Timing Couldn’t Be Much Better for First-time Homebuyers–
Be Sure You Make the Right Moves
By Rae Catanese, PA
Prudential Tropical Realty-Tampa, Fl
First-time homebuyers dominated the U.S. real estate market in 2009, accounting for roughly half of all residential transactions, according to the National Association of REALTORS®.
That trend is likely to continue well into the new year. That’s because interest rates are hovering near all-time lows, home-price affordability is near all-time highs and a third factor – Congress’ extension of the first-time homebuyer tax credit until April 30, 2010 – make conditions quite favorable for those considering homeownership for the first time.
Still, with the prospect of making one of the largest investments you’ll ever make in your life, you can easily become overwhelmed.
Some of the questions you may be asking are:
Will I be able to afford the home of my dreams? Do I have enough money for a down payment? Will I qualify for the tax credit? Will I make smart home buying decisions? If you go into the process prepared, your first purchase – like the current timing – can be just right.
The costs involved in the purchase of a home can seem overwhelming to first-time homebuyers. There are mortgage costs, the down payment, and closing costs to think about.
1. Affordability–By looking at your income and debt ratio, your sales professional can help you calculate how much you can afford each month in mortgage payments. But before determining your price range, you should also take into consideration other factors that will affect your monthly budget once you are a homeowner, such as property taxes, insurance, homeowner association dues, utilities and maintenance. And if your down payment is less than 20 percent of the cost of the home, you will be responsible for private mortgage insurance, more commonly referred to as PMI.
2. Mortgage payment–Fear of being rejected for a home loan is one of the main concerns for first-time homebuyers. To lessen the stress, you may want to get pre-approved for a loan before looking at prospective homes. This will not only help you feel more confident, it will also give you an advantage where there are multiple offers for a specific property. In addition, the fact that your loan has already been approved is of great value to the seller because it shortens the purchase process, and there is less of a chance that the buyer will back out of the sale. If you don’t have a specific mortgage lender in mind, ask your sales professional for a recommendation.
3. Down payment–The down payment amount varies depending on the value of the home you choose and your mortgage lender. Your real estate professional will be able to explain the different options available to you.
4. Tax credit–The first-time homebuyer tax credit, a key component of the American Recovery and Reinvestment Act of 2009, equates to as much as $8,000, or 10% of a principal residence’s purchase price, and is available to those who have not owned a principal residence in the past three years. You can use the tax credit to help purchase your home or help pay for its closing costs, or the credit can be used to remodel, refurnish and repair your property. See your tax advisor for details about the tax-credit program and how you may benefit.
5. Making offers–Don’t feel pressured into making an offer on the first home you see. This is a common mistake of many first-time homebuyers. Make sure you view different homes to get a feel for the marketplace. When you decide on a home to make a bid on, work with your real estate professional to get all of your questions answered before making an offer. But don’t wait too long to make an offer. The longer you wait, the greater the chance other prospective buyers may place offers, making it harder for you to negotiate a good deal.
Above all, remember there are no silly questions. Make sure you understand and are comfortable with every aspect of the transaction. Your real estate professional can be an invaluable asset in helping you make educated decisions so that your first home purchase is a rewarding experience.
Need a Buyer’s Agent? Questions? Email me or Call: 813 784 7744
The Worker, Homeownership, and Business Assistance Act of 2009 has established a tax credit of up to $6,500 for qualified move-up/repeat home buyers (existing home owners) purchasing a principal residence after November 6, 2009 and on or before April 30, 2010 (or purchased by June 30, 2010 with a binding sales contract signed by April 30, 2010). The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.
Who is eligible to claim the $6,500 tax credit?
Qualified move-up or repeat home buyers purchasing any kind of home are eligible to claim this credit. [click to continue…]
Home Owner Move-Up/Repeat Home Buyer Tax Credit FAQ
The Worker, Homeownership, and Business Assistance Act of 2009 has established a tax credit of up to $6,500 for qualified move-up/repeat home buyers (existing home owners) purchasing a principal residence after November 6, 2009 and on or before April 30, 2010 (or purchased by June 30, 2010 with a binding sales contract signed by April 30, 2010). Who is eligible to claim the $6,500 tax credit?
