Details of $7,500 Tax Credit/Refund

Now of course there is some fine print with the $7,500 tax credit that you may be eligible for and here is some fine print you must be aware of—

· There are income limits for this tax credit that begin at $75,000 for individual taxpayers and $150,000 for married filing jointly taxpayers.

· You can’t buy a home from a family member.

· You can’t obtain a mortgage from CHFA, a down payment assistance loan type, and receive the tax credit.

· You must own the home at the end of that taxable year. Believe it or not this has come up with one of my clients already.

· If you are married filing jointly both spouses must not have owned a home in the last 3 years.

· If you are married filing separately, then one spouse could take a $3750 tax credit.

· It 2 or more unmarried people buy their first home together it appears and I assume that each person would get a portion of the $7,500 tax credit. For example, 3 buyers each would get a $2,500 tax credit. This is not set in stone however.

· Please consult your tax advisor for more details and realize some of these details may not be worked out yet.

One other great benefit of this bill is even if you buy a home in the first 6 months of 2009 you can receive the credit and refund on your 2008 tax return.

This bill comes at a great time in Denver for first time home buyers as it appears that our market has already hit bottom and in some parts of town home prices never did drop (Wash Park, Platte Park, Stapleton, parts of Highlands Ranch, parts of SW Jefferson County).

So take advantage of this great offer by June 30, 2009.

What Only 1 First Time Home Buyer Knew

Since July 30th when President Bush signed into law The Housing and Economic Recovery Act of 2008 I have been amazed how few first time home buyers know about a great provision in this bill that applies to them. How few? Only one first time home buyer, out of dozens that I have talked to, in the last 3 months have known about this benefit and he was a financial advisor.

One of the main provisions of this bill is a $7,500 tax CREDIT for eligible first time home buyers and a tax CREDIT is far better than a tax deduction. This credit will directly reduce your IRS tax bill by up to $7,500. In instance, if your income tax owed to the IRS this year is $9,000 and you paid to the IRS through employer withholdings $9,000, you would be eligible for a $7,500 tax refund!

If your total tax bill is only $6,000 and you paid $6,000 already to the IRS through your withholdings on your paycheck, you will receive a refund of $7,500 which is more than you paid in!

Would you like Uncle Sam to give you $7,500 next year when you file your tax returns? If so, here is what you have to do—

· First, be a first time home buyer defined as someone who has not owned a home in the last 3 years.
· Buy a home with a value of $75,000 or more. If you buy a cheaper home your credit will be a little smaller.
· Must, buy a home between April 9, 2008 and June 30, 2009.

Please realize that this is money that does have to be repaid to the IRS over 15 years beginning in tax year 2010 in increments of $502 a year. Thus, it is essentially an interest free loan, which is the best kind of loan. You get all the benefit now (Instant Gratification) that you repay over time.

Now, how can you use this money to buy your first home? Really the only way possible is to obtain a loan from a family member for the amount of your down payment, normally 3% of the sales price. Then, next year repay them when you get your tax refund. Another idea is adjust your W-4 Withholdings with your employer so that more money stays in your pocket. This would be a great idea if you intend to buy your first home in 2009.

Are Mortgages Still Available?

Ever since the Treasury Department took over Fannie Mae and Freddie Mac in early September millions of people are wondering “are mortgages still available?” The resounding answer is YES! If the following statements describe you and your situation, mortgages are still available for you—

· You have been employed for the last 6 months.
· Your earnings from work are by salary or hourly pay.

· If you receive commissions, you have received them for at least 2 years.

· If you are self-employed you have been so for at least 2 years and you can prove your net income with your tax returns.

· You can “round up” at least $1,000 (legally of course).

· Your credit score is 580 or higher (if your credit score is below 580, I can help you improve it).

So, you may be thinking that I must be describing only awful sub-prime loans are still available. Far from it! Sub-prime loans are basically non-existent anymore.

The loans I am talking about are FHA loans, which are insured by the government. FHA loans are great loans for both first time buyers and repeat home buyers. What are the benefits of a FHA loan?

· Fixed rate loan terms of 15-30 years providing you with peace of mind.

· Great interest rates—if your credit score is less than 740 almost always a FHA loan will give you a lower rate than a conventional loan from Fannie or Freddie.

· Only 3% down through end of 2008. In January this increases to 3.5%.

· Only need a 580 credit score to be approved.

· Much cheaper mortgage insurance than on a conventional loan.

· Down payment can be gifted to you or lent to you by a family member.

· A co-borrower such as a parent who will not live in the home is allowed.

· Down payment assistance loans are allowed.

· No hefty pre-payment penalties.

FHA loans have come back “en vogue” in the last 15 months with many mortgage professionals. For me they have always been “en vogue” as I HATED doing sub-prime loans for two reasons. First, they are bad loans for my clients. Second, don’t even get me started about how these sub-prime lenders treated me and my clients before closing. I would blow a gasket! Ugh!

This is why I have only closed 6 sub-prime loans in nearly 11 years and hundreds of FHA loans in that time. It’s all about doing what is best for my clients and my own sanity.

My Favorite Clients to Help

In my 10+ years in the mortgage business, my favorite clients to help and serve have been first time home buyers. Why? There are three reasons. First, is the excitment of helping someone or a couple fulfill the dream of owning a home. It is very rewarding! At a recent closing a young lady broke out in tears of joy when the closing was complete.

Second, I have found first time home buyers are "hungry" for information and very willing to learn. I adore this trait in first time home buyers as I love to educate and inform people. This spring I was helping a young couple less than one year out of college and their parents were concerned that they were "biting off more than they could chew" as they were buying a $230k home in south Aurora. They were both from Kansas where home prices are much cheaper. I reassured them that they were not as their total debt to income ratio was only 32% which is below the 36% standard that many financial advisors recommend.

Third, first time home buyers are very appreciative of my services. I must admit I enjoy their compliments. I use my 10+ years of experience to make the process as easy and smooth as possible. I have had many first time home buyers comment at or near closing, "this wasn't so tough" after the horror stories they have heard from friends and family. Next, I strongly encourage my clients to ask any and all questions as there is no such thing as a stupid question with me. This summer one lady finally asked me about a week from closing, "Lonnie, are you sick and tired of all my questions yet?" I told her, "No, and keep asking".