MortgageSmart Blog

Who is Eligible

• The $8,000 tax credit is available for first-time home buyers only.
• The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase.
• All U.S. citizens who file taxes are eligible to participate in the program.

Payback Provisions

• The tax credit is a true credit. It does not have to be repaid.
• The only repayment requirement is if the home owner sold the home within three years after the purchase.

Income Limits

• Home buyers who file as single or head-of-household taxpayers can claim the full $8,000 credit if their modified adjusted gross income (MAGI) is less than $75,000.
• For married couples filing a joint return, the income limit doubles to $150,000.
• Single or head-of-household taxpayers who earn between $75,000 and $95,000 are eligible to receive a partial first-time home buyer tax credit.
• Married couples who earn between $150,000 and $170,000 are eligible to receive a partial first-time home buyer tax credit.
• The credit is not available for single taxpayers whose MAGI is greater than $95,000 and married couples with a MAGI that exceeds $170,000.

Effective Dates for the Tax Credit

• First-time home buyers would receive an $8,000 tax credit for the purchase of any home on or after January 1, 2009 and before December 1, 2009. To qualify, you must actually close on the sale of the home during this period.

Tax Credit is Refundable

• A refundable credit means that if you pay less than $8,000 in federal income taxes, then the government will write you a check for the difference.
• For example, if you owe $5,000 in federal income taxes, you would pay nothing to the IRS and receive a $3,000 payment from the government.
• If you are due to receive a $1,000 tax refund from the government, your refund would grow to $9,000 ($1,000 plus $8,000 from the home buyer tax credit).
• Buyers can take the tax credit on their 2008 or 2009 income tax return.

Types of Homes that Qualify for the Tax Credit

• All homes, whether single-family, townhomes or condominium apartments will qualify, provided that the home will be used as a principal residence and the buyer has not owned a principal residence in the prior three years. This also includes newly-constructed homes.

For more details on the tax credit, go to www.federalhousingtaxcredit.com

Posted by egmaldonado at 08:10 PM | Permalink | Comments (0) | TrackBacks (0)

Here is an overview of some benefits of the Economic Stimulus Plan for 2009 and the Homeowner Affordability and Stability Plan that may impact you.  Hopefully you will find this helpful as a sort of check-list of your own situation. 

Please keep in mind that many of the plan's details are still being worked out and will not be announced until March 4.

Tax Credit for Homebuyers

First-time homebuyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit.  It's important to remember that the $8,000 tax credit is just that... a tax credit. The benefit of a tax credit is that it's a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if you were to owe $8,000 in income taxes and would qualify for the $8,000 tax credit, you would owe nothing.  The tax credit is refundable, which means you can receive a check for the credit even if you have little income tax liability. For example, if you're liable for $4,000 in income tax, you can offset that $4,000 with half of the tax credit... and still receive a check for the remaining $4,000!

• The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000.
• The tax credit is applicable to any home that will be used as a principle residence.

Refinancing Initiative

A refinancing program for homeowners with less than 20% equity in their homes, or who owe more than their home is worth. 

• Open to homeowners who have conforming loans which are guaranteed by Fannie Mae and Freddie Mac, and who owe up to 5% more than their home is worth.
• Cannot include prepayment penalties or balloon payments.
• Details credit score requirements will be released at a future date.

Stability Initiative

A program to help to lower monthly payments for homeowners at risk of losing their home. It is intended to help homeowners who are struggling to afford their mortgage payments, but cannot sell their homes because prices have fallen significantly.  Homeowners who are current on their mortgages but are struggling can apply for this program.

Lenders will be “encouraged” to lower homeowners' payments to 31% of their income by:

• Lowering their interest rate to as low as 2%, or
• Extending the terms of the loan, or
• Lowering the principal owed by the borrower, with Treasury sharing in the costs.

Conforming Jumbo Loans

While details are sketchy - we will expect to get some clarity soon as to an additional tier of conforming loan amounts which had been first established in 2008. This tier of home loans are those greater than $417,000, and with a maximum that depends on the area, but is not greater than $729,750.  These loans would be eligible for rates that are slightly higher than conforming loan rates, but less expensive than the standard "jumbo" loan rates.

Posted by egmaldonado at 09:49 PM | Permalink | Comments (0) | TrackBacks (0)

President Obama's new real estate rescue plan offers two key possible benefits: More refinancing opportunities and greater chance for a loan modification.

 -- The eagerly anticipated foreclosure prevention program unveiled Wednesday by President Obama targets 9 million borrowers for help - are you one of them?

The $75 billion effort, dubbed the Homeowner Affordability and Stability Plan, boils down to two basic solutions:

First, the government is aiming to help more homeowners refinance to take advantage of new low interest rates.

Second, it provides incentives to lenders and servicers to restructure your mortgage to more affordable levels.

Official guidelines won't be unveiled until March 4, but here's how to know whether you'll likely be able to take advantage of either of these options.

Help for those seeking refinancing
This part of the program targets borrowers who have kept current on their mortgages. Many of the homeowners in this group have been unable to lower their housing costs through refinancings because of falling home prices.

Right now, if you're underwater on your mortgage, owing more than the home's market value, forget about qualifying for a refi. In fact, at least 20% equity in your home is now a must, unless you're using an FHA loan.

The new guidelines should help. Even homeowners with debt that exceeds home value by 5% could be eligible. And there will be no prepayment penalties. But your loan must be owned or backed by Fannie Mae or Freddie Mac.

The Administration estimates that this will enable up to 5 million homeowners to obtain lower interest rate mortgages.

Who's not eligible. Homeowners whose property values have dipped severely, putting them underwater by more than 5% are out of luck.

