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FIRST-TIME HOME BUYER TAX CREDIT

BREAKING NEWS!!!!

Tax Credit Can Be Used for Down Payment

Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, on Tuesday 05/12/2009 said that the Federal Housing Administration is going to permit its lenders to allow home buyers to use the $8,000 tax credit as a down payment.

Previously, most buyers wouldn't receive the funds until after they filed their tax return, and that deterred some people from using the credit. The NATIONAL ASSOCIATION OF REALTORS® has been calling for the change.

“We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a down payment,” Donovan says. His remarks came in an address to several thousand REALTORS® gathered Tuesday morning at "The Real Estate Summit: Advancing the U.S. Economy," at the 2009 REALTORS® Midyear Legislative Meetings & Trade Expo in Washington, D.C.

He says FHA’s approved lenders will be permitted to “monetize” the tax credit through short-term bridge loans. This will allow eligible home buyers to access the funds immediately at the closing table.

February 23, 2009, The last few days have been filled with questions about who can benefit from the new economic stimulus package.  Here's the scoop:  IRC § 36 increases the 1st time home buyer credit from $7,500 to $8,000 and eliminates the repayment requirement for homes purchased in 2009. 

Single Buyers:  $75,000 max annual income, reduced credit for incomes $75,000 - $90,000.

Married Buyers:  $150,000 max annual income, reduced credit for incomes $150,000 to $170,000.

Please remember:  1st time home buyer is defined as no present ownership (includes either spouse, if married), in a US principle residence for 3 years prior to the purchase.  Subject property must close by 12/31/2009 and remain purchaser's principle residence for 3 years from the date of purchase.  Taxpayer can claim the credit on 2009 1040 or amended 2008 1040.

Will this help?  Economic recovery started?  Please remember, the media needs to eat too!  Try to separate manipulative news targeted at listener ratings from informative facts.  There will always be an opportunity to stand with those who's cup is half full.  And in DC, it's more the half full.  Sellers have gotten the message:  Price well and help with closing or take a back seat.  Banks have gotten the message:  write down or add another property to the default list.  Banks know the average cost to foreclose is about $60K.  Buyers are also on-board and know that the 1st stop on the home shopping list is the mtg co.  A clean Offer with few or no contingencies can translate into a 3%-7% reduction in the ratified selling price - that's after you position your offer using the basic pre-approval and market (comp) analysis.  Refinancing?  Ask about the 15 day pricing.

New economic stimulus perk:  For 2009 and 2010, the cost of computers and related technology qualifies as higher education expenses for purposes of the rules governing distributions from a section 529 qualified tuition plan, as long as the beneficiary of the plan is enrolled at an eligible educational institution. Internet access charges are also covered, as well as software, so long as it’s not for sports, games or hobbies (unless the software is predominantly educational in nature).  Section 529 plans may buy computers:  Consult you tax advisor for details.

New Program: $100 down for law enforcement officers, firefighters, teachers & emergency medical technicians (EMT's).   These public service professionals can purchase a HUD-acquired property at a 50% discount in HUD designated, revitalized areas.  HUD provides a forgivable 2nd mortgage to help supplement the discounted sales price.  Minimum cash investment: $100.  Buyer (including his/her spouse) cannot have owned a home for 1 year prior to submitting the bid on the HUD home.  Buyer must occupy for 3 years.  These properties are often good candidates for the 203k renovation program.  Adding a 50% discount to the benefit of increasing the home's value through renovating can equate to a handsome profit.  While a successful purchase should not necessarily be defined in dollars gained through equity, one should be willing set an example in caring about the neighborhood and in making a positive difference in the community.

American Recovery and Reinvestment Act of 2009

Here are details of the President's initiatives to
get us out of this economic crises!

Homebuyer Tax Credit – The bill provides for a $8,000 tax credit that would be available to first-time home buyers for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009.  The credit does not require repayment.  Most of the mechanics of the credit will be the same as under the 2008 rules:  the credit will be claimed on a tax return to reduce the purchaser's income tax liability.  If any credit amount remains unused, then the unused amount will be refunded as a check to the purchaser.
Chart Highlighting the Major Modifications to the First-Time Homebuyer Tax Credit> (PDF: 309K)
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FHA, Fannie Mae and Freddie Mac Loan Limits -The bill reinstates last year's 2008 loan limits for FHA, Freddie Mac, and Fannie Mae loans.  These limits were equal to the greater of 125% of the 2008 local area median home price or $271,050 for FHA and $417,000 for Fannie and Freddie, with an overall maximum cap of  $729,750.  For the few areas where the 2009 limits were higher, the higher limits will apply.  In addition, the bill includes language providing the HUD Secretary with the discretion, if warranted, to increase the loan limit for any “sub-area”, i.e.an area smaller than a county. The Secretary's discretion is again limited by the $729,750 cap. These 2009 limits will expire December 31, 2009.

