Use a 6 month gift from a relative to buy a home, thanks to the Tax Credit

By
Mortgage and Lending with Social Media - Infinity Home Mortgage Company, Inc

 

Tax Credit

 

The government is handing out money as a long term loan.  Take advantage of this!!!

 

The Housing and Economic Recovery Act of 2008 produced the 7500 tax credit for First Time Homebuyers. In this case, to be eligible for the tax credit, a first time homebuyer is defined as : someone who had not owned a home from July 2, 2005, through July 1, 2008. In order to become eligible, you have to buy your home after April 8, 2008, and before July 1, 2009. I will go over some of the other guidelines later.

 

 

gift

When it comes to buying a home, you can't borrower money to use as a down payment or for closing costs. And you can get county or state assistance under certain programs or grants, to use for your new home purchase. But when it comes to FHA loans, you can actually get 100% gift monies from a relative. It's called a gift because HUD doesn't want the burden of you having to pay back a loan after buying a new home. Hence why this 7500 tax credit is still a great way to help you get into a new home prior to July 1, 2009.  And you can still get up to 6% seller help even if you were to get a 100% gift from a family member.

 

 

So, how does this tax credit work?  Please read below for some details :

 

  • The maximum tax credit is $7,500 for either a single taxpayer or a married couple filing jointly. It is 10% of the purchase price. So in order to get the maximum credit, the purchase price must be $75,000 or more.
  • This credit is an interest free loan and the credit must be repaid over a 15 year period. This loan must be paid back by including one-fifteenth of the amount credited, or $500, as an additional tax on their 2010 return.
  • There are income restrictions which can range from $150,000 to $170,000 for a joint return or from $75,000 to $95,000 for a single return. There are other factors involved when determining the actual income restrictions.
  • This credit can't be used if you are buying a home from a close relative, which is to include a spouse, a grandparent, child, or even a grandchild.
  • You can only use this tax credit for your primary home, not for a second home or an investment property.

 

There are some other restrictions, examples, and explanations to how this tax credit can work. For more information, please read : Tax Credit for First Time Homebuyers

 

 

An example of how this tax credit could work :

If you were to receive a $2,000 refund when filing your return, and you were eligible for an additional $7,500 if you choose to receive this credit, this means that your refund will now be $9,500 instead. On the flip side of things, if you were to owe $2,000, you would actually get back $5,500 instead of owing money.

 

 

One thing to keep in mind.... you can use this money for anything. How could you use this money?

  • You could use it to repay other loans or debts.
  • To invest in the market or CD's.
  • To buy another property such as an investment property. But you would need to understand the seasoning requirements when putting this kind of money into your bank account.
  • Use the money to fix up your new home that you just bought.
  • To start a business.... to help a business grow.
  • And as mentioned, FHA loans allow for 100% gift monies from a relative. Maybe you could thank them later on and give them the money back down the road. I know I wouldn't want this hanging over my head. As of January 1st, 2009, when buying a home with a FHA mortgage, you now need 3 1/2 percent down of your own money (gift monies allowed).

 

 

Feature blog :  How to use the tax credit before you even get it !!!!

 

Lastly, talk to your tax accountant when it comes to the specifics of this tax credit and in regards to gifts and what is allowed before being taxed.

 

Update as of March 28th, 2009 - 2009 first time homebuyers tax credit

 

Happy house hunting. For a creative way to help you finance your new home, please don't hesitate to contact me. There are so many options out there and you need a creative loan officer that knows more than just the basics.

 

 

 

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

For more information on how you can obtain your dream home, please click here : Mortgage Financing Options

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

 

Copyright © 2008 by Jeff Belonger

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

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

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For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc

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Re-Blogged 13 times:

Re-Blogged By Re-Blogged At
  1. Julianna Hind 01/01/2009 09:10 AM
  2. Elizabeth Cooper-Golden 01/01/2009 01:37 PM
  3. Diane Bell, Hilton Head Real Estate, Bluffton 01/01/2009 10:39 PM
  4. Sarah, John Rummage 01/02/2009 02:02 AM
  5. Gabe Sanders 01/02/2009 10:39 AM
  6. . 4Terra Land Brokers .. 828-776-0779 Asheville NC 01/03/2009 12:49 AM
  7. Renée Donohue~Home Photography 01/03/2009 02:57 AM
  8. Tom Burris 01/03/2009 09:51 AM
  9. Brian & Marie Spray 01/03/2009 10:08 AM
  10. Sean Wheelan 01/03/2009 01:42 PM
  11. Erica Ramus 01/10/2009 07:11 AM
  12. Mirela Monte 01/10/2009 02:36 PM
  13. Colleen Craig 01/11/2009 10:57 AM
Topic:
Lending / Financial
Location:
Virginia Alexandria City County Alexandria
Groups:
Realtors®
Mortgages
All About Mortgages/Mortgage Networking
1st Time Buyers
The FHA Mortgage Group
Tags:
mortgages
gifts
fha loans
tax credit
first time homebuyers
fha mortgages
7500 tax credit
100 gifts

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Ambassador
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

KEN..... .  some very excellent information. I wasn't clear on the loan by a relative, but I knew that their employer could gift monies and that there could be a 2nd lien... but as you mentioned, all needs to be calculated within the debt ratios.  Hence why HUD doesn't really look into any of this.....   thanks for detailing this stuff. I did write about the employer gift in a few blogs, but it just confuses more people.

