On October 1, 2010, the U. S. Congress voted to extend the heretofore temporary Fannie Mae and Freddie Mac conforming loan limits. The bill has been passed on to President Obama and he is expected to sign it extending the expiration date until October 1, 2011.

In the U.S. a conforming mortgage loan is one that conforms to Fannie Mae/Freddie Mac guidelines. Conforming loans offer the best possible interest rates and qualification requirements are not as strict as Jumbo loans. Conforming loans are favorable both in terms of available rates & qualification, because Fannie/Freddie guarantee they will buy all conforming loans from lending banks. This is paramount to all banks maintaining proper balance of liquidity vs. loans oustanding.

There used to be only 2 types of loans: conforming & jumbo. Now, since 2008, the mortgage market should be thought of as having 3 types of loans: conforming, high balance conforming (aka “confumbo”), and Jumbo. Most of the qualification criteria guidelines for the high balance conforming loans mirror those of true conforming, but carry a small rate premium of .25%, on most business days.

In order to help the housing market, the high balance, or “confumbo,” loan amount limits were put in place in 2008 to bring more homes within loan limits that conform to Fannie/Freddie guidelines. “Confumbo” limits are geographically specific based on median price range within a county, and have a nationwide cap of $729,750. In 2009 these limits were temporarily reduced to reflect updated/lower median price ranges, but were quickly, and temporarily, amended back up to previous limits as part of the stimulus package. These limits were returned higher temporarily and are exactly what Congress voted to extend again on October 1^st, 2010. This vote prevents the lowering of “confumbo” loan limits in each county, and rather than the nationwide cap dropping to $625,500, it will remain at $729,750. This will help the housing market.

Moreover, the true conforming loan limit is still set nationwide at $417,000. Loans above the “confumbo” limits are Jumbo.

How this might affect us as consumers can be illustrated here. Let’s consider a property owner who currently holds a $700,000, 30 year fixed mortgage at a rate of 7% (payment Principle and Interest = $4657 per month). It is now possible that he would be able to refinance his loan into a $700,000, 30 year fixed mortgage at a rate of 4.5% (payment $3547 per month), thus saving himself $1,110 per month. If these limits had not been extended, this homeowner would be subjected to higher interest rates & stricter qualification guidelines of the Jumbo loan market.

You can visit Ephraim here if you have more questions.

]]> http://www.tahoetruckeehomesales.com/congress-votes-to-extend-temporary-loan-limits-for-fannie-freddie/feed/ 0 http://www.tahoetruckeehomesales.com/more-homebuyer-tax-credits-courtesy-of-california/ http://www.tahoetruckeehomesales.com/more-homebuyer-tax-credits-courtesy-of-california/#comments Wed, 31 Mar 2010 19:39:22 +0000 Kappy Mann http://www.tahoetruckeehomesales.com/?p=1208 Read More »]]> California may be broke but our legislators  are working hard to give away tax credits to first time buyers and purchasers of never lived in homes.  This is being done in order to stimulate the housing and construction industries.   Governor Schwartzenegger  signed into effect a law on March 25, 2010 that will run alongside the federal government’s soon to expire (4-30-10) current $8,000 first time homebuyer and $6500 long time resident homebuyer tax credits.

Under the combined state and federal provisions, a first time buyer who enters into a purchase contract for a principal residence before May 1, 2010 and closes escrow between May 1, 2010 and June 30, 2010, inclusive are eligible for up to $18,000 in combined tax credits.  Home buyers who are not first time buyers but have lived in their residences for awhile may also take advantage of up to $16,500 combined tax credit if they purchase a home that has never been lived in.  Federal benefit is up to $6,500 and California is up to $10,000.

The timing is critical on both of these programs.  Also, California has a limit of $100 million in credits to be given to each program (first time buyer and new home buyer).

The FHA is talking about increasing the fee from the current level of 1.75 percent of the loan to 2.25 percent.  That would mean that based on a $300,000 mortgage, a borrower will now have to pony up  $6,750 instead of $5,250. This amount will still be able to be financed by adding it to the total loan.  These changes are expected to take effect sometime in the first half of this year (2010).

