First Time Homebuyer Tax Credit Update & Changes

THE FIRST TIME HOME BUYER TAX CREDIT IS BEING EXTENDED!

Here is the brief version, see below for all of the details

There have been some slight revisions “Buyers who have owned their current homes at least five years would be eligible for tax credits of up to $6,500. First-time homebuyers — or anyone who hasn't owned a home in the last three years — would still get up to $8,000. To qualify, buyers in both groups have to sign a purchase agreement by April 30, 2010, and close by June 30. The credit is available for the purchase of principal homes costing $800,000 or less, meaning vacation homes are ineligible. The credit would be phased out for individuals with annual incomes above $125,000 and for joint filers with incomes above $225,000.”

Tax Credit for Homebuyers

First-Time Homebuyers (FTHBs): First-time homebuyers (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

Current Owners: The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

What are the New Deadlines?

In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

Tax Credit Versus Tax Deduction

It’s important to remember that the 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 a first-time homebuyer were to owe $8,000 in income taxes and would qualify for a tax credit of $8,000, she would owe nothing.

Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little income tax liability. For example, if a first-time homebuyer is eligible for a tax credit of $8,000 but is liable for $4,000 in income tax, she can still receive a check for the remaining $4,000!

Higher Income Caps

The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.


Maximum Purchase Price

Qualifying buyers may purchase a property with a maximum sale price of $800,000.

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Remember, the new tax credit program includes a number of details and qualifications. For more information or answers to specific questions, please call or email me today.

In addition, you may be able to benefit from additional housing related provisions, including the following:

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Tax Incentives to Spur Energy Savings and Green Jobs
This provision is designed to help promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation.

Landmark Energy Savings

This provision provides $5 Billion for energy efficient improvements for more than one million modest-income homes through weatherization. According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills.

Repairing Public Housing and Making Key Energy Efficiency Retrofits To HUD-Assisted Housing

This provision provides a total of $6.3 Billion for increasing energy efficiency in federally supported housing programs. Specifically, it establishes a new program to upgrade HUD-sponsored low-income housing (for elderly)

Grants and The Home Run Grant!

Condo changes coming, Hang on for the bumpy ride!

If you would like a copy of the full letter from hud on these changes, please email me or call me and I would be happy to get it to you.

What is the Mortgage Disclosure Improvement Act Policy (MDIA) and How does it effect you?

As many of you know there have been many recent new changes that have gone into effect as of July 30, 2009. One of those changes is the MDIA which is the Mortgage Disclosure Improvement Act Policy.

There are a few things that you have to remember for this new policy:

1) There are now waiting periods that the buyer has in order to review the documents of 3 days, each time they are disclosed or re-disclosed.

2) You cannot close a loan for a min. of 7 business days from the first set of documents signed

3) Nothing other than credit can be ordered until we have signed documents. If the documents were marked "mailed" we have to wait 3 business days and on the 4th day, we can order appraisal etc..

4) Anytime the Truth in Lending changes .125% higher or lower we must re-disclose and then wait 3 business days.

5) A business day is considered any day other than Sunday and Federal Holidays.

Basically, what this boils down to is that the fees disclosed to the borrower can not be .125% (eighth) higher or lower than what was originally disclosed. If it is an eighth higher or lower, than we will have to re-disclose those fees and wait 3 business days before closing.

So you ask, what are the fees that will be included in the TIL that can effect and trigger off the 3 days waiting period of re-disclosure? I have included the list of items below for your review.

Many Realtors have also asked what they can do to help this along and make it smoother for us to make sure our numbers are as accurate as possible. A few things that you can do to help your loan officer are:

1)encourage your buyer to get with the loan officer as soon as they can to sign the application.

2)ANYTIME you have an addendum done, please send it over as soon as you can. especially if there are any changes to the purchase price in any way. this will trigger a re-discloser.

3)Short Sales can be another one that can bugger up the closing and trigger off a
re-disclosure. We all know that we can wait months sometimes for the official acceptance from a bank. And usually when they finally approve the offer there are changes to the purchase price or the closing costs that they will pay. And, usually the bank wants to close ASAP. This is all fine and dandy but if we have to change any of the numbers that are included in the TIL, a new re-disclosure has to be signed and 3 business days starts.

4)If the lender gets the file done early and everyone wants to close early... A new re-disclosure will have to be sent out since less interest days will need to be collected and this effects the TIL. So, this can be signed and 3 business days later you can close early.(because the original one will include the amount of days going off of the REPC (purchase contract).