Those with "jumbo" mortgages also don't qualify - only those with "conforming' mortgages do. To be absolutely sure what kind of loan you have, you need to check with your servicer or lender after March 4. But in general, until the past year, loans above $417,000 were considered jumbo mortgages, and Fannie Mae and Freddie Mac were not allowed to buy and guarantee them.

All borrowers will have to prove they have sufficient income to be able to keep up their loan payments, though what would be sufficient proof wasn't yet clear.

Mortgage modification help for at-risk borrowers
Homeowners in default or at risk of default may qualify for loan modifications, which restructure the terms of loans.

Anyone with high combined mortgage debt compared to income or who is underwater may be eligible for a loan modification.

Borrowers with high levels of other debt, such as car loans and credit card debt exceeding 55% of their incomes, may still qualify for a modification but they'll be required to accept debt counseling in a HUD-certified program.

If you qualify, your servicer or lender will reduce your monthly mortgage payments to 31% of your gross income.

The payment would stay there for five years and then gradually revert back to the conforming loan rates in place at the time.

The reduction would come mostly through interest-rate reductions, though in some cases, principal reduction also would be an option.

Borrowers would also receive incentive bonuses of up to $1,000 a year for five years for making payments on time.

President Obama estimated 3 to 4 million homeowners could benefit from the new modification procedures.

Who's not eligible. Speculators, those who bought homes for investment purposes, do not qualify for help -- all homes must be owner/occupied.

The program will also not reward homebuyers who were irresponsible in their borrowing. All applicants will be closely examined by lenders and those who acted unscrupulously by, for example, misrepresenting their incomes in no-doc loan applications, would not qualify.

And, in order to protect taxpayers from excessive expenses, no loans will be modified unless it results in a net savings compared with the costs of foreclosing. Finally, rates would not be lowered below 2%.

That will disqualify many borrowers who simply can't afford any reasonable mortgage payment because of illness, for example, or job loss.

"[The plan] will not reward folks who bought homes they knew from the beginning they would never be able to afford," said Obama. "In short, this plan will not save every home."

No mortgages for amounts above comforming loan limits would be eligible.

By Les Christie, CNNMoney.com staff writer
Last Updated: February 19, 2009: 11:57 AM ET
NEW YORK (CNNMoney.com)First Published: February 18, 2009: 6:57 PM ET
Find mortgage rates in your area

Posted by egmaldonado at 02:35 AM | Permalink | Comments (0) | TrackBacks (0)

So let’s say you want to buy a home, but—like the rest of the country—you’d prefer a bargain when it comes to your mortgage payment. Enter the temporary rate buy-down, taking homeowners nationwide by storm. Some lenders are offering a temporary buy-down version of FHA mortgages. What’s a temporary buy-down? Basically, the program will provide clients who are purchasing a home with a reduced interest rate for up to the first two years that they’re in their home.

Choose from two FHA Rate Buy-Down Options

The FHA Rate Buy-down, sometimes referred to as an FHA Rate Break, is available on most FHA purchase mortgages. Clients can choose from a 2-1-0 buy-down and the new lender-paid 1-0 buy-down on a 30-year fixed mortgage. That’s a lot of jargon—so don’t worry, we’ll explain.

The 2-1-0 FHA Rate Buy-Down

The 2-1-0 program simply means your interest rate for the first year in your home will be 2% lower than you regular rate, then the next year it’ll be 1% lower, then on the third year your rate will return to the normal rate for the remainder of your mortgage term. (Hence the “2-1-0” reference.)

To clarify, here’s an example. If your loan amount is $200,000 at a 6.99% rate for a 30-year fixed rate FHA loan, with the 2-1-0 program your rate could be:
Year 1: 4.99%
Year 2: 5.99 Year 3: Adjusts to 6.99 for the remaining term of the loan

Who pays?
With the 2-1-0 temporary rate buy-down, the transaction is a lot like a down payment on a car. You (the borrower) will put money down at closing in order to get your payment reduced for the first two years. The amount you owe at closing is calculated by adding up the total difference you’ll save over two years between your reduced payment and your normal payment. That amount will be collected at closing and saved in an escrow account to be added to the monthly payment throughout the first two years of the loan.

The Exclusive 1-0 FHA Rate Buy-down

The 1-0 FHA Rate Break is an exclusive program offered as an incentive to buyers like you! Similar to the 2-1-0 buy-down option, the 1-0 FHA rate buy-down gives you an interest rate that is 1% lower than your normal rate for the first year of the loan, and then returns to the standard rate for the remaining term of the loan. But unlike other buy-downs, you don’t have to pay the difference at closing… because your lender pays it for you!

Who pays?
The best part about the 1-0 buy-down is that your lender pays for the buy-down, so homeowners receive even more value! Clients can now take advantage of the exclusive 1-0 option in which your mortgage company reduces your rate and payment for the first year of your loan! Call me if you’d like to find out more about the 1-0 FHA Rate Break.

Benefits of rate buy-downs

 • It’s perfect for anyone who wants the security of a fixed rate but wants to ease into their payments
 • Use the option to help ease into your rate and increase your cash flow for up to two years
 • Why buy down your own rate when your lender can buy it down for you? Take advantage of lender-paid buy-downs and get a lower rate at no extra cost!

Who are buy-downs for?

 • 1st-time Home Buyers : for extra cash every month to buy furniture and make home improvements, etc.
 • If you have sellers concessions that you want to use toward lowering your rate
 • If you have tiered income (income that increases with each year of service like teachers, or pilots)
 • If you need extra money every month to pay off debt

For more information on temporary rate buy-downs and FHA Rate Break call me at 818-378-8669, or email me at liz@mortgagesmart.biz

Posted by egmaldonado at 07:40 PM | Permalink | Comments (0) | TrackBacks (0)

Posted by egmaldonado at 11:12 PM | Permalink | Comments (0) | TrackBacks (0)