Posts Tagged ‘first time home buyer’

There’s still time

April 26, 2010

It seems many potential buyers are not aware of the “fine print” details of the current tax credits for buying homes (either as a first time home buyer OR repeat buyer). Most believe that it is too late to take advantage of the tax credit since it comes to an end this Friday (end of April). That is definitely NOT the case!

Home buyers only need to be under contract by the end of April, then they have another 60 days to complete the purchase. That means buyers still have all week to find a home and get under contract!

Bottom line – if you haven’t given it much thought, have been sitting on the fence, or unsure of what to do, don’t worry, you do still have some time. Just get under contract by the April 30th because 60 days is MORE than enough time to work with a mortgage consultant to complete the purchase.

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Tax season Q and A

March 2, 2010

It is upon us… one of the two guarantees in life – death and taxes. For this post, we’ll focus solely on taxes as I provide some answers to common questions I receive this time of year.

Let me start this list by stating that I am not a licensed tax professional. For information on how to file tax returns, how to write off the items listed below, etc., please consult a licensed tax professional. If you would like a referral, I know some excellent CPAs, including this one.

  • Is mortgage interest tax deductible? – Yes! Home owners are allowed to deduct interest paid on their mortgage. The IRS requires the mortgage lender to provide the documentation (form 1098) showing the interest paid by the borrower. Bottom line – check your mail and then look at Schedule A on the federal return!
  • Is mortgage insurance* tax deductible? – Possibly. Under the current tax code, mortgage insurance is tax deductible for households with adjusted gross income less than $100,000 ($50,000 for single file). The benefits begin to faze out once crossing the $100,000 ($50,000) threshold, and is entirely gone once adjusted gross income surpases $110,000 ($55,000).
  • How do I file for the home buying tax credit? – Whether a first time OR repeat home buyer (see the IRS website for complete details), anyone claiming one of these tax credits must file a paper (non-electronic) return, include a copy of the HUD-1 settlement statement, and a completed Form 5405. Note that while the form 5405 says “first time home buyer”, it is the form for both tax credits. Filing a paper return may not be as fast as an e-file, but the payoff ($8,000 or $6,500) will definitely be worth it!

While this is by no means an exhaustive list, these are by far the most common questions I’ve received this year. Remember, I’ll be glad to answer any questions and help however I can, but I am not a licensed tax professional. See a tax professional to complete and file your 2009 return.

* – Mortgage insurance is required for borrowers who buy a home with less than a 20% down payment. For conventional loans, mortgage insurance is more commonly referred to as PMI or private mortgage insurance. For FHA loans, it is known as mortgage insurance premium.


it’s official

November 6, 2009

The new bill extending the first time home buyers tax credit passed through both the House and the Senate.  The last stop is President Obama’s desk.  Once signed, the law goes into affect.

Several aspects of the bill are the same, but there are some new twists this time around.

  • First time home buyer tax credit of $8,000 extends through April 30, 2010. Home must be under contract by that date and closed on or before June 30, 2010.
  • As before, first time home buyers are individuals who have never owned a home OR have not owned a home in 3+ years.
  • A “moving up” tax credit of $6,500 is available for current home owners buying a new home.  To qualify, home owners moving up must have lived in their current residence for 5+ years.
  • Income levels for a single purchaser are limited to $125,000 adjust gross income (up from $75,000) and $225,000 for couples (up from $150,000).
  • Home buyers with adjusted gross income above those levels can still qualify for the tax credit, but the amount of the credit diminishes as you move above the income limits.
  • In order to cut down on fraud, home buyers must be at least 18 years old and must submit a copy of the HUD-1 settlement statement from closing.

There you have it.  New life in the tax credit and let a new countdown begin… only 175 days left before you must have a home under contract to qualify for either of the tax credits.

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Seems that time is not running out

November 2, 2009

There has been a lot of talk coming out of Washington regarding extending the first time home buyer’s tax credit.  There are those that want it extended for another year.  Others that want it phased out gradually over the next year.  There are some who want it to end now.

After weeks of hearing about it, there are actual developments to report on a possible new bill that will extend the tax credit.  Note the use of the word “possible” because this is not a done deal.

  • the tax credit applies to first time home buyers (never owned a home OR not owned a home in 3+ years) and could also apply to buyers moving up to a larger primary residence (must have owned current home 5+ years)
  • the first time home buyer credit would remain at $8,000 and the trade up credit would be $6,500
  • home buyers (first home or new home) adjusted gross cannot exceed $125,000 ($225,000 for couples filing  jointly)
  • homes must be under a signed contract by the end of April and close no later than June 30, 2010
  • tax credit only applies to homes $800,000 or less

As of this posting, the bill has not been passed and no vote is scheduled.  What does that mean? If you want to make sure you get the $8,000 tax credit as a first time home buyer, start the process now and own your home before the end of November.

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November 30, 2009 – don’t be late!

July 28, 2009

The $8,000 tax credit for first time home buyers comes to an end on November 30, 2009.  Buyers looking to take advantage of it must have the purchase of their new home completed on November 30th… not in process, not loan approved, and not cleared to close… completed, done, finished… you get the idea.

I know what you are thinking, “it’s still July. There’s over 120 days until then.” Yes, it is indeed July. I can’t argue with you there.  That said, think about these two things.

  • If you give yourself roughly 30 days to find a home about the same amount of time to get a loan and close on the home, that is roughly 60 days.  Now all of the sudden, there are only about 60 days to spare.
  • Think about how many people are going to “jump off the fence” and want to buy a home to take advantage of the tax credit before the end of November?  Realtors will be pressed for time… Underwriting times will lengthen… Closing times with attorneys will be harder to schedule.

I am advising all of my first time home buyers to be ready to close (house found, under contract, and loan approved) by the end of October 2009. If there is a delay for any reason, you would still have 30 days to get it resolved.

It won’t be an easy process to find a home, get under contract, and buy the home if you start the process in late October or November 1st.  Don’t be like this guy, who is always running late!