If you’ve been holding off buying that first great or second move-up home, hoping that the market would drop in price, now’s the time to act.  There is absolutely no activity on Capitol Hill that would lead me to believe this tax credit will be extended.  In addition, there are some other things happening that may affect the how much home you can afford.

As you know, the tax credit is a refundable credit of $8000 for first-time homebuyers and $6500 for move up buyers who have owned another primary residence for at least 5 years.  In order to qualify for the credit in 2010, you must write a purchase agreement on a home by April 30^th, 2010.  You must then close on that home by June 30, 2010.  Tick tock.  Tick tock.  The clock is running out.

And as if that isn’t bad news enough, at the end of March, a Federal program which has been purchasing mortgaged backed securities will end.  This program has put an artificial price on these securities, insuring lower mortgage rates.  Most analysts are expecting mortgage rates to rise at the end of this program.  In other words, when the government stops buying these securities, the analysts don’t expect that the private investor market will pick up the slack.

This will mean an increase in the monthly mortgage payment for the home buyer.  For example, a payment on a $200,000 mortgage, principal and interest fixed over 30 years at 5% interest is $1074.  At 6%, it is $1200 or roughly another $125 per month. 

So get out there and buy now.  With the Federal buying program in place , you can lock in a lower interest rate and you will avoid the price increases that always accompany the brisk spring market.

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.

Recently, I had two homebuyers come to our seminar for First-Time Home Buyers who plan to buy a home this year.  They want to take advantage of the record-breaking drop in home prices, the record-breaking low interest rates and the first time ever tax credit for first-time homebuyers.

They asked me if they could split the tax credit.  Well, at the time, I didn’t know the answer to that question but God Bless America.  The IRS website at IRS.gov had an answer for their question.  Of course, you know the IRS!! The answer WAS NOT short but basically it said this.

Of course you can split the one-time $8000 tax credit.  But you should be sensible about it.  For example, if you and a fiancé bought your first home together, and you each paid ½ of the down payment, you could split the tax credit 50/50 each taking ½ of the credit.  Or let’s say you paid cash for a home and you contributed $25,000 and your partner contributed $75,000 towards a $100,000 home.  You could split the credit taking 25% or $2000 for yourself and giving 75% or $6000 for your partner.

Or let’s say that your partner has been out of work for a year and thus doesn’t owe any taxes but you are self-employed and will owe $6000 at the end of the year.  In this case, it may make sense for you to take the whole tax credit to offset your taxes.  You would still get a check for the difference of $2000.  You can make the credit work for you…just have some sensible explanation to give the IRS.

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.

If you bought or are buying your first home between January 1, 2008 and June 30, 2010, you will qualify for a refundable credit from the IRS.  There are two types of tax credit.  The non-refundable credits reduce your tax but only can reduce your tax to zero.  Refundable credits mean that once your tax is at zero, the rest of the credit will be mailed to you as a check.

For example, let’s say your taxes are $5000 this year and you have already paid $4500 towards those taxes in withholding from your paychecks.  So you would owe $500 to the IRS.  However, you bought your first home this year (2009) so when you file your taxes in 2010 for 2009, you claim the first time homebuyer credit.  The IRS would send you a refund check for $7500.  They would take $500 from the credit to pay the balance of the taxes you owed to them.  The rest would be refunded to you.

Now there are some differences in the tax credits available for first-time homebuyers.   If you bought between January 1, 2008 and December 31, 2008, the credit is $7500 and must be repaid over 15 years starting the second year after receiving the credit at $500 per year.  If you bought between January 1, 2009 and June 30, 2010, the credit is $8000 and doesn’t have to be repaid if you live in that home you bought for 3 or more years.  If you bought between January 1, 2009 and November 6, 2009, the credit is $8000 and you can e-file to claim the credit.  If you bought your first home after November 7, 2009 but before June 30, 2010, you cannot e-file your return to claim the $8000 credit as the IRS now requires you to attach proof of home purchase to your return.

If you have filed taxes for 2008 but bought your first home after you filed, you can file an amended return this year to claim the credit.  You don’t have to wait to file your tax return for 2009.  This is a great benefit for first time buyers, defined by the IRS as folks who haven’t owned a home for the three years prior to closing on their new home.  Good luck in buying that first great home!!

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.

WASHINGTON — A new law that went into effect Nov. 6 extends the first-time homebuyer credit five months and expands the eligibility requirements for purchasers.

The Worker, Homeownership, and Business Assistance Act of 2009 extends the deadline for qualifying home purchases from Nov. 30, 2009, to April 30, 2010. Additionally, if a buyer enters into a binding contract by April 30, 2010, the buyer has until June 30, 2010, to settle on the purchase.

The maximum credit amount remains at $8,000 for a first-time homebuyer –– that is, a buyer who has not owned a primary residence during the three years up to the date of purchase.

But the new law also provides a “long-time resident” credit of up to $6,500 to others who do not qualify as “first-time homebuyers.” To qualify this way, a buyer must have owned and used the same home as a principal or primary residence for at least five consecutive years of the eight-year period ending on the date of purchase of a new home as a primary residence.

For all qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 tax returns.

A new version of Form 5405, First-Time Homebuyer Credit, will be available in the next few weeks. A taxpayer who purchases a home after Nov. 6 must use this new version of the form to claim the credit. Likewise, taxpayers claiming the credit on their 2009 returns, no matter when the house was purchased, must also use the new version of Form 5405. Taxpayers who claim the credit on their 2009 tax return will not be able to file electronically but instead will need to file a paper return.

A taxpayer who purchased a home on or before Nov. 6 and chooses to claim the credit on an original or amended 2008 return may continue to use the current version of Form 5405.

Recently, I had two homebuyers come to our seminar for First-Time Home Buyers who plan to buy a home this year.  They want to take advantage of the record-breaking drop in home prices, the record-breaking low interest rates and the first time ever tax credit for first-time homebuyers.

They asked me if they could split the tax credit.  Well, at the time, I didn’t know the answer to that question but God Bless America.  The IRS website at IRS.gov had an answer for their question.  Of course, you know the IRS!! The answer WAS NOT short but basically it said this.

Of course you can split the one-time $8000 tax credit.  But you should be sensible about it.  For example, if you and a fiancé bought your first home together, and you each paid ½ of the down payment, you could split the tax credit 50/50 each taking ½ of the credit.  Or let’s say you paid cash for a home and you contributed $25,000 and your partner contributed $75,000 towards a $100,000 home.  You could split the credit taking 25% or $2000 for yourself and giving 75% or $6000 for your partner.

Or let’s say that your partner has been out of work for a year and thus doesn’t owe any taxes but you are self-employed and will owe $6000 at the end of the year.  In this case, it may make sense for you to take the whole tax credit to offset your taxes.  You would still get a check for the difference of $2000.  You can make the credit work for you…just have some sensible explanation to give the IRS.

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.

Yes, our good Uncle Sam has once more come through for us and you can benefit from Congress’s largesse.  The $8000 tax credit for first-time homebuyers has been extended through April 30, 2010.  If you have been shopping and missed the first deadline of November 30, 2009, your impulse will be to kick back and enjoy the reprieve.  If you haven’t started shopping yet, your impulse may be to say “hey, I have a lot of time now”.

But let’s face a few facts.  First of all, spring is the busiest time of the year for real estate sales.  In Minnesota, the snow, the cold, the short days and the holidays conspire to distract home buyers in November and December.  These are usually slow shopping months.  But the pace picks up in February and March.   The Parade of Homes, sponsored by the Builder’s Association, runs through mid-March.  This gets homebuyer’s out shopping. The days become longer, the snow starts to melt, spring is in the air and first time homebuyers, like Monarch butterflies, swarm around the good homes.

The deadline for the first-time homebuyer tax credit will fall right towards the end of the spring real estate market.  Spring is always a busy time, even in this down economy.  This year it will be doubly busy because of the tax credit and good homes will be in short supply. 

If I were a first-time homebuyer, I would start shopping now.  November and December are slow months without much competition from other buyers.  There will be good deals out there.  Also, the mortgage interest rates tend to drop during these months due to less demand so you will pay less for your monthly house payment.  Finally, you will have plenty of time to get it all done before the tax credit disappears and you won’t have to worry about making the deadline.

Be smart.  Plan ahead.  Beat the crowd.  Get a great house and a great mortgage.

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.

On November 6, 2009, President Obama signed into law an extension and expansion of the First Time HomeBuyer Tax Credit which has been in effect since January 1, 2009.  Briefly, the law extends the $8000 tax credit which was due to expire on November 30, 2009.  The new law extends the credit into 2010.  The rules state that the home purchase agreement must be written and signed by April 30, 2010 and closed by June 30, 2010.  The former requirement that the buyers not have owned a home in the past three years is still in effect.  The credit is limited to 10% of the purchase price of the home or $8000, whichever is less.  Income requirements have been increased.  The law is effective immediately.

The law is also expanded to include homeowners who have owned their home at least five years of the last eight years.  If these homeowners sell their current home and buy a new home before April 30, 2010 and close both transactions by June 30, 2010, they can take a tax credit of $6500.  This law goes into effect immediately and will affect any closings occurring between November 6, 2009 and the end of the program on June 30 of 2010.