SHERIE..... . thanks and thanks for the kind words...

 

Jan 02, 2009 05:18 AM #44
Anonymous
Darin/Wisconsin......One Source Mortgage, LLC

Hey Jeff,

Due to the "controversy" your BLOG brought up, (thought it is only from a few), I had to read the whole thing.  Very well done.  I like the comparisons and contrasting style here.  

In order to deal with WAYNE thought and his comment, you really need alot more information from him in order to find out what is driving his hostility and mis-trust.  I would love to talk with him directly, as I am sure you would as well.  Wayne, you can call me at 608-438-4922.  Either we dont have enough information, or you have been severely mislead.

If you can, google an article from the Arizona Daily Star Newspaper, dated Sunday April 24th, 2005.  It clearly shows the benefits of a mortgage broker.  Moreover, dishonesty and fraud can run JUST as rampant in a bank!  Whether it is nationally, regionally, or locally chartered, quite frankly, many of them break the law every single day with their "in house" loans.  However, I AM NOT SLAMMING LOCAL SMALL TOWN BANKS!  I am merely stating that bad practice is bad practice!

Jeff, point of fact though....you are correct that you cannot borrow money for a down payment or closing costs, but I would have taken that one step further and explain under which conventional programs you can or cannot.  For example, I have a 20% down deal closing on Tuesday that is getting a gift for the closing costs.  This is perfectly allowable.  However, it is a gift from family, instead of a gift from a seller.  So, maybe explaining the different TYPES of gifts would be swell!

I only say this because in some of the responses you received (which were tremendous)< it appears alot of people are confused...and as you have said before, blanket statements dont help!  Right??

Well done!@  I printed this, and will put in my next newsletter!   www.federalhousingtaxcredit.com

I had already sent a breakdown like this to 1000's of customers, but a different perspective like this really helps!

Darin

Jan 02, 2009 10:25 AM #45
Ambassador
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Renée Donohue~Home Photography
Savvy Home Pix - Allegan, MI
Western Michigan Real Estate Photographer

Reblogged, great info Jeff and you know I am not huge on reblogging :)

Jan 03, 2009 03:02 AM #46
Rainer
6,669
Gina Bendel
Realty Associates - Lebanon, OR

Thank you for this blog Jeff.  It is very nicely written and contains valuable information we can all share with our clients!  I look forward to reading all of your blogs!  Here's to a prosperous and happy New Year for us all.   :)

Jan 03, 2009 06:55 AM #48
Rainmaker
405,429
Sal Poliandro - NJ Bergen County Realtor
RE/MAX Properties - Ridgewood, NJ
Short Sale Specialist - CDPE, SRES, SFR, IRES

Jeff,

    Great blog! You make the whole process so easy to understand. Thanks for all you do here in the Rain.

Jan 03, 2009 10:31 AM #49
Ambassador
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

DARIN... .  well, not to sound full of myself, but many of my blogs have been stirring up some controversey or negative feedback. But everyone of those that say something negative, can't back it up with proof or guidelines.  But some just need to bring you down. If I am not sure of something and it's a fact, I research it first.

In regards to the benefits of a mortgage broker though?  Not sure what that has to do with this post. Besides, I am a banker that we use several different investors and we can broker loans. So we could debate that one later... ;o)

In any case, thanks for the kind words and for the support. Good luck to you in 2009.

 

RENEE.... .  thank you very much....and I feel so honored about you reblogging this... seriously, thanks.

GINA.... . thanks... I try to make most of my blogs easy to read. I hate when I read a mortgage related blog and I have no idea what that author is trying to say. I could only imagine what it's like for the consumer then.  Thanks again and happy new year.

SAL.... . thank you for those polite compliments and comments...  I truly do appreciate that.

 

Jan 03, 2009 04:08 PM #50
Rainmaker
99,135
Gerry Suarez Jr.
Jet Home Loans NMLS 1660135 - Maitland, FL
FL Mortgage Guru

Boy Jeff, you started the new year off right!

Great concise and easy to read post on the subject. It's not rocket science and the details shouldn't discourage someone from taking advantage of this "tax credit" to better their situation. Regarding the repayment issue due be aware you can spell it all out in a loan note that states the grantor will be repaid from proceeds of the "tax credit" and any other amount owed (if any) will be gifted to the buyer. That note does not have to recorded as a mortgage or lien and as long as there is no monthly payment there is nothing to add to the buyer's ratios.

That's the best part about HUD/FHA- if you are straight up honest, and it really does make sense, you can usually do it!

Gerry Suarez, Jr.

Your FHA Loan Pro!

Jan 04, 2009 11:59 AM #51
Rainmaker
246,930
Jackie - computer-training-atlanta.com
770.498.7333 - Atlanta, GA
Learn to leverage technology to get more done.

