Don’t buy or lease an auto

Lenders look carefully at your debt-to-income ratio. A large payment such as a car lease or purchase can greatly impact those ratios and prevent you from qualifying for a home loan.

Don’t move assets from one bank account to another

These transfers show up as new deposits and complicate the application process, as you must then disclose and document the source of funds for each new account. The lender can verify each account as it currently exists. You can consolidate your accounts later if you need to.

Don’t change jobs

A new job may involve a probation period, which must be satisfied before income from the new job can be considered for qualifying purposes.

Don’t buy new furniture or major appliances for your “new home”

If the new purchases increase the amount of debt you are responsible for on a monthly basis, there is the possibility this may disqualify you from getting the loan, or cut down on the available funds you need to meet the closing costs.

Don’t run a Credit report on yourself

This will show as an inquiry on your lender’s credit report. Inquiries must be explained in writing.

Don’t attempt to consolidate bills before speaking with your lender

The loan officer can advise you if this needs to be done.

Don’t pack or ship information needed for the loan application

If you are relocating, important paperwork such as W-2 forms, divorce decrees, and tax returns should not be sent with your household goods. Duplicate copies take weeks to obtain, and could stall the closing date on your transaction.

This information was made available by Bruce Howard, Landover Mortgage, phone: 503-201-2083 brucehoward@landovemrortgage.com

I would like all of the Buyers out there to take a deep breath. Unless you are speculating, looking for quick easy money from equity realized by buying low and selling high, you are unlikely to make a misstep in this market. Doug and I work with Buyers and Sellers using current Portland area market data to ground prices in reality. Knowing the inventory, recognizing when a home is priced well, is essential in feeling good about your decision. Make the offer on the house you want to live in, and negotiate with respect. You are unlikely to regret acting.

NW St. Helens Rd. Beauty!

SOLD!

We’ve recently begun marketing a new listing in Scappoose. I know – what are we doing in Scappoose? The truth of it is, after a peaceful 20 minute drive up HWY. 30, you’re there. And there in this case is an elegant remodeled Craftsman with 3 bedrooms, 2.5 bathrooms on, drumroll please…(thanks!) 13.5 ACRES! This is an incredible property with a Guest House that has its own deck into the trees, fireplace, and full bath – the perfect studio for writers and other artists. There is a large patio with a beautiful water feature, there’s a sports court on the extensive grounds, and there’s a pristine BarnMaster barn with fenced pastures. If you don’t have animals, we’ve already lined up horse owner interested in boarding hers. The Seller is MOTIVATED! We’ve all heard that before, but in this case it means a price of $650K – dramatically below the 2007 appraised value of $750K (which was just the house and 5 acres). Check it out, and tell all of your friends!

Looking at fixers, but unsure how to pay for the fixing? You need to know about FHA 203(k) loans. These give buyers additional money to address repairs, and can be a great opportunity for folks looking to get a fixer. It’s a complicated process, but a good lender can walk you through the specifics. I just represented Buyers who financed their purchase with this program. Doing so meant they didn’t have to settle for a house that didn’t suit them.

My clients, Jeff and Keri, had been dissappointed with the sizes of homes in their price range – under $210K. Portland’s entry level market is very active, meaning good inventory and lots of Buyers. The 1st Time Buyer tax credit and low interest rates are performing as desired – helping people acheive home ownership on excellent terms. But for Jeff and Keri, there just wasn’t a property that matched their needs, their biggest priority being enough space for two very active kids and a big dog. Houses that worked on paper were in significant disrepair, usually a deal breaker for FHA loans. So when I encouraged them to look at fixers and explore the 203(k) program they were excited to learn more.

Kara Berglund of HomeStreet Bank walked them through the process. In many ways it is a combination between a loan to buy a house and a loan to remodel a house. You have the same steps requiring that both property and Buyer qualify for the loan amount requested, and you also need to address the repairs and improvements, assigning a dollar value for materials and labor. Jeff is a General Contractor so he was able to collect bids and submit a plan for improvements, but this can be a challenge for people not versed in construction. Getting a good GC to steer the process is often the best way to go, but if the repairs aren’t that extensive, sometimes you can collect bids from the specific trades, and submit them with your plan. In this way it’s similar to addressing repairs as part of the home inspection contingency. Once the lender has the plan for improvements they send an appraiser to verify what the property will be worth after the work is complete. Easy schmeezy, right?

For Jeff and Keri everything was humming right along. The plan they submitted was thorough and within the $35K limit. However, while the appraising guidelines aren’t quite as strict as those for a regular FHA loan (providing the improvement plan addresses the condition issues), they still require a clean Pest and Dry Rot Report, and there can be no structural issues. This is where it got interesting. We had termites, post beetles, and weed trees that had eaten the foundation. Without a clean P&D and foundation repairs, we would be dead in the water.

