A Home-Buyer Tax Credit Worthy of the Name

Should you give the $7,500 home-buyer tax credit a second look?

Now that Congress might be on the verge of transforming it into a true tax credit -- one that never has to be paid back -- you might want to do so.
On Jan. 15, the House Democratic leadership outlined its $825 billion economic stimulus package, loaded with $275 billion in tax cuts and $550 billion in new spending on health care, education, alternative energy and infrastructure improvements. Tucked away in the tax section was a significant improvement to last July's congressional effort to stimulate home sales. That program offered a credit of up to $7,500 to purchasers who had never bought a house or hadn't owned one during the previous three years. To qualify, taxpayers would need to close on a house between April 8, 2008, and this coming July 1. But relatively few people were attracted to the plan because unlike almost all other federal tax credits, this one had to be repaid in full over a 15-year period. In effect, the $7,500 was more like an interest-free installment loan from the government than a straightforward dollar-for-dollar reduction on buyers' tax bills. Although final details on a revised credit are still subject to negotiations between the House and Senate -- and to passage of the economic stimulus package itself -- there's a good chance that buyers who sought the credit in 2008, and new purchasers in 2009, will be relieved of the repayment requirement. According to industry projections, removing the repayment rule could lead to an additional 202,000 purchases this year.
The National Association of Realtors is pushing for the July 1 deadline to be extended to Dec. 31, opening the door to even more sales. Meanwhile, the IRS has come out with two recent advisories on the credit, plus a new Form 5405 for taxpayers interested in claiming the $7,500 benefit, either for 2008 or 2009. You can download a copy of the form at http://www.irs.gov in the publications and forms section.

Based on the latest IRS guidance, here's what you need to know if you're thinking about buying a house this year -- taking advantage not only of low prices and record low mortgage rates, but a temporary tax credit that might or might not eventually have to be repaid. * The $7,500 is available to singles, married couples filing jointly and unmarried co-purchasers, provided they meet the non-ownership test for the previous three years. Married couples filing separately can claim up to $3,750 each. Unmarried individuals can allocate the credit on their filings according to their respective ownership shares or capital investments in the house. * Only principal residences -- or in the IRS's words, "the one you live in most of the time" -- are eligible.

No second homes, investment properties or houses outside the United States pass the test. However, the definition of "home" extends far beyond conventional houses sited on lots. It "can be a . . . houseboat, housetrailer, cooperative apartment, condominium or other type of residence," according to Form 5405. For example, if you buy a sailboat or powerboat with full living facilities, tie it up at a marina, and make it your "main home," you should be eligible to claim the credit, though you might want to run all the specifics of your situation by your accountant or tax adviser. * Even if it's your first home purchase, you are not eligible if your adjusted gross income is above $95,000 (single filer) or $170,000 (married joint filers). Married couples with incomes between $150,000 and $170,000 are eligible for reduced credits, based on a phase-out schedule. Single filers with incomes between $75,000 and $95,000 also are subject to reduced credit limits. D.C. home buyers who are eligible for the city's first-time buyer credit are barred from use of the federal tax credit. Taxpayers who use tax-exempt mortgage bonds issued by state or local governments to finance home purchases also are ineligible. * You can't claim the $7,500 credit if you buy your house from a "related person," meaning a spouse, parents, grandparents, children or a corporation or partnership in which you own more than 50 percent of the stock or capital interests. If you pass all of these tests, and get the purchase done by whatever deadline Congress decides as part of the final stimulus package, you should be able to take $7,500 off your federal tax bottom line, and possibly not worry about ever paying it back.
By Kenneth R. Harney Saturday, January 24, 2009;

Cell Phone Numbers Go Public Next Month!

All cell phone numbers are being released to telemarketing companies and you will start to receive sale calls. YOU WILL BE CHARGED FOR THESE CALLS.
To prevent this, call the following number from you cell phone 888-382-1222.
It is the National DO NOT CALL list.
It will only take a minute of your time. It blocks your number for five (5) years.
You must call from the number you wish to have blocked.

Help others by passing this along.

This will also work for your home phone.

Tips for Preparing Buyers in 2009

I came across a blog article on Tips from a broker on getting yourself ready to purchase a home, and thought it was good enough to share. Make a new year's resolution to take the steps to purchase a home.



Link to artice directly: http://blog.al.com/regb/2009/01/steps_to_preparing_to_purchase.html



Steps to preparing to purchase a new home in the new year
Posted by asarchib January 11, 2009 17:06PM

We continue our series on the local real estate market with a look at getting ready to purchase a new home in the New Year.

Physical fitness is at the top of many New Year's resolution lists. But with local real estate in a buyers' market mode, some are including home-buying fitness on their tally of ways to improve their lives in 2009.
"There's a real quick list," Scott McFadden, co-owner of MortgageBanc, said of getting your financial house in order - in order to buy a new home.

• Obtain pre-qualification for a mortgage.Clean up and/or correct your credit report.Have adequate cash reserves before applying for a mortgage.
• Step number one, McFadden said, is getting pre-qualified for a mortgage loan. That's when an applicant provides verbal information about their assets, income and debt to a mortgage professional to determine the price - including monthly payments - for which he or she likely will qualify.A critical step the mortgage lender takes is running a check on the applicant's credit rating.
• Credit ratings are based on how much debt an applicant has relative to how much he or she is approved for, how long he or she has had credit and how promptly they pay back creditors. They profoundly affect how much and at what interest rate an applicant can borrow money. But sometimes they reflect errors."You would really be surprised how often there are mistakes or errors that need to be corrected," said McFadden, who has been in business since 1995 and has run thousands of credit reports.
• Even minor mistakes can drastically drop a score. "To make sure everything is correct is paramount."
• So is having enough cash on hand.McFadden said many people believe alleviating debt before applying for a mortgage is their top task, but that's not always the case."My suggestion is to not do anything until you consult your mortgage professional," he said. "Right now cash is king. Sometimes it makes more sense for people to have available more cash than less debt, because being able to put down more money gives them more options than paying down certain items."
• A rule of thumb (on an FHA loan) is have a 3.5-percent down payment and two months' mortgage payments in reserve.
• With a conventional loan, applicants need at least 5-percent down with two months' payments in reserve.If the borrower has enough money in reserve - or after he or she has secured a mortgage - they then should begin paying down debt.
• And there is a proven way to do so in the shortest amount of time."Pay off the lowest balance with the highest monthly payment and move forward accordingly," McFadden said. "If you've got a $500 balance and your payment is $250, pay that off first, then take that payment amount and pay off the next-lowest balance with the next-highest payment. Because it's not necessarily the loan that has the highest interest rate that you knock out first, and you don't have to change how your budget is spent."
• And if a purchaser has their financial house in order, now is a great time to buy, said a local Realtor."The number-one reason is without question - and this is always going to remain true - (buying a home) is the American dream in good times and bad times," said RealtySouth's Ed Coe. "Next to having a good marriage and a healthy family."And next ­- rates are lower than they've ever been since I've been in the business."The fixed interest rate Thursday on a 30-year loan was about 4.75 percent, McFadden said.
• Along with contacting a mortgage professional, Coe encouraged calling a Realtor."People that really want to buy a house if they'll call professionals they'll get some answers," he said. "If you're in a desert and you see somebody riding a camel and the camel's moving I'd ask them 'Where is the water?' The people who are out there doing business have the answers."

Have questions, need advice, ready to start looking in the market? Contact me!