- The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.
- The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009
- The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May 2009.
- The current loan-to-value (LTV) ratio must be greater than 80%.
- The borrower must be current on the mortgage at the time of the refinance, with a good payment history in the past 12 months.
Home Buyers Who Missed 8,000 Dollar Tax Credit Coming Out Ahead
By Jim Weiker
RISMEDIA, June 29, 2010—(MCT)—Home shoppers who missed the April 30 deadline for a housing tax credit might have the last laugh. For a variety of reasons, they could end up saving more than the $8,000 they could have received from the tax refund.
In some neighborhoods and price ranges, sellers are dropping their prices because buyers are harder to find now that the credit has expired. Builders and real estate companies began offering promotions after the tax credit ended that, in many cases, are worth more than the credit.
Interest rates have dropped enough since the credit deadline that, over the life of a loan, a homeowner could easily save more than the value of the credit. “I think some folks possibly could have benefited from waiting until after the tax credit,” said Joe Jackson, a real estate agent with Keller Williams Capital Partners. “It would depend on the price point they were buying in and the market they were looking in.”
Home sales leapt in March and April during the waning weeks of the credit, especially for homes priced at less than $200,000, which appealed to first-time home buyers. Since the credit expired, home contracts and building permits have tapered off, leaving sellers with fewer buyers and, in some cases, little choice but to cut their price.
According to real estate website Trulia.com, which tracks price reductions, 30% of central Ohio homes for sale on May 1 had reduced their asking price—more than in April or March. Buyers hope they can take advantage.
Karen Kosnikowski learned days after the tax credit ended that she would have to leave her Victorian Village apartment June 30 because her landlord wanted the place. Her initial frustration at missing the tax credit changed when she started seeing price declines. “I would say five or 10 times a day, something comes in, and half of those are price drops. Sometimes, they are down several thousand,” Kosnikowski said. “So places I’ve seen before are starting to drop, or others are coming into my price range.”
A home in the Clintonville neighborhood she has toured twice, for example, dropped in May from $185,000 to $167,900. Another Clintonville home on her radar dropped from $179,900 to $167,000 after the credit expired, while a Downtown condo she visited went from $189,900 to $169,500.
“None of these went anywhere during the tax credit,” said her agent, Terry Penrod of Real Living HER. “So Karen can just wait to see how low they go.”
Kathy Shiflet, an agent in the Dublin-Hilliard office of Coldwell Banker King Thompson, has found the same thing. She represents a buyer looking for a two-story home in Hilliard. After the tax credit expired, one of two homes under consideration dropped from $156,900 to $149,900 while the other dropped from $154,900 to $149,900.
The tax credit might have something to do with it, but Shiflet thinks the season is a greater factor. “There have been reductions in prices, but traditionally, prices start to come down in June anyway,” she said, “because everyone wants to move in time for school.”
Those shopping for new homes are finding a different kind of bargain as some builders roll out incentives to keep traffic moving.
After the credit expired, Dominion Homes and Fischer Homes launched promotions for free finished basements and/or other upgrades. Either deal would be worth well above the $8,000 credit. “We expected a drop in traffic after the tax credit expired, and we saw that a little bit,” said Jon Jasper, who manages the Columbus division of Fischer Homes. “We anticipated that, and we had strategized to offer some incentives to bring people back. That promotion we’re offering with the free basement is huge in this market.”
Other builders are offering free appliances, trade-in programs, rebates and “sweat-equity” discounts that allow a homeowner to drop the price by painting, landscaping or otherwise helping to finish their home.
Mike Marshall, an agent with Buyer’s Resource Realty Services, said he represented one buyer who deliberately passed on the tax credit to wait for a better deal on a new home. “They found a new build that was so much better in price with the discounts that they gave up the tax credit,” Marshall said.
Real estate companies are also getting into the act. To compensate for the vanishing tax credit, Coldwell Banker launched its Buyer Bonus Program that awards up to $8,000 back to buyers from participating sellers.
Finally, interest rates have dropped nearly half a point since the end of April, saving buyers thousands of dollars over the life of a loan. Buyers of a $180,000 home who borrowed $173,700 in mid-April at an interest rate of 5.125% would have paid $377,442 over the next 30 years—$15,000 more than they would pay if they borrowed last week at an interest rate of 4.75%.
“I know it’s not money in your pocket right away,” said Barb Wilson, the head of mortgage lending at Newark-based Park National Bank, “but the value of the interest rate today is really better than the tax credit.”
Some real estate experts see the central Ohio housing market now settling into a normal rhythm in the absence of the stimulus, which so far has cost taxpayers $18.7 billion.
“At the end of the day, we don’t believe the tax stimulus will put us any further ahead than we would have been otherwise,” said Jerry White, executive vice president with Coldwell Banker King Thompson.
Senate OKs new tax credit closing deadline
CLARIFICATION: While the Senate has amended HR 4213, the "American Jobs and Closing Tax Loopholes Act of 2010," to extend the closing deadline for the tax credit, it has not held a vote on the amended bill itself. Senate Democrats have reportedly trimmed $60 billion in spending from the bill in hopes of passing it this week. The House and Senate must resolve differences between previous versions of the bill passed in both chambers before it can become law.
The Senate has amended a bill to give homebuyers who were under contract on a home purchase by April 30 an additional three months to close the deal and claim the federal homebuyer tax credit.
Extending the deadline for closing from June 30 to Sept. 30 would allow lenders more time to clear a backlog of 180,000 homebuyers nationwide, said amendment sponsor Sen. Harry Reid, D-Nev.
The amendment to HR 4213, the "American Jobs and Closing Tax Loopholes Act of 2010" -- which primarily extends unemployment insurance benefits -- was approved in a 60-37 vote Wednesday. The vote on the amendment was mostly along party lines, with only four Republicans in favor and one Democrat opposed. The Senate has not yet voted on the amended bill itself.
"While I am disappointed that more Republicans did not support this common-sense measure to strengthen the economy and reduce the deficit, I am committed to ensuring that more Nevadans and Americans can become homeowners and that this amendment becomes law," Reid said in a statement.
The House passed an earlier version of the bill in December, which the Senate amended and approved in March. The House and Senate must resolve differences between versions of the bill before it becomes law.
The National Association of Realtors supports the amendment, saying Realtors have reported that as many as one-third of qualified applicants have been told by lenders that their loans will not close before June 30 because of the sheer volume of loan applications in the pipeline.
The amendment does not extend the deadline for homebuyers to qualify for the tax credit, NAR said in urging lawmakers to approve it, but simply extends the deadline for closing transactions already in contract.
"Since these applications were already in the pipeline and figured into the program's cost, the extension of the closing deadline should not incur any further government costs," NAR President Vicki Cox Golder said in a statement.
There has been some speculation that some homebuyers will attempt to submit fraudulent claims for the tax credit by backdating documents showing they were under contract by April 30, and that extending the deadline for closing would expose the government to more fraudulent claims.
California Passes Large Tax Credit for Homebuyers!!
California has initiated its own homebuyer tax credit. The credit is for 5% of the purchase price, with a maximum credit of $10,000. That’s a dollar-for-dollar reduction against income tax payments that would otherwise be due. Homebuyers must claim the tax credit in equal installments over three consecutive years, beginning with the year of purchase. Purchasers are required to live in the home as their primary residence for two years or forfeit the credit.
To be eligible, first-time homebuyers can purchase a new or existing home. Repeat or move-up homebuyers are eligible for the credit only if they buy a new home.
Buyers of existing homes must close escrow between May 1 and December 31, 2010. The credit is available to buyers of new homes who sign purchase agreements between May 1 and December 31, and close escrow by August 1, 2011.
Separate from the California tax credit is the federal tax credit. The federal homebuyer tax credit will expire soon. If you want to take advantage of this tax credit, you must act fast. The tax credit is available to buyers who sign purchase agreements on a new or existing primary residence home between December 1, 2009, and April 30, 2010. Buyers have until June 30 to close the mortgage loan on their new home.
If you have any questions about how the California or federal tax credit may benefit you, please call us or your lender today or visit http://www.ftb.ca.gov/individuals/New_Home_Credit.shtml
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HAFA Rules, Guidelines and Qualifications
Do you know the rules and guidelines for the HAFA short sale program? Do you qualify? Unfortunately, not everyone does. To qualify, you must own a home that was purchased before the year 2009. In addition, you must be living in the home as your primary residence, and must have been previously considered for other foreclosure prevention options including loan modification.
Borrowers must also meet HAMP eligibility, but can be either delinquent or current on their mortgage payments. Even if current, the borrower must be able to demonstrate financial hardship.
Here are a few guideline questions to ask yourself to determine your eligibility:
1) Is your home your primary residence? In other words, if you have multiple residences - do you spend most of your time in this residence?
2) Is the amount you owe on your first mortgage equal to or less than $729,750? (Do not include the total of your second mortgage.)
3) Are you having ongoing financial trouble that makes it difficult for you to make your mortgage payments each month?
4) Did you get your current mortgage before January 1, 2009?
5) Is your monthly payment on your first mortgage (including principal, interest, taxes, insurance and homeowner's association dues, etc) more than 31% of your current gross income?
If your answers to all five of these questions are "yes", then it is very likely that you qualify to receive assistance through the HAFA program. If you answered "no" to one or two questions, you may still qualify. To be sure, contact your lender's local office.
For More information, please visist:
http://www.whatishafa.org/hafa_qualifications.html
The above content is for informational purposes only and should not be used as a substitute for consultation with a tax advisor.