Do you see the pattern? There are a lot of things that can trigger re-disclosure.

I estimate that borrowers will sign re-disclosed documents at least 3 times before closing. (this is the minimum) The first time will be for the Pre-qual with a TBD address. The second will be once they go under contract and the address and purchase price etc. is established. And thirdly, we will send out a re-disclosure 5 days before closing just to be safe.

So 3 times min. they will re-sign docs (luckily it is only a few docs that need to be re-signed)

I am preparing my borrowers when I sit down with them of how many times they will get to sign things so it is not a surprise. The agents can assist us by letting the buyer know that this is normal and part of the new MDIA law that was effective July 30, 2009.

If we didnt have enough to think about, well there is the HVCC (appraisal) new law that we have to add on top of these deadlines too. That is another entry, another day.

Once again, please let me know if you would like further information and assistance.

Cindee Stone
801-381-3863
www.cindeestone.com

Here is that list that I promised you.

Fees that affect the APR on the Truth in Lending (TIL)

Administration Fee
Closing/Settlement Fee
Courier Fee (Overnight delivery, courier, messenger fees)
Discount Points
E-mail/E-Doc Fee
Final Inspection Fee
Flood Cert Fee, if Life of Loan
Loan Origination Fee
Mortgage Broker Fee
Mortgage Insurance Premium (MIP, PMI, VA Funding Fee)
Payoff Processing Fee
Prepaid Interest (until 1st of following month)
Processing Fee
Reconveyance TRACKING Fee
Tax Service Fee
Underwriting Fee
Wire Fee


Fees that DO NOT affect the APR on the TIL:
Appraisal or Appraisal Waiver Fee
Credit Report
Doc Prep Fee
Endorsements
Hazard/Flood Insurance Premiums
HOA Dues
Reconveyance Fees (Not Tracking Fee)
Recording Fees
Reserves (Taxes and Insurance)
Termite/Pest Inspection Fees
Title Insurance Premium

$100 HUD Loan Program

Economic Calendar for August 17-August 21 2009

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

Economic Calendar for the Week of August 17 - August 21

Date ET Economic Report For Estimate Actual Prior Impact
Mon. August 17 08:30 Empire State Index Aug 2.20 -0.55 Moderate
Tue. August 18 08:30 Building Permits Jul 576K 570K Moderate
Tue. August 18 08:30 Housing Starts Jul 598K 582K Moderate
Tue. August 18 08:30 Producer Price Index (PPI) Jul -0.2% 1.8% Moderate
Tue. August 18 08:30 Core Producer Price Index (PPI) Jul 0.1% 0.5% Moderate
Wed. August 19 10:30 Crude Inventories 8/14 NA 2.52M Moderate
Thu. August 20 08:30 Jobless Claims (Initial) 8/15 553K 558K Moderate
Thu. August 20 10:00 Index of Leading Econ Ind (LEI) Jul 0.6% 0.7% Low
Thu. August 20 10:00 Philadelphia Fed Index Aug -2.0 -7.5 HIGH
Fri. August 21 10:00 Existing Home Sales Jul 5.00M 4.80M Moderate

Volatility Accompanies Subdued Consumer Spending

Last Week in Review

There's no time like the present, so the famous saying goes. And that's certainly true when it comes to the good inflation news we saw last week. But, remember, things with inflation could change in the future as the economy continues to try to climb out of the recession...which could have a negative impact on Bonds and home loan rates. Here's what you need to know.

The Consumer Price Index (CPI) for July was unchanged, and, as you can see in the chart below, the year-over-year CPI fell 2.1%, the largest 12-month decline since 1950.

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Chart: Consumer Price Index


There was also good news on inflation last week from the Labor Department. Worker Productivity came in better than expected, rising at its fastest pace in 6 years, as companies cut costs and try to maximize output from their current workforce. This efficiency helps curb inflation, which is good for Bonds and home loan rates.

So how does this news tie in with the economy overall? For one thing, consider last week's Retail Sales Report, which showed that Retail Sales dropped in July by 0.1%, well below the 0.8% gain that was expected. This report negated the better than expected Wal-Mart second quarter earnings report and signals that consumers are still saving more than spending.

Although low consumer spending may seem like a bad thing, it is actually not such bad news in terms of inflation because of a little known (and rarely discussed) but critical facet of the economy called the velocity of money.

The velocity of money concept is simple. It goes like this: when you buy a pair of shoes, the owner of the shoe store takes that profit and buys a big screen TV, then the TV store owner buys something else, etc. The same dollar passes through the economy over and over again, triggering growth, jobs and, ultimately, inflation. The latest Retail Sales Report tells us that the velocity of money effect has been stagnant...that shoe store owner is not running out to buy a big screen TV with the profits. Once consumer spending begins to increase and the velocity of money increases, inflation is likely to follow. This will be something to look for as the economy continues to stabilize.

Something else to look for is the approaching end of the Fed's Bond purchase program. Home loan rates have stayed historically low since the program began in January. So, this is another variable that could push Bonds down and home loan rates up in the future.

Bonds and rates did manage to end last week better than where they began, but there was a great deal of volatility along the way. Give me a call if you want to look at your situation and see if now is the time for you to act.

LAST WEEK MARKED MORE TREASURY PURCHASES AND ANOTHER RATE AND POLICY DECISION FROM THE FED. CHECK OUT THIS WEEK'S MORTGAGE MARKET VIEW TO LEARN EVEN MORE ABOUT WHAT THE FED DOES.

Forecast for the Week

While there will be a break in the Fed Treasury auctions this week, there will still be plenty of news that could affect the markets. Tuesday will bring more inflation news in the form of the Producer Price Index (PPI), which provides information about wholesale level price changes. We'll also get a read on the housing market with Tuesday's Housing Starts and Building Permits Report as well as Friday's Existing Home Sales Report.

Thursday brings both the Philadelphia Fed Report, which is one of the most-watched manufacturing reports overall, as well as the Initial Jobless Claims Report. We have seen three weeks of readings under 600,000 claims after 22 consecutive weeks of readings over that level. However, it may be that those numbers have dropped as a result of Claims benefits expiring, rather than people finding employment.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. As you can see in the chart below, Bonds and home loan rates were helped last week by tame inflation readings and a strong demand for Treasuries. I will be watching closely to see what this week brings.

Chart: Fannie Mae 4.5% Mortgage Bond (Friday Aug 14, 2009)

The Mortgage Market View...

What the Fed Does
By Steve Sampson

The Fed provides banking services to America's banks and to Uncle Sam. That's the nitty-gritty part of its job. On the more glamorous side, it also develops and implements the nation's monetary policy--and in the process influences interest rates.

Mighty Money Supplier


The media often suggest that the Fed "sets" interest rates--as if the Fed chairman just says "let the rate be 4 percent" and the nation's banks make it so. But that's not how it works. Banks determine interest rates based on all sorts of factors, from recipients' credit histories, to the current money supply, to how low their competitors are willing to go.

The Fed has no control over many of these factors, but it can influence the money supply--in three ways. First, it loans money directly to banks, though only on a limited scale. Second, it occasionally changes how much money banks must keep on reserve. Third, and most important, the Fed uses what it calls "open market operations" to move money into and out of the banking system.

We're Banking on You

To get an idea how the Fed's open market operations work, imagine you're the manager of Knowledge News National Bank (it's OK, we trust you). Your job is to make as much money as you can for the bank, and one of the ways you do that is by making loans, on which the bank earns interest.

The Fed requires KNB (and all banks) to keep a certain percentage of customer deposits in reserve at all times. As KNB's manager, you use deposits to make loans. But you must also maintain the required reserves--and you never know how much money customers will deposit or withdraw each day. When you're short on reserves at the end of the day, you must find a way to cover the difference.

Luckily, you know where to go. Other bank managers have extra money on hand, and they want to loan it out to earn interest. It's a perfect match. All you have to do is agree on an interest rate. If lots of banks have money to loan and not many are shopping for it, supply and demand dictates that rates will go down. On the other hand, if lots of banks want to borrow money and not many have it, rates will go up.

Smooth Open Market Operator

Recognizing this, the Fed influences interest rates by buying and selling securities on the open market. If it wants rates to go up, it starts selling lots of securities. The buyers of those securities pay the Fed millions, even billions, of dollars. That money comes right out of the buyers' bank accounts, reducing the amount of reserves in the banking system. Money gets "tight," and the rate banks charge each other for overnight loans--the "federal funds rate"-goes up.

The same supply-and-demand rules apply in reverse. When the Fed buys securities, it pays millions, even billions, of dollars into the sellers' bank accounts, increasing the amount of reserves in the banking system. With more money out there to loan, the federal funds rate goes down.

Over time, changes in the federal funds rate lead to changes in short-term interest rates, followed by changes in long-term interest rates. When the Fed nudges those rates down, it's hoping for some good old-fashioned economic stimulation. When it nudges rates up, it's hoping to fight inflation.

This article was provided to you through collaboration with Every Learner.
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