Luckily for us the Seller was VERY motivated and in the construction business. He jumped in with both feet to get a structural engineer to assess the building and prescribe remedies, and then he performed those repairs. The very able James Mahn at Black’s Pest Services took care of the bugs and we closed only 3 days late. Jeff has started on projects, prioritizing a vegetable and herb garden in the enormous back yard. And the boys christened the house with their first antic game of hide and seek. Keri is taking deep breaths and pinching herself. All are very excited to embark on this adventure!

Frequently Asked Questions About The 2009 First-Time Homebuyer Tax Credit 

1. How much is the 2009 first-time homebuyer tax credit? 
The 2009 tax credit has been increased to $8000 for qualifying home purchases. While the 2008 tax credit required the buyer to repay the credit over time, this provision has been eliminated for the 2009 credit. Any home that is purchased for $80,000 or more qualifies for the full $8000 amount. If the house costs less than $80,000, the credit will be 10% of the cost. Thus, if an individual purchased a home for $75,000, the credit would be $7500.

2. Who is eligible to get the credit?
Only first-time homebuyers are eligible. A person is considered a first-time buyer if he/she has not had any ownership interest in a home in the three years previous to the day of the 2009 purchase.

3. When does a home have to be purchased? 
To qualify for the 2009 tax credit, the home purchase must close on or after January 1, 2009, and before December 1, 2009.

4. How does a tax credit work?
Every dollar of a tax credit reduces one’s income tax by a dollar. Once a qualified homebuyer has calculated the total income tax he/she owes, the tax credit will be applied to reduce his/her total tax bill. So, for a purchaser who has a total tax liability of $9500, the $8000 credit would wipe out all but $1500 of the tax due. ($9,500 – $8000 = $1500.)

This tax credit is far preferable to an income tax deduction, which only reduces a percentage of taxable income (as opposed to being a dollar-for-dollar reduction of tax owed).

5. So what if the purchaser is eligible for the $8000 credit but his/her entire income tax liability for the year is only $6000?
This tax credit is what’s called a “refundable” credit. Thus, if the eligible purchaser’s total tax liability was $6000, the IRS would send the purchaser a check for $2000. The refundable amount is the difference between the $8000 credit amount and the amount of tax liability. ($8000 – $6000 = $2000.)

6. How does withholding affect my tax credit and my refund?
A few examples are provided at the end of this FAQ. There are several steps in this calculation, but most income tax software programs are equipped to make that determination.

7. Is there an income restriction?
Yes. The income restriction is based on the tax filing status the purchaser claims when filing his/her income tax return. Individuals filing Form 1040 as Single (or Head of Household) are eligible for the credit if their income is no more than $75,000. Married couples who file a Joint return may have income of no more than $150,000.

8. How is my “income” determined?
For most individuals, income is defined and calculated in the same manner as their Adjusted Gross Income (AGI) on their 1040 income tax return. AGI includes items like wages, salaries, interest and dividends, pension and retirement earnings, rental income and a host of other elements. AGI is the final number that appears on the bottom line of the front page of an IRS Form 1040.

9. What if I worked abroad for part of the year?
Some individuals have earned income and/or received housing allowances while working outside the . Their income will be adjusted to reflect those items to measure Modified Adjusted Gross Income (MAGI). Their eligibility for the credit will be based on their MAGI.

10. Do individuals with incomes higher than the $75,000 or $150,000 limits lose all the benefit of the credit?
Not always. The credit phases-out between $75,000 – $95,000 for singles and $150,000 – $170,000 for married filing jointly. The closer a buyer comes to the maximum phase-out amount, the smaller the credit will be. The law provides a formula to gradually withdraw the credit. Thus, the credit will disappear after an individual’s income reaches $95,000 (single return) or $170,000 (joint return).

For example, if a married couple had income of $165,000, their credit would be reduced by 75% as shown:
Couple’s income = $165,000
Tax credit’s income limit = $150,000
Excess income = $15,000 

The excess income amount ($15,000 in this example) is used to form a fraction. The numerator of the fraction is the excess income amount ($15,000). The denominator is $20,000 (specified by the statute).
In this example, the disallowed portion of the credit is 75% of $8000, or $6000 ($15,000/$20,000 = 75% x $8000 = $6000). Stated another way, only 25% of the credit amount would be allowed. In this example, the allowable credit would be $2000 (25% x $8000 = $2000).

11. What’s the definition of “principal residence”?
A principal residence is the home where an individual spends most of his/her time (generally defined as more than 50%). It is also defined as “owner-occupied” housing. The term includes single-family detached housing, condos or co-ops, townhouses or any similar type of new or existing dwelling. Even some houseboats or manufactured homes count as principal residences.

12. Are there restrictions on the location of the property?
Yes. The home must be located in the . Property located outside the is not eligible for the credit.

13. Are there restrictions related to the financing for the mortgage on the property?
In 2009, most financing arrangements are acceptable and will not affect eligibility for the credit. Congress eliminated the financing restriction that applied in 2008. (In 2008, purchasers were ineligible for the $7500 credit if the financing was obtained by means of mortgage revenue bonds.) Now, mortgage-revenue bond financing will not disqualify an otherwise-eligible purchaser. (Mortgage revenue bonds are tax-exempt bonds issued by a state housing agency. Proceeds from the bonds must be used for below market loans to qualified buyers.)

14. Do I have to repay the 2009 tax credit?
NO. There is no repayment requirement for the 2009 first-time homebuyer tax credit.

15. Do 2008 purchasers still have to repay their tax credit?
YES. The $7500 credit in 2008 was more like an interest-free loan. All eligible purchasers who claimed the 2008 credit will still be required to repay it over 15 years, starting with their 2010 tax return.

16. How do I apply for the credit?
There is no pre-purchase authorization, application or similar approval process. All eligible purchasers simply claim the credit on their IRS Form 1040 tax return. The credit will be reflected on a new Form 5405 that will be attached to the 1040. Form 5405 can be found at www.irs.gov.

17. So I can’t use the credit amount as part of my downpayment?
No. Congress tried hard to devise a mechanism that would make the funds available for closing costs, but found that pre-funding would require cumbersome processes that would, in effect, bring the IRS into the purchase and settlement phase of the transaction.

18. So there’s no way to get any cashflow benefits before I file my tax return?
Yes, there is. Any first-time homebuyers who believe they are eligible for all or part of the credit can modify their income tax withholding (through their employers) or adjust their quarterly estimated tax payments. Individuals subject to income tax withholding would get an IRS Form W-4 from their employer, follow the instructions on the schedules provided and give the completed Form W-4 back to the employer. In many cases their withholding would decrease and their take-home pay would increase. Those who make estimated tax payments would make similar adjustments.

19. What if I purchase later this year but can’t get to settlement before December 1?
The credit is available for purchases before December 1, 2009. A home is considered “purchased” when all events have occurred that transfer the title from the seller to the new purchaser. Thus, closings must occur before December 1, 2009 for purchases to be eligible for the credit.

20. I haven’t even filed my 2008 tax return yet. If I buy in 2009, do I have to wait until next year to get the benefit of the credit?
You’ll have a helpful choice that might speed up the process. Eligible homebuyers who make their purchase between January 1, 2009 and December 1, 2009, can treat the purchase as if it had occurred on December 31, 2008. Thus, they can claim the credit on their 2008 tax return that is due on April 15, 2009. They actually have three filing options:
-          If they purchase between January 1, 2009 and April 15, 2009, they can claim the $8000 credit on the 2008 return due on April 15.
-          They can extend their 2008 income-tax filing until as late as October 15, 2009. (The IRS grants automatic extensions, but the taxpayer must file for the extension. See www.irs.gov for instructions on how to obtain an extension.)
-          If they have filed their 2008 return before they purchase the home, they may file an amended 2008 tax return on Form 1040X. (Form 1040X is available at www.irs.gov.) 

Of course, 2009 purchasers will always have the option of claiming the credit for the 2009 purchase on their 2009 return. Their 2009 tax return is due on April 15, 2010.

21. I purchased my home in early 2009 before the stimulus bill was enacted. I claimed a $7500 tax credit on my 2008 return as prior law had permitted. Am I restricted to just a $7500 credit?
No, you would qualify for the $8000 credit. Eligible purchasers who have already claimed the $7500 credit on a 2008 return for a 2009 purchase may file an amended return (IRS Form 1040X) for the 2008 tax year. This amended return will enable them to obtain the additional $500 credit amount.

22. If I claim my 2009 $8000 credit on my 2008 tax return, will I have to repay the credit just as the 2008 credits are repaid?
No. Congress anticipated this confusion and has made specific provision so that there would be no repayment of 2009 credits that are claimed on 2008 returns.

23. I made an eligible purchase of a principal residence in May 2008 and claimed the $7500 credit on my 2008 tax return. My brother, who has never owned a home, wishes to purchase a partial interest in the home this spring and move in. Will he qualify for the $8000 credit, as well?
No. Any purchase of a principal residence (or interest in a principal residence) from a related party such as a sibling, parent, grandparent, aunt or uncle is ineligible for the tax credit. Since you and your brother are related in this way, he cannot qualify for the credit on any portion of the home that he purchases from you, even if he is a first-time homebuyer.

24. I know there is no repayment requirement for the $8000 credit. Will I ever have to repay any of the credit back to the government?
One situation does require a recapture payment back to the government. If you claim the credit but then sell the property within three years of the date of purchase, you are required to pay back the full amount of any credit, including any refund you received from it. A few exceptions apply. Note that this same 3-year recapture rule also applies to the $7500 credit available for 2008. This provision was designed to discourage flipping.

25. What if I die or get divorced or my property is ruined in a natural disaster within the 3 years?
The repayment rules are eased for many circumstances. If the homeowner who used the credit dies within the first three years of ownership, there is no recapture. Special rules make adjustments for people who sell homes as part of a divorce settlement, as well. Similarly, adjustments are made in the case of a home that is part of an involuntary conversion (property is destroyed in a natural disaster or subject to condemnation by eminent domain by an authorized agency) within the first three years.

26. I have a home under construction. Am I eligible for the credit?
Yes, so long as you actually occupy the home before December 1, 2009.

WITHHOLDING EXAMPLES (see question 5 above) Note: The impact of estimated tax payments would be the same.

Situation 1: Sally plans her withholding so that her withholding is as close as possible to what she anticipates as her income tax liability for the year. When she fills out her 1040, her liability is $6000. She has had $6000 withheld from her paycheck. She also qualifies for the $8000 homebuyer credit.
Result: Sally’s withholding satisfies her tax liability and reduces it to zero. She will receive a refund of the full $8000.

Situation 2: Nick and Nora file a joint return. Nick is self-employed and makes estimated payments; Nora has taxes withheld from her salary. When they compute their taxes, their combined withholding and estimated tax payments are $11,000. Their income tax liability is $9800. They also qualified as first-time homebuyers and are eligible for the $8000 refundable tax credit.
Result: Ordinarily, their combined estimated tax payments and withholding would make them eligible for a refund of $1200 ($11,000 – $9800 = $1200). Because they are eligible for the refundable tax credit as well, they will receive a refund of $9200 ($1200 income tax refund + $8000 refundable tax credit = $9200).

Situation 3: Cesar and Maria both have income taxes withheld from their salaries and file a joint return. When they file their income tax return, their combined withholding is $5000. However, their total tax liability is $7200, generating an additional income tax liability of $2200 ($7200 – $5000). They also qualify for the $8000 first-time homebuyer tax credit.
Result: Cesar and Maria have been under-withheld by $2200. Ordinarily, they would be required to pay the additional $2200 they owe (plus any applicable interest and penalties). Because they are eligible for the refundable homebuyer tax credit, the credit will cover the $2200 additional liability. In addition, they will receive an income tax refund of $5800 ($8000 – $2200 = $5800). If they owed penalties and/or interest, that amount would further reduce the refund.

The above information is for general guidance only. It should not be construed as legal, tax or investment advice. Before making any decision or taking any action on this information, you should consult a qualified professional adviser. 

Freddie Mac

HUD

Call Bruce Howard, Regional Sales Manager @ Landover Mortgage

503-201-2083

Fax: 866-788-1010

brucehoward@landovermortgage.com

www.landovermortgage.com/brucehoward

1. Expansion of First-time Home Buyer Tax Credit
The tax credit available to first time home buyers was increased from $7,500 to $8,000 for homes purchased between January 1, 2009, and December 1, 2009. Also, the credit no longer needs to be paid back as long as you live in the home without selling it for at least 3 years. The income limitations remain the same ($75,000 for single tax payers claiming the full credit and $150,000 for married tax payers). Also, the credit remains refundable. This means that first-time home buyers who owe less than $8,000 in taxes for the year are still eligible for the full $8,000 credit when they file their tax returns. There is one catch, however: if you bought the home in 2008, the credit remains $7,500, and it still needs to be paid back over a 15 year timeframe beginning in 2011 when you file your 2010 returns.

2. Higher Reverse Mortgage Loan Limits
The loan limits for FHA-insured reverse mortgages have been increased to $625,500 across the entire country – not just the higher cost areas. The previous limit was $417,000 across the country. This is especially important because the FHA program is virtually the only game in town as private and jumbo reverse mortgage programs have nearly all evaporated. This coincides with another little-known change in the reverse mortgage arena: the availability of reverse mortgages on home purchase transactions. This is a fantastic opportunity for senior citizens to buy a new home and live mortgage payment-free without having to wait for their old home to sell. Seniors could also use this strategy to buy a new home and turn the old home into a rental or otherwise wait for market conditions to improve before trying to sell the old home.

3. Expansion of Home Improvement Tax Credit
The tax credit for making energy efficient home improvements is now 30% of the cost of the improvements up to a maximum of $1,500. This means that if the improvements cost you $4,500, you would receive a tax refund of $1,500 when you file your tax returns. Eligible improvements include energy efficient exterior doors and windows, insulation, heat pumps, furnaces, central air conditioners and water heaters.