Great, educational post on how FTHB can use the tax credit to their advantage.

Jan 05, 2009 10:11 AM #53
Anonymous
Anonymous

Hey Jeff,

Here is WAYNES question, and that is what I was addressing.

A gift is a gift and a loan is a loan. If you tell people to say a loan is a gift it is called bank fraud. I know no one wants to hear this but it is true. As an agent or a mortgage broker if you encourage this you are breaking the law. As a loan officer you are held to a higher standard and may be penalized more than the actual borrower. By the way FHA allows for a unsecured loan as well as a gift from a family member.

 

01/01/2009 08:25 PM by Wayne Malcomb

You are right though, I think your blogs are CHALLENGES, and that is what creates contreversy!  The part you are right about, they cannot back it up!  You can.  Whether I agree or disagree, is irrellevant.

I was just trying to say to dEFINE a gift a little more. 

Thanks again for the post!

Darin

 

 

 

Jan 05, 2009 10:22 AM #54
Ambassador
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

GERRY..... .  bingo, it's not rocket scientist.  HUD spells out everything. As long as we explain it to the borrower, it's all on them then. thanks for the compliment and for the feedback.

JACKIE..... .  thank you very much. I actually enjoyed writing this one.... I hope more people realize this and use it to their advantage.

 

DARIN..... .  I know what Waynes question was... and I know if I tell someone one thing, that it's another, that it is fraud.  Not sure what you are trying to say. Are you saying that I wasn't specific?  Or telling people to commit fraud?  Again, just curious...

In regards to defining gift a little more?  You can't be any more direct and to the point than to state that you can get a 100% gift from a family member. If they can't understand 100% or gift, not sure what else to say. A loan is something that you borrower... a gift is something given to you... and with HUD, is not to be paid back.  In any case, thanks for the compliment...

 

Jan 05, 2009 03:03 PM #55
Rainer
24,603
Keith Pound
EXIT REALTY CRUTCHER - Louisville, KY
Realtor, Auctioneer - Louisville, KY - 502-645-5950

Great post and update on the tax credit, now just to find some buyers with decent credit.

Jan 20, 2009 03:33 PM #58
Ambassador
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

KEITH....  thanks for the compliment.....  I think the tax credit is a great thing and could help so many. Some dislike it, but not sure why. Buyers should jump on this and the low rates.  thanks

 

Jan 24, 2009 01:59 PM #59
Anonymous
Blake

I was wondering if I bought my house from my Great Aunt if I would still be eligable for the tax credit? Or is that considered to close of a relative?

Jan 28, 2009 12:01 PM #60
Ambassador
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

BLAKE.... as long as you are a first time homebuyer, and you bought it between the dates that I mentioned above, yes, you could...    you can also reach me here...  jbelonger@ihcmi.com   If you have any more questions or that I might be able to help you.  thanks, jeff

 

Jan 28, 2009 12:05 PM #61
Anonymous
Blake

Thanks Jeff, I just saw something on a website that said if you bought the house from a relative you wouldn't be eligable.

Jan 28, 2009 12:14 PM #62
Ambassador
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

BLAKE.... my bad... I do apologize... I didn't go to bed until 3 am this morning, was up at 7:30 am and still working on clients stuff now. After you thanked me, I said wait... I said, no problem?  lol  I hate that term from anyone in the mortgage industry.  I then went back to do a double take on the issue because I did remember that you couldn't be a relative.

It's all here.... sorry about the misinformation :  T500 Tax Credit info   So, the previous lender from that other source is correct.  Again, sorry about that.

 

Jan 28, 2009 12:22 PM #63
Anonymous
Wanda

I Believe they are trying to pass legislation now so that the borrowers do not have to pay this back. As it stands currently, this "0 percent interest loan" has to be paid back at the rate of $500 per year for 15 years, via the tax return filings.

Feb 02, 2009 12:49 AM #64
Ambassador
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

WANDA ..... yes, I have heard this. And in my personal and professional opinion, I think that is a huge mistake. Whose printing press for money are we going to use now?  I think the ink dried on our last one. Seriously, what do the people want?  To pay nothing?  Do you know that we will all pay for this down the road. I think this is an excellent program, that is tax free, and only $500 a year for 15 yrs. You can't beat that, yet people are complaining about this. I am extremely disappointed about that. I try my hardest to help people, to educate them, to help them get that mortgage, but I think this is pushing it.  thanks

 

Feb 02, 2009 12:55 AM #65
Anonymous
Mark

Hey Jeff, if someone used this credit and now wants to refi, does the whole thing have to be paid in full?

Feb 09, 2009 05:44 AM #66
Rainmaker
299,145
Kathy McGraw
CELLing Realty - White Water, CA
Riverside County CA Real Estate

Jeff, with the new version of the Package is this Relative issue still in there?  Also now owning a house in 3 years, doesn't this mean not buying a house in 3 years?  Just want to have my facts right.

Feb 14, 2009 06:47 AM #67
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