Qualified move-up or repeat home buyers purchasing any kind of home are eligible to claim this credit.
What is the definition of a move-up or repeat home buyer?
The law defines a tax credit qualified move-up home buyer (“long-time resident”) as a home owner who has owned and resided in a home for at least five consecutive years of the eight years prior to the purchase date. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. Repeat home buyers do not have to purchase a home that is more expensive than their previous home to qualify for the tax credit.
How is the amount of the tax credit determined?
The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $6,500. Purchases of homes priced above $800,000 are not eligible for the tax credit.
Are there any income limits for claiming the tax credit?
Yes. The income limit for single taxpayers is $125,000; the limit is $225,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) above those limits. The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $145,000 (single) or $245,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.
What is “modified adjusted gross income”?
Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine “adjusted gross income” or AGI. AGI is total income for a year minus certain deductions (known as “adjustments” or “above-the-line deductions”), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and the first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.To determine modified adjusted gross income (MAGI), add to AGI certain amounts of foreign-earned income. See IRS Form 5405 for more details.
If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
Possibly. It depends on your income. Partial credits of less than $6,500 are available for some taxpayers whose MAGI exceeds the phaseout limits.
Can you give me an example of how the partial tax credit is determined?
Just as an example, assume that a married couple has a modified adjusted gross income of $235,000. The applicable phaseout to qualify for the tax credit is $225,000, and the couple is $10,000 over this amount. Dividing $10,000 by the phaseout range of $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $6,500 by 0.5. The result is $3,250.Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $138,000. The buyer’s income exceeds $125,000 by $13,000. Dividing $13,000 by the phaseout range of $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $6,500 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,275.
Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances
See also: Other Important information about the tax credit for first time home buyers
The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.
If you are looking to use the first time home buyer tax credit, here is the information on changes and the extension.
I’ve also posted links to a spreadsheet that provides more details on changes to the tax credit. Please take the time to read over the Frequently Asked Questions document as well.
Please let me know if you are looking to purchase a home in the Tampa Bay Area and would like more information! realtyrae@yahoo.com
As part of its plan to stimulate the U.S. housing market and address the economic challenges facing our nation, Congress has passed new legislation that:
- Extends the First-Time Home Buyer Tax Credit of up to $8,000 to first-time home buyers until April 30, 2010.
- Expands the credit to grant a $6,500 credit to current home owners purchasing a new or existing home between the date the bill is signed by President Obama and April 30, 2010.
Here is more information about how the Extended Home Buyer Tax Credit can help prospective home buyers become part of the American dream.
Who Qualifies for the Extended Credit?
- First-time home buyers who purchase homes between the date the bill is signed by President Obama and April 30, 2010.
- Current home owners purchasing a home between the date the bill is signed by President Obama and April 30, 2010, who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight.
To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.
How is a Buyer’s Credit Amount Determined?
Each home buyer’s tax credit is determined by tow additional factors:
- The price of the home.
- The buyer’s income.
Price
Under the Extended Home Buyer Tax Credit, credit may only be awarded on homes purchased for $800,000 or less.
Buyer Income
Under the Extended Home Buyer Tax Credit which is effective on the date the bill is signed by President Obama single buyers with incomes up to $125,000 and married couples with incomes up to $225,000—may receive the maximum tax credit.
Can a Buyer Still Qualify If He/She Closes After April 30, 2010?
Under the Extended Home Buyer Tax Credit, as long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close.
Will the Tax Credit Need to Be Repaid?
No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during this three-year period, the full amount credit will be recouped on the sale.
Tax Credit Changes (PDF: 455K)
Home Buyer Tax Credit FAQ (PDF: 596K)
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Here’s an update on the home buyer tax credit which is hopefully going to be EXTENDED until June 2010. This will make a big impact on Tampa Real Estate, since many buyer’s have now run out of time to purchase a home by Dec. 1st. Glad to see they are working on extending it!
