Posts Tagged ‘credit’

October 27, 2009 — Realty Times Feature Article by Bob Hunt

The clock is ticking. Time is running out. To be exact, time runs out midnight, November 30, 2009. Many readers will know what I am referring to. Under the American Recovery and Reinvestment Act of 2009, November 30 is the last day for a home purchased by a first-time home buyer to qualify for the $8,000 tax credit. The purchase must be closed and title transferred by that date. It will not be sufficient simply to be under contract or in escrow.

By way of a brief refresher:

1. The tax credit is for first-time home buyers only. For the program, the IRS defines a first-time home buyer as someone who has not owned a principal residence for the past three years.
2. The credit does not have to be repaid.
3. The tax credit is equal to 10% of the home’s purchase price, up to a maximum of $8,000.
4. The credit is available for homes purchased (closed) on or after January 1, 2009 and before December 1, 2009.
5. Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.
6. The credit can be taken for either 2008 or 2009 taxes. In the former case, an amended return can be filed.

By all accounts the program has been extremely popular – which is to say, successful. The National Association of Realtors® (NAR) estimated that, by September, about 1.1 million first time home buyers had used the program; and another 700,000 are expected to do so. Already, the Treasury Department has reported nearly 315,000 people have claimed the tax credit after filing an amended 2008 return.

As enacted, the program is set to expire at the end of November. A number of bills have been introduced to extend and/or expand it. Representative Eddie Johnson (D-Texas) introduced a bill to extend the program through 2010. Another would also expand it to all home buyers. In the Senate, a bill co-sponsored by Johnny Isakson (R-Georgia) and Chris Dodd (D-Conn.) would expand the tax credit to $15,000 and make it available to any buyer regardless of income.

One would think that at least the modest proposal for an extension would be a no-brainer. It is a government program that is working, for goodness sakes. But even that legislation is in doubt. Two obstacles are cited. One is the cost. Extending this program would result in reduced future revenues. The second problem is that such a bill will have a hard time receiving any attention while the Congress is – for the next foreseeable months – focused on considerably higher profile items such as health-care and Afghanistan.

The first so-called problem seems just crazy. Suppose an extension generated an extra 1 million sales. That would result in $8 billion in unrealized tax revenues. Now that is a lot of money; but it is chump change compared to the amounts that have been lavished on financial firms and auto makers, with yet to be determined beneficial effects. The tax credit program only costs money if it works. Its cost is proportional to its success. If it didn’t work at all, it wouldn’t cost a dime. Imagine that for a government program.

The second problem is realistic. There’s a lot of heavy-duty stuff going on. But, it would seem a simple extension of the program could be achieved with very little ado and virtually no distractions from the “big issues.”

Meanwhile, what should interested parties do?

1. If you are a first-time home buyer, you had better get off the dime. There’s certainly no guarantee the program will be extended.
2. If you are a real estate agent, pass #1 along to every potential first-time buyer that you know.
3. Whether you are a Realtor® or not, if you believe in extending the program, let your representatives know.
4. If you are a member of the Realtor® organization, respond to NAR’s call for action, supporting its lobbying efforts.

For more information, call Prudential Vision Properties at 573-449-6200 to speak with a real estate expert without any obligation or cost. You can also email your questions to info@PrudentialVision.com (email responses usually come back within the hour)

All offers to purchase must be reduced to writing. Verbal offers to a seller or the selling agent have no credibility and are not binding.

Your sales professional will use standard contract forms approved by the real estate commission for specific use. Your offer should be precise regarding terms, dates, and special requests. Since your sales professional is not licensed to practice law, only factual business details may be added. You may request that your offer be examined by your attorney.

All buyers should sign the initial offer. Your sales professional will take or fax the offer to the listing agent who will present it to the seller. The selling agent may be present at the time the offer is presented. Most times seller/agent location or schedules prevent this.

The listing agent will present the offer to the seller along with written proof of the buyer’s financial qualification. The seller will weigh the merits of the offer and the buyer, assess the bottom line, and make a decision. The seller can accept the contract ‘as is,’ reject the contract, or make a counter offer.

If the offer is accepted, all sellers should sign the contract and an effective contract date is set. If the contract is rejected, no further action is required except informing the selling agent.

If the offer is countered, the seller will change the terms that are unacceptable, initial all changes, and sign the contract. The countered contract is then delivered either in person or via fax to the selling agent for presentation to the buyer. The buyer can accept, reject, or make another counter offer. The offer does not become a binding contract until all parties have signed and all changes have been initialed by all parties.