The inclusion of these loan limit provisions in the final bill is a victory for homeowners, buyers and Realtors.  While these new limits were included in version of the original stimulus bill approved by the House, the bill first approved by the Senate did not.  NAR's Call for Action to both the House and the Senate prior to the final vote advocated strongly for the provisions which were then included in the final bill approved by both Chambers. 

Estimated 2009 FHA, Fannie Mae and Freddie Mac Loan Limits> (PDF: 1.3M)
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Neighborhood Stabilization – Division A, Title XII of the bill provides $2,000,000,000 in additional funding for the Neighborhood Stabilization Program (NSP).  The NSP was created by the Housing and Economic Recovery Act of 2089 (Public Law 110–289) to provide grants through the Community Development Block Grant program (CDBG) to states and localities to address the problems that can be created when whole neighborhoods are decimated by foreclosures. The funds can be used to purchase, manage, repair and resell foreclosed and abandoned properties. In addition, the funds can also be used by states and localities to establish financing methods for the purchase and redevelopment of foreclosed properties.  After purchase the homes must be used to assist individuals and families with incomes at or below 120% of area median income. Twenty-five percent of funds must be used for households with incomes at or below 50% of area median income.  By leveraging their expertise in partnership with others from both the public and private sector, Realtors® in many communities have been making important contributions to their local communities’ neighborhood stabilization programs.
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Commercial Real Estate - Commercial real estate is impacted primarily through those provisions of the bill focused on green building and energy efficiency as well as business tax incentives. H.R. 1 provides significant funds for state energy programs, which could be used to support commerical property owners' investment in energy efficiency upgrades while commercial property owners seeking to invest in alternative energy systems for onsite power generation would benefit from the Department of Energy Renewable Energy Loan Guarantees Program.  Of particular benefit to small businesses would be certain provisions of the bill that provide tax relief in the area of bonus depreciation and capital expenditures, as well as the 5-Year carryback of net operating losses for small businesses.
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Rural Housing Service – The bill provides an additional $500 million to existing USDA Rural Housing programs.  The RHS provides both a guaranteed loan program and a direct housing loan program for those meeting the program’s eligibility criteria. The direct loan program will receive $270 million while $230 million will be allocated for unsubsidized guaranteed loans. It has been reported that this level of funding would provide for an additional 192,000 homeowners.
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Low Income Housing Grants - Allow states to trade in a portion of their 2009 low-income housing tax credits for Treasury grants to finance the construction or acquisition and rehabilitation of low-income housing, including those with or without tax credit allocations.
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Tax-Exempt Housing Bonds - Tax-exempt interest earned on specified state and local bonds issued during 2009 and 2010 will not be subject to the Alternative Minimum Tax (AMT).  In addition, financial institutions will have greater capacity to purchase tax-exempt state and local bonds.
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Energy Efficient Housing Tax Credits & Grants - To promote green jobs and energy independence, ARRA invests significantly in efforts to make homes and buildings more energy efficient.  The bill provides state and local governments with $6 billion in energy efficiency and conservation grants for energy audits, retrofits and financial incentives.  Through 2010, homeowners will be able to claim a 30% tax credit (up from 10%) for purchases of new furnaces, windows and insulation.  Another $5 billion will be available to modernize the nation’s electricity grid and install smart meters on homes that help to save consumers money.  There is also $5 billion for weatherization assistance for low income households and $2 billion for federally assisted housing (section 8) efficiency efforts. 
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Transportation Investments - The bill provides $46.7 billion to states and localities for capital investment for surface transportation projects including highways, bridges, transit, and rail projects.  NAR policy supports increased spending on the types of transportation infrastructure addressed in the bill with the exception of Amtrak and high-speed inter-city rail where NAR has no policy.  These investments will tend to moderate traffic congestion and support a variety of transportation alternatives which will improve the quality of life of American communities and bolster the value of real estate.
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Broadband Deployment - The bill creates $7.2 billion in grants to promote broadband deployment in unserved and underserved areas and for mapping the availability of broadband service in the U.S. Any entity is eligible to apply for a grant including municipalities, public/private partnerships and private companies as long as they comply with the grant conditions. The grants are subject to “network neutrality” requirements to ensure that broadband networks be free of restrictions on content, sites, or platforms, on the kinds of equipment that may be attached, and on the modes of communication allowed. 

The bill also charges the FCC is with developing a national broadband plan that shall seek to ensure that all Americans have access to broadband capability and shall establish benchmarks for meeting that goal.