WASHINGTON — Senators agreed Wednesday to extend a popular tax credit for first-time home buyers and to offer a reduced credit to some repeat buyers. The tax credit provides up to $8,000 to first-time home buyers but is set to expire at the end of November. The Commerce Department said Wednesday that new home sales fell 3.6% in September, and some industry representatives blamed uncertainty about the tax credit.
Senators agreed to extend the existing $8,000 tax credit for first-time home buyers while offering a reduced credit of up to $6,500 to repeat buyers who have owned their current homes for at least five years, said Regan Lachapelle, a spokeswoman for Senate Majority Leader Harry Reid, D-Nev.
The tax credits would be available to home buyers who sign sales agreements by the end of April. They would have until the end of June to close on their new homes, according to a summary of the legislation being circulated among lawmakers.
Please contact me with any questions: 813 784 7744-Rae Catanese, Realtor
There is no official news that the tax credit will be extended past the Dec 1st deadline. Realtors are campaigning to ask Congress to extend the credit for one year.
As a Realtor, I can assure you that the $8,000 first-time homebuyer tax credit has definitely been a success. Homebuyer interest and housing sales increased almost as soon as the ink was dry on the tax credit legislation. Today’s lower prices and interest rates appeal to consumers, but it’s been the tax credit that has attracted people to open houses and to homeownership.
That progress could grind to a halt sooner than you think. Congress must act NOW to extend the credit through 2010. Otherwise, uncertainty will return and the market might again be frozen — possibly as soon as October.
A homebuyer is eligible for the tax credit only if the home is “purchased” before December 1, 2009. That means that buyers have to find a house, complete a contract, satisfy any contingencies, secure financing and go to closing by November 30. Accomplishing those tasks by November 30 will become more difficult with every passing day. In today’s market, it generally takes between 45 and 60 days to go from contract to closing.
The market has improved, but it has not yet fully corrected itself. The credit needs to be extended for an additional period of time and expanded in order to build upon the progress that’s been made. Uncertainty about the future of the credit will dampen consumer demand. The best way to assure continued housing activity is to extend and expand the credit and to do that NOW.
Questions? email me: realtyrae@yahoo.com
Rae Catanese
First Time Home Buyers Seminar @ IKEA
“$500 certificate for closing costs to anyone that attends”
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Hosted by: Transcontinential Lending Group
Price: FREE
Infact we are giving away $500 dollars for attending
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Here is what you will learn at this “FREE” presentation:
• Discover the seven secrets to hidden Tampa’s real estate values
• Learn how to find the right property to buy
• How to receive your $8,000 tax credit within a few weeks of closing
• The difference between renting and owning
• How to improve your credit score
• How to find the best mortgage program for your new home
• How to eliminate debt, maximize tax advantages and create wealth
Furthermore, please send this invite to friends, family, or anyone that would want to attend.
Seating is limited so please email Rae Catanese, Realtor, Prudential Tropical Realty
or
call 813-784 7744
$8000 tax credit ends Dec 1st. Time is running out!
Decision Time Draws Near for First Time Buyer’s Credit
While the economy continues to show signs of improvement and many housing markets are beginning to heat up, scores of would-be buyers are still waiting on the sidelines for further positive housing trends. But for first-time buyers, time is running short on the federal government’s $8,000 tax credit.
Though the official expiration date of the credit is December 1, in reality on-the-fence buyers will need to make a decision one way or the other fairly soon. The reason: in order to qualify for the credit, the home purchase must close by December 1st. Merely having loan approval, an accepted offer or a signed contract won’t be enough to qualify for the Housing and Economic Recovery Act.
Decision-Making Timeline – While each transaction is unique, closing a real estate deal is no speedy matter. On average, closing takes place 45 to 60 days after the date that the contract is signed. In order to meet the December 1st deadline, this would mean having a signing date in late September or early October. Those who consider the tax credit an important incentive but are still unsure about entering the market will need to make a decision one way or another before many more summer days pass.
To have any chance at finding a home and having an offer accepted by early October, buyers will want to wade into the home buying process right away. The immediate steps include making a final list of desired home attributes, scouting favorite neighborhoods and areas, starting the mortgage pre-approval process and beginning the home search process online.
Potential for Delays - Buying a home is a complicated process, and it is not unusual for purchases involving first-time buyers to take slightly longer than those involving experienced buyers. Some of the delays that first-time buyers may face over the coming months:
Competition with Other Buyers
While home may be selling at a lower rate than in years past, in many areas changes in inventory have created extremely competitive buying environments. Foreclosures or other homes with greatly lowered asking prices are particularly sought after, and in many cases investors are very active in the marketplace.
Disclosures & Contingencies
The seller is obligated to disclose any material facts about the property, including any property defects or any lawsuits regarding claim to ownership on the property. Disclosures can stall negotiations and delay the contract signing depending on their nature and severity. Contingencies (written clauses in the sales contract that give protection to both the buyer and the seller of a home) can also result in some delay in negotiation, particularly if the contingency requires the seller to make specific repairs.
Appraisal: The lender will arrange for appraisal of the property, which will include a thorough inspection of the home’s interior and exterior. The appraiser’s report will describe the physical characteristics of the property and comparable property values will be used to determine the value of the property. If the appraisal of the home’s value is lower than the agreed upon sales price, the buyer’s chance of loan approval can be in jeopardy. In addition, recently added rules for appraisers have been causing some delays based upon anecdotal evidence.
Loan Approval
While interest rates remain advantageous for buyers, lenders are being much more fastidious during the approval process. Obtaining pre-approval can help prevent many delays.
The Holiday Season
Buyers who submit an offer in mid-fall may likely run into another roadblock to a pre-December 1st closing date: the approaching holiday season. Closing a real estate sale requires the work and attention of a number of professionals; from real estate agents to attorneys to bankers. Like many Americans, it is not uncommon for individuals in these fields to use up vacation time in the last few weeks of November. Securing a closing date during Thanksgiving week may be something approaching miraculous.
Additional Delays for Short Sales and Foreclosures
Buyers who make an offer on a short sale property or bank-owned foreclosure may find that it takes a significantly longer time to receive a reply than expected. Overall, buying these types of properties is a longer process than buying homes listed on the market by individual owners.
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Looking for a Real Estate Agent who can help you with the home buying process? Give me a call! Rae Catanese, PA 813 784 7744
Friday the St. Petersburg Times stated that Governor Christ signed a bill to allow for the First Time Homebuyer Credit to be used as down payment and I am getting numerous emails regarding the details so I wanted to take a moment and update everyone.
FHA announced today that it will allow the First Time Homebuyer Tax Credit of 8,000 to be used for down payment ONLY ABOVE the FHA required down payment of 3.5% of sales price or the credit can be used towards closing costs. This means that the Buyer would still need a 3.5% down payment from their own funds or from a gift. Today’s announcement does NOT allow the Buyer to use the First Time Homebuyer Tax Credit as the 3.5%. This credit will assist our Buyers with payment for closing costs or the additional deposit which could help the Buyer to qualify for a lower loan amount. There are still details to work out in the mortgage industry before any lender can underwrite and close on this type of transaction.
At this time there is NO program that would allow for the First Time Homebuyer Tax Credit to be used for down payment on a conventional loan. We will keep you updated. Although the Governor signed a bill we do not have any specifics nor information on what State program will be used to work with the tax credit as down payment.
For most of our market area the maximum FHA loan amount is $292,500. If you want to take advantage of this option and have 3.5% saved or can get a gift from an approved source and want to write a contract, at this time my suggestion would be to write the contract for a closing of 90 days. We do not have all the procedures finalized by FHA inorder to close the loan.
Remember, a first time home buyer is someone who has not owned a home in 3 years, not just a first timer!
Tony Marks with Marks and Marks Mortgage just informed me of a great benefit for those looking to purchase a home this year!
"We all want to enable FHA consumers to access the tax credit funds when they close on their home loans so that the cash can be used as a down payment."
United States HUD Secretary, Shaun Donovan. May 12th, 2009. FHA will allow approved lenders and nonprofits, and state and local government agencies to issue short-term bridge loans buyers can use for down payments. Buyers would repay the loans after getting their tax refunds in 2010.
We will soon release details on the new program as it FHA/HUD announces further explanations.