For the reader who is not aware, the FHA does not make loans, they insure loans against default, something that we have seen a lot of lately.   According to The Mortgage Banker’s Association, 18 percent of FHA borrowers are at least one payment behind or in foreclosure, compared with 14 percent of all loans.   FHA insured loans are traditionally granted to those borrowers who put a minimum of 3.5% downpayment of their own money.

So, Buyers, hurry up.  On top of this looming cloud, don’t forget the other reasons to purchase NOW.

1)  prices are lower than they have been in years,  here is a list of homes under $350,000 – there are condos too, call us for more info.
2)  The federal government has offered a tax credit of up to $8000 for the first time buyer. This credit is set to expire in April 2010;
3)  There are many down payment assistance plans in your neighborhood. If you live in Truckee check it out here at. If you live elsewhere, check with your city or county website or housing affordability department.  I’ll bet there is something similar there, everyone is trying to stimulate the economy.

Whatever you do, be sure to go talk to a mortgage broker and a Realtor about your chances of purchasing your new home this year.  We’re Realtors and We would love to help you!!

TAX CREDIT OVERVIEW

Who Gets What?

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.

What are the 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.

What is the Maximum Purchase Price?

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

What is a Tax Credit?

A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual’s primary residence.

How Much are First-Time Homebuyers (FTHB) Eligible to Receive?

An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.

Who is Eligible fort FTHB Tax Credit?

Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible.

This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.

As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.

How Much are Current Home Owners Eligible to Receive?

The tax credit program includes 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.

Can Homebuyers Claim the Tax Credit in Advance of Purchasing a Property?

No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.

Can a Taxpayer Claim a Credit if the Property is Purchased from a Seller with Seller Financing and the Seller Retains Title to the Property?

Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Some examples of this would include a land contract or a contract for deed.

According to the IRS, factors that would demonstrate the ownership of the property would include:

1. Right of possession,
2. Right to obtain legal title upon full payment of the purchase price,
3. Right to construct improvements,
4. Obligation to pay property taxes,
5. Risk of loss,
6. Responsibility to insure the property, and
7. Duty to maintain the property.

Are There Other Restrictions to Taking the FTHB Credit?

Yes. According to the IRS, if any of the following describe a homebuyer’s situation, a credit would not be due:

• They buy the home from a close relative. This includes a spouse, parent, grandparent, child or grandchild. (Please see the question below for details regarding purchases from “step-relatives.”)
• They do not use the home as your principal residence.
• They sell their home before the end of the year.
• They are a nonresident alien.
• They are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)
• Their home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
• They owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2005, through July 1, 2008.

Can Homebuyers Purchase a Home from a Step-Relative and Still be Eligible for the Credit?

Yes. As long as the person they buy the home from is not a direct blood relative, the purchase would be allowed.

If a Parent (Who Will Not Live In The Property) Cosigns for a Mortgage, Will Their Child Still be Eligible for the Credit?

Yes, provided that the child meets the other requirements for the tax credit.

Ephraim Schwartz

Partner, Mortgage Consultant CMPS

O’Dette Mortgage Group

415-931-2129 (San Francisco Office) * 1842 Union St., San Francisco, CA 94123

530-582-3345 (Tahoe Office) * 11209 Brockway Rd. #304, Truckee, CA 96161

415-297-8514 (cell)

866-304-8323 (fax)

www.omglenders.com

As I said, these articles were really directed towards agents, making the point that if you don’t know what is out there in the way of incentives — how will your clients? 

One of the articles was on how much home can a buyer afford to purchase.  The author made a great case for making sure that we did not advise potential buyerson the amount that they could afford based on some pat formula made up of monthly income and a standard list of expenses.  Each individual borrower is different.  His advice is to figure out what the potential borrower’s normal living expenses are (food, clothing, insurance, income taxes etc. etc.)  and THEN work around those.  This way a borrower/buyer will not be caught with a mortgage that forces him to change his lifestyle.  Brilliant, I say.  Thank you Ralph Roberts for reminding me that we are working for the buyer (client) not the bank.

Obama Administration Announces Financial Incentives and Uniform Process for Short Sales

 The NATIONAL ASSOCIATION OF REALTORS® (NAR) today announced that the Obama Administration has added new incentives and uniform procedures for short sales under its new Foreclosure Alternatives Program (FAP), part of  the administration’s Making Home Affordable plan.

 Loan servicers may consider short sales or deeds-in-lieu of foreclosure for borrowers who do not qualify to have their loans modified on a permanent basis under the Making Home Affordable Loan Modification Program.   

• Borrowers/homeowners qualify under the FAP if they meet minimum eligibility requirements for the Home Affordable Modification program, but don’t qualify for a modification or do not successfully complete the three-month trial period. Before proceeding with a foreclosure, servicers must determine if a short sale is appropriate.

• Incentives include: $1,000 for servicers for successful completion of a short sale or deed-in-lieu of foreclosure; $1,500 for borrowers/homeowners to help with relocation expenses; and up to $1,000 toward the cost of paying junior lien holders to release their liens (one dollar from the government for every $2 paid by the investors to the second lien holders).

• The program will include streamlined and standardized documents, including a Short Sale Agreement and an Offer Acceptance Letter. The goal is to minimize complexity and increase use of the short sale option.

• Servicers will independently establish both property value and minimum acceptable net return, in accordance with investor requirements. The price may be determined based on an appraisal or one or more broker price opinions (BPOs), issued no more than 120 days before the date of the short sale agreement.

• In the Short Sale Agreement, servicers must give borrowers/homeowners at least 90 days to market and sell the property, or up to one year, depending on market conditions. Property must be listed with a licensed real estate professional with experience in the neighborhood. No foreclosure may take place during the marketing period (at least 90 days) specified in the Short Sale Agreement.

• The Short Sale Agreement must specify the reasonable and customary real estate commissions and costs that may be deducted from the sales price. The servicer must agree not to negotiate a lower commission after an offer has been received.

• Servicers may not charge fees to borrowers/homeowners for participating in the FAP.

• The program is in effect through 2012.

• Servicers have the option to require the borrower/homeowner to agree to deed the property to the servicer in exchange for a release from the debt if the property does not sell within the time allowed in the Short Sale Agreement (plus any extensions).

 C.A.R. LAUNCHES MORTGAGE PROTECTION PROGRAM

To help provide first-time home buyers with peace of mind when purchasing a home, the C.A.R. Housing Affordability Fund (C.A.R.H.A.F.) is offering a new mortgage protection program to first-time home buyers.

Through the Housing Affordability Fund’s Mortgage Protection Program, first-time home buyers who lose their jobs due to layoffs may be eligible to receive up to $1,500 per month for up to six months to help make their mortgage payments. A qualified co-buyer also can participate in the program, for a monthly benefit of $750 per month for up to six months. Program benefits also include coverage for accidental disability and a $10,000 death benefit. C.A.R.’s Housing Affordability Fund is dedicating $1 million toward its Mortgage Protection Program this year, and estimates that up to 3,000 families will benefit from the program throughout 2009.

To qualify for the Mortgage Protection Program, applicants must:
. Be a first-time home buyer – someone who has not owned a home in the last three years
. Open escrow April 2, 2009, or later, and close on or before Dec. 31, 2009
. Use a California REALTOR® in the transaction
. Purchase the property in California
. Be a W-2 employee (cannot be self-employed or military personnel)

First-time home buyers must request an application for the H.A.F. Mortgage Protection Program from their REALTOR®. For applications and other information on this exciting new program, go to www.car.org/aboutus/hafmainpage/ or contact Monica Rodriguez at (213) 739-8380 or monicar@car.org.

U.S. renters turn buyers as homes become affordable

by Julie Haviv

| Reprints | Single Page

NEW YORK (Reuters) – After six years of renting in San Francisco, Kate Wilusz jumped at the chance to swap her tiny apartment for a roomy four-bedroom Victorian home. But she is paying a mortgage instead of rent — and coming out even.

“I could not be more thrilled,” said Wilusz, a financial planner who recently closed on the dream house with her husband, Charley.    click here for the full story

 

By Julie Haviv

Tax Credit for New Home Purchase

Last updated: 02/27/2009

We will update this information frequently. Please check this page often.

This tax credit is available for qualified buyers who on or after March 1, 2009, and before March 1, 2010, purchase a qualified principal residence that has never been occupied. The buyer must reside in the new home for a minimum of two years immediately following the purchase date.

We will accept applications for allocation of credit by fax only (916.845.9754), starting March 1, 2009; however, we will not send notifications of credit allocation until we have developed procedures. Once we begin processing allocation applications, credits will be allocated on a first-come, first-served basis. We will update this page as soon as we begin mailing credit allocation letters.