Both first-timers and repeat buyers will have a price ceiling for the new home of $800,000.  The real estate lobby worked hard and long to encourage lawmakers to sign this program extension.  There was concern that if the program ended in November, 2009, the housing market would take a nose dive.  Timing the program ending for next April is better because the real estate market is typically the strongest over the spring and summer months.

If you have questions, come to our homebuyers class where we have the answers as well as  special handouts covering program rules and your questions.

We are living in unprecedented times.  Not since World War II when our government enacted a special loan program for the returning soldiers through the Veteran’s Administration have we seen such a sweet plum for first time home buyers.  Last year, the Housing Recovery Act of 2007 offered first time home buyers a $7500 tax credit if they bought a home after April 8, 2008 and before January 1, 2009.  However, the credit was not a true credit; it was an interest free loan.  If you claimed the credit, you needed to repay it $500 a year over 15 years.

This year, in the Housing Recovery Act of 2008, Congress sweetened the pot.  The tax credit was increased to $8000 and the repayment provision was dropped.  Yes, that’s right.  If you are a first-time homebuyer and you buy a home after January 1, 2009 but before December 1, 2009, you can claim the tax credit of $8000 or 10% of the purchase price of the home, whichever is less.

I had a student attending our seminar for First-Time Homebuyers ask if I thought this provision would be extended yet one more year. It depends.  The provision was an attempt to put a stop to the rapid drop in home prices and create a new “floor” for the housing market.  In our area, the tax credit has accelerated home purchases.  Home sellers, however, are still hesitant to list their home for sale because of the huge price drops of the last three years.  So slowly, houses are being taken off the market and inventory is dropping.  If there is not a glut of low cost housing on the market in November, my guess is the tax provision will not be extended.

However, there it is, right now.  TAKE ADVANTAGE OF IT.  Never before have low prices, low mortgage rates and a great tax credit come together to make this the best time to buy a first home in the last 50 years.

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.

If you are a first time homebuyer and you wanted to take advantage of the 2009 first time home buyer tax credit, pay attention!!   As of this moment, there has been no extension of the $8000 tax credit by Congress.  It will expire on November 30, 2009.  That means that you have to purchase your first home and close on it BEFORE December 1^st, 2009. 

I have some advice for you.  Forget “short sales”.  They aren’t short and it can take as long as three or four months to hear from the seller’s bank, which has to approve the sale.  You don’t have that kind of time.  Focus instead on foreclosed homes or seller owned homes.  The bank owning the foreclosed home  will respond to any offer usually within the week.  With a seller owned home, not a short sale, you could receive a response  in 24 hours or less.

Don’t wait till the last minute.  In this turbulent market, loans are more complicated, houses have more issues, and foreclosures add a whole level of complexity.  Do plan to close by the end of October or middle of November, at the latest.  If anything goes wrong, you’ll still have a cushion of time to make the deal happen.

Remember, it’s about the home.  It’s great to get a tax refund of $8000, but you still have to live in that home for 3 years or more for the refund to be permanent.  Don’t buy a home just to buy a home.  Make sure it’s the right one for you.  Don’t wait till the last minute and buy in a panic.  Homes in the lower price ranges are moving briskly.  Start shopping now and keep an eye out for new listings coming on the market.  They are more likely to contain “stars” rather than the “dogs” than have been on the market for months.

Shop smart.  Shop now.  Get the credit. Get a great home. Good luck.

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.

The first-time homebuyer tax credit has been getting a lot of publicity lately.  Although it’s pretty easy to qualify, there are still some guidelines which must be followed.

First, and probably the most important, you must be a FIRST-TIME HOMEBUYER.  So if you married recently and your spouse owned a home previously, you can’t qualify for the credit.  BOTH of you must be first-time homebuyers.  How the Federal government defines this is someone who hasn’t owned a home in the previous three years.  This must be calculated to the date of the sale of the previous home.  For example, if you are buying a home and closing the home purchase on March 31, 2009 but you sold a previous home in April of 2006, you wouldn’t qualify.  You’d have to wait till after the three year anniversary of the home sale.

Let’s say that you are a first-time homebuyer but you want to buy the house as an investment and rent it out.  Sorry, once again, you don’t qualify.  The tax credit goes to those who are buying the home as their own residence.

Once you purchase the home and claim your $8000 tax credit, you must live in the home for a full three years in order to keep the credit.  If you sell before the three year anniversary of the purchase, you will have to repay the credit.

The credit is a once in a lifetime opportunity.  There has never been a credit like this before and there likely will not be one again, at least in our lifetimes.  Take full advantage of it and buy a home before December 1^st of this year.  Free money.  $8000 to spend on the home or on a great vacation.  Hurry.  It’s too good to pass up.

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.