up turning dials and that is why his generation is superior different).

Sitting on our own fat bubble- enhanced, low taxed properties, we watched prices spiral out of control here in the San Francisco Bay Area. We believed our children would either:

1. Never be able to afford a house
   
2. Move away forever
3. Move back in with us (eek!) 

But post meltdown, all of that has changed. And in the wake of economic disaster lies a once in a lifetime opportunity to get junior into his very own house or condo.

This is the year to help your kid become a first time buyer. You snooze, you lose.

No, I cannot promise son will become a handyman or daughter will turn into Martha Stewart. But I can promise you that everyone in the family will look back someday (sooner than you think) and thank their lucky stars you took advantage of a 24 karat golden real estate opportunity to give your child financial stability.

Why this year? Here are 3 reasons that point directly to the stars being lined up perfectly:

1. Cheap properties (prices being driven down by foreclosures)
2. Low fixed rates on old fashioned 30 year mortgages
   
3. FHA financing finally has limits high enough to buy in California

As if that isn't ENOUGH, here is your amazing limited time BONUS OFFER: First Time Homebuyer Tax Credit of $8000 is good through the end of the year.

 

The strategy:

1. GIFT your child the down minimum payment (3.5% of selling price)
2. ASK the seller to pay the closing costs in your offer, so your kid needs NO cash at all
   
3. SNAG a cheap property in the best location your kid can afford

Be prepared for this:

1. MULTIPLE OFFERS on lender foreclosed properties for sale
2. SELLERS insisting on an approval with a LENDER (not just a letter from the mortgage person)
3. A LONGER time line than you are expecting

10 things not to worry about:

1. Rates will go lower. FHA loans have the ability to be easily re-written if rates drop (streamline refinance) 
2. Real estate will be cheaper. So what? Think long term.
3. Your kid isn't "ready". Most first time buyers do not have the perspective to understand the benefit of the tax credit, or the silver lining of economic downturns. Come to think of it, you probably weren't "ready" when he was born.
4. Going on the loan with your kid. If your kid has no job now, or just can't afford to buy, you can co-sign.
5. Finding the "perfect" house/condo. It is a starter house, for crying out loud. Do not expect lender foreclosures to be pretty
6. FHA closing costs are "too high". Yep, FHA will have slightly higher closing costs than conventional. Seller may not pay closing costs. You can gift your kid closing costs, too.
7. What if my kid loses his job?  "What if's" are the biggest reason for missed opportunities!
   
8. The real estate market is just too confusing! That is why you should find a great real estate agent
9. Getting a loan is a big hassle! Get preapproved first with a great mortgage person
   
10. Where will I get the cash to help my kid? How about an equity line or retirement account? Maybe Grandma has the money?

Get your kid set and maybe you could move in with him someday. (double eek!)

Maybe not.

 

 

Written by Janet Guilbault, Mortgage Banker/Broker Based Out of the San Francisco Bay Area

 

 

10 Reasons That You Should Wait to Buy in this Market

 With all the posts out there about how now is the best time in history to run out and buy a home, I thought it only fair to show you the reasons that you should not do so. The last thing this economy needs is for consumers to start spending money, that would actually cause the great deals to go away. Mainly due to the fact that it would cause the economy and the real estate market to recover, and at this point that's the last thing we need.

10-  Rent is fun to pay. I mean it's not at all like having to pay your own mortgage, why do that when you can pay a mortgage for someone else. If you went out and bought a home, there would be one less investor out there getting a free house with your money.

9- The amount of homes for sale on the market. There is no need to running out there when you have a ton of homes for sale at your disposal. You should certainly wait for the numbers to dwindle so you will have less of a choice you decide to buy. This will keep you from having to be so picky.

8- The great deals will be the first to go. This will be your indicator that you are getting close to time to start looking. All the good homes will be taken and then you can go sift through the left overs for what you can salvage.

7- Low Interest rates. Low interest rates will cause your mortgage payments to be lower, and this may make you feel like you are not doing your fair share. You should definitely wait around for those rates to rise so you can make a higher monthly payment. Then you won't have to deal with the guilt of saving money.

6- The price of homes for sale. Currently many homes for sale are on the market at very competitive lower prices. If you can manage to hang in there a little longer without buying a home, then you can catch market during or after a recovery. This means that you will get to pay more for the home than you would today.

5- With today's rates and prices, mortgages on many homes for sale are actually cheaper than rent on the same homes. Again this would possibly save you money, and that's not what you want to do. You need to wait for the prices to rise so you're not getting as good of a deal.

4- A 10% of the sales price tax credit up to $8,000. If you were to buy a home now,and you are a first time home buyer, then you would receive this tax credit. If you can hold out until next year, then you will be able to avoid this tax credit all together. This will save you the aggravation of trying to decide what to do with the extra money on next year's tax return.

3-Builder incentives. At present, in addition to the competitive prices, many builders are offering other incentives on new homes. Incentives like a percentage of of the home for sale depending on your employment and reduced pricing on upgrades. Some are even offering free upgrades and tossing in little extras that they normally do not offer in order to sweeten the pot. This would mean that you could get a great deal on a brand new home in your area, and that's the last thing you want. Wait for these deals to be snatched up other buyers before you even consider looking for your new home.

2- Lack of competition for you. Right now with many would be buyers sitting on the fence trying to make a decision, you would have your pick of the litter as far as the homes currently available are concerned. You need to wait until many more buyers are on the search, that way you can possibly end up in multiple offer situations and have to fight another buyer over the home you really want.

1- The pride of home ownership. There is no reason to come home to a home that actually belongs to you. Why not constantly come home to a house that you are buying for someone else.

 

 I hope that in some way this has helped anyone reading to figure out why you should stay on that fence. There are really too many great deals and incentives out there to subject yourself to making a decision as to which one you want. So hang in there and stay on those sidelines. With a little discipline and a little luck you'll be able to avoid all the great deals that this current market has to offer. Best of luck to you.

 

www.jlboney.com

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