Tax credit amounts

California allocated $100,000,000 for this tax credit. Buyers must apply for credit allocation from us. Applications will be reviewed and credit allocations will be made on a first-come, first-served basis. Once $100,000,000 has been allocated, the tax credit will no longer be available. Please check this page for updates on the allocated and remaining credits available.

Note: The remaining credit amount displayed above only reflects allocations processed as of the latest update. This amount does not include applications that have been received, but not yet processed.

California allows qualified new home buyers a total tax credit amount equal to either five percent of the purchase price or $10,000, whichever is less. Taxpayers must apply the total tax credit in equal amounts over three successive taxable years (maximum of $3,333 per year) beginning with the taxable year (2009 or 2010) in which the new home is purchased.

How to apply

• Within one week (seven calendar days) after the close of escrow:
  • The seller must complete Part I of Form 3528-A, Application for New Home Credit, certifying that the home has never been occupied, and provide a copy to the buyer or escrow person.
  • The buyer will complete Parts II & III of Form 3528-A.
  • The escrow person on behalf of the seller and buyer will fax the completed Form 3528-A to FTB at 916.845.9754, and provide a copy to the buyer.
• Fax is the only delivery method that will be accepted and considered for credit allocation by FTB, as the date and time stamp on the fax will determine the order in which credits are allocated.
• Fax only one completed application per residence with all qualified buyers listed. Do not include information on nonqualified buyers. An incomplete application may delay or prevent credit allocation.
• Do not fax the application to FTB before escrow closes.
• Do not fax the application to FTB more than once. We will process the applications in the order received as quickly as possible.
• Escrow companies should only send one application per fax transmission.
• The buyer keeps a copy of the completed Form 3528-A for their records.

Application processing

• The buyer will receive notification of credit allocation from us.
• An allocation of credit will not be issued if:
  • The home has been previously occupied.
  • The application is not received within one week after the close of escrow.
  • The application is received after the total credits available ($100,000,000) have been allocated.

Requirements of the credit

• The home must be a “qualified principal residence” as defined under California Revenue and Taxation Code Section 17059(b)(1). The home must:
  • Be a single-family residence, whether detached or attached.
  • Never have been previously occupied.
  • Be occupied by the taxpayer for a minimum of two years.
  • Be eligible for the property tax homeowner’s exemption under California Revenue and Taxation Code Section 218.
• For over three successive taxable years, the total credit allocated among owners that occupy the home must not exceed $10,000. (Multiple qualified buyers that occupy the home will be allocated credit based on the amount paid and their percentage of ownership.)
• Any credit that reduced tax on a tax return must be repaid if the buyer does not occupy the home for at least two years immediately following the purchase date.
• FTB may request documentation to ensure buyers have complied with the requirements of the credit.

Claiming the credit

• The buyer must receive an allocation of credit from us to claim the credit. The credit allocation letter will state the amount they can claim listed by tax year.
• The buyer should refer to Publication 3528 (available by 12/2009) for instructions on claiming the credit.
• The buyer must claim the credit on an original timely filed return, including returns filed on an extension.
• Special rules apply to married/RDP (Registered Domestic Partners) taxpayers filing separately, in which case each spouse is entitled to one-half of the credit, even if their ownership percentages are not equal. For two or more taxpayers who are not married/RDP, the credit amount will have already been allocated to each taxpayer occupying the residence on their respective credit allocation letter.
• If the available credit exceeds the current year net tax, the unused credit may not be carried over to the following year.
• The credit is not refundable.

Definitions

Purchase date:
The date escrow closes.

Qualified buyer:
A taxpayer who purchases a single-family residence, whether detached or attached, that has never been occupied, that is purchased to be the principal residence of the taxpayer for a minimum of two years, and that is eligible for the homeowner’s exemption under California Revenue and Taxation Code Section 218.

Qualified Principal Residence/New Home:
A qualified principal residence means a single-family residence, whether detached or attached, that has never been occupied and is purchased to be the principal residence of the taxpayer for a minimum of two years and is eligible for the property tax homeowner’s exemption.

Contact us

Phone:

• 888.792.4900 (press 5)
• 916.845.4900 (not toll-free)

Email: wscsgen@ftb.ca.gov
This is not a secure email address. Please do not send confidential information