For more information, call Prudential Vision Properties at 573-449-6200 to speak with a real estate expert without any obligation or cost. You can also email your questions to info@PrudentialVision.com (email responses usually come back within the hour)

Learn more about making the initial offer.

Your lender will counsel you on available mortgage choices and products. Basic mortgage choices are FHA, VA, or conventional loans. Within these basics are different mortgage products and programs that have been tailored to today’s buyer needs. Since one size does not fit all, some mortgage products will be better suited to your financial situation.

Fixed-rate mortgages are mortgages where the interest rate remains the same for the whole loan term. Thus your principal and interest will be the same every month until the loan is paid in full. Many home buyers choose this product because it minimizes uncertainty about the monthly payment. Home buyers can more readily budget around a house payment that they can count on.

Adjustable-Rate Mortgages (ARMs) are mortgages where the interest rate changes periodically according to a predetermined index. These loans initially have a lower interest rate. When borrowers qualify at an initial lower rate, they can afford more house.

ARMs vary according to how often the rate adjusts. Some ARMs have caps on the amount of rate change with each adjustment. ARMs are tied to one of a variety of market indexes. Your lender can show you how the index has behaved historically. This will allow you to gauge if there will be wide fluctuations in rate changes over the life of the mortgage. Some ARMs are hybrids with a fixed initial interest rate before they move into an adjustable mode.

No or Low Down Mortgages are mortgage products tailored to borrowers who are short on available cash but who have the income to support a higher payment. The risk to the lender is greater on this mortgage because the buyer has little cash investment. Thus these loans will require strong buyer credit histories.

For more information, call Prudential Vision Properties at 573-449-6200 to speak with a real estate expert without any obligation or cost. You can also email your questions to info@PrudentialVision.com (email responses usually come back within the hour)

There are basically three mortgage categories employed in a home purchase: FHA, VA, and conventional. Within these categories, there are many variations. Your lender’s role is to counsel you regarding your mortgage options.

An FHA loan is a mortgage insured by the Federal Housing Administration (FHA), administered by the Federal Department of Housing and Urban Development (HUD). FHA will guarantee the lender against loss if the buyer does not pay the investor back.

Buyers find FHA loans attractive because they require as little as 3 percent down payment. FHA qualifying guidelines are also more lenient for the buyer. This makes them more attractive for a buyer who has a heavier debt load.

VA loans are mortgages offered only to veterans. To obtain a VA loan, the veteran must have a Certificate of Eligibility verifying the veteran’s active duty status since September 16, 1940 and discharge papers from the service. VA loans require no down payment, have limited closing costs, and sometimes have lower interest rates. The Veteran’s Administration (VA) will guarantee the lender against loss if the buyer does not make payments on the loan.

Conventional loans are mortgages which conform to standards set forth by the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac). Investors remain at risk up to 80 percent of the value of the property. The amount borrowed above 80 percent of the home value is insured against loss by private mortgage insurance.

There are many different mortgage products within these three categories. Learn more about the various mortgage products.

For more information, call Prudential Vision Properties at 573-449-6200 to speak with a real estate expert without any obligation or cost. You can also email your questions to info@PrudentialVision.com (email responses usually come back within the hour)

The right fit between lender and mortgage products furthers your financial goals. Your lender will counsel you about the best mortgage product for your financial profile. You should be candid with your lender about the specifics of your financial information and share future goals and explore any concerns about your mortgage.

Your lender weighs how much money you have, your debt load, and your income. Other considerations should be the likelihood of a significant change in your income, future financial goals, your ability and willingness to save, your spending habits, and how mobile you will be in the near and long term.

The property itself may influence your choice. A property in need of major repairs may dictate the balance between the money for down payment and funds designated for repairs. Your lender can provide the best advice when you’ve provided a true picture of your situation.

Your lender provides the pathway to your mortgage by packaging information to showcase you to the underwriter. If your credit is tarnished, your lender can help you clear it up. If your credit has been damaged, your lender can work with you to design a repair strategy and obtain a mortgage at a later time.

Get more tips on how to choose your lender. Also, learn about your mortgage choices and the types of mortgage products available.

For more information, call Prudential Vision Properties at 573-449-6200 to speak with a real estate expert. You can also email your questions to info@PrudentialVision.com (email responses usually come back within the hour)