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Mortgage and Tax Credit News

Hello KCM Community!

It is our pleasure to introduce to you veteran mortgage planner (and today’s guest blogger) Dean Hartman.  Yesterday we looked at interest rates and why buying now might be a good financial decision. Today, Dean will take us a few steps further and look at other reasons to move forward on the purchase of a new home.

Dean is a very special guest, so please help welcome him to our community by leaving him comments or questions in the comment section below.

-The KCM Crew

Mortgage and Tax Credit News

by Dean Hartman

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As we look at the homestretch of 2009 and gaze to the future of 2010, it seems to be a perfect time to pause and look at the current lending landscape and make some informed predictions for the next couple of months.

Lending Guidelines continue to tighten.

We all understand that mortgages were too easy to get a few years back, and that was a major contributor to home values climbing too quickly and the resultant bursting of the bubble; however, it is apparent that today many loans that “make sense” are not being closed.

Gone are the “Stated Income Loans” where proof of income was not required (unless you have 30% or more for a down payment), replaced by required verification of income direct from the IRS itself.  Gone is the judgment of credit-worthiness of a borrower by an underwriter, replaced by automated underwriting systems.  For the client who “fits in the box”, mortgage money is plentiful (and cheap!), but that box is shrinking.

Is FHA about to make radical changes?

The Secretary of HUD spoke in front of Congress this week and made two major points.  First, they are intent in making sure that lenders adhere to guidelines.  Seven lenders have been eliminated from the program and 270 have been sanctioned for their practices.  Additionally, in order to protect the fiscal integrity of the insurance fund (FHA is at its core an insurance company), increases in the insurance premiums are being discussed, as well as, significant changes in the underwriting guidelines.  Will the allowable “Seller’s Concession” be reduced from 6% to 3%?  Will the required down payment be upped from 3.5% to 5%?  If those two changes happen, buyers will need 4.5% more cash into the transaction.  On a $400,000 Purchase, that’s $18,000 more!  Will that drive home prices down further???

Five more months to get in Contract for the Federal Tax Credit for FIRST TIME HOME BUYERS.

Beyond the basics (the definition of a First Time Home Buyer and the fact that you must stay in the home for three years), here are a few of the lesser known talking points:

  • There is an increase in Income Limits (and resulting Phase Out Limits) from $75,000 to $125,000 for single filers and from $150,000 to $225,000 for married filers.  That means many more people qualify!

Tax Credit Income Limits

  • That if you close in 2010 before the June 30th deadline, you can get the credit in your 2009 Returns.  You can even file an extension and not even file until AFTER you have closed, or amend returns that had been filed.  Any of these actions will get you your tax credit cash in a matter of weeks, not in 2011!
  • That if there are multiple home buyers and/or co-signers that may or may not be First Timers, there are options on how the credit can be allocated.  As always, discuss these items with your accountant.

There is a new REPEAT HOME BUYER TAX CREDIT of up to $6,500.

Are you aware that you need NOT purchase a more expensive home to qualify?  Just be in contract by April 30, 2010 and close by June 30.  Many of your questions about either Tax Credit can be answered at http://www.federalhousingtaxcredit.com/

When you combine these likely changes and deadlines with a probably rising interest rate market, I can’t imagine a better time to ACT NOW before rates go up, the need for cash to close goes up, and the tax credit expiration looms.


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  1. Social comments and analytics for this post…

    This post was mentioned on Twitter by Kimmaxwell71: RT @SteveHarney Mortgage and Tax Credit News http://bit.ly/6aGWQu

  2. […] we have talked about real estate as an investment, financing costs (interest rates) and gave you reasons to buy now instead of waiting. It is important that we realize that this does not apply solely to the first time […]

  3. […] This post was mentioned on Twitter by Eric Bryn, Steve Harney. Steve Harney said: Mortgage and Tax Credit News: Hello KCM Community! It is our pleasure to introduce to you veteran mortgage plan.. http://bit.ly/6MzwZM […]

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