Fannie Mae is changing its former Homepath program. The new program, dubbed, "First Look" appears as if it will be very beneficial to First time and owner occupant buyers. There is going to be a 15 day period where only owner occupants will have a chance to get in on the ground floor.
This is actually "great news" for first time buyers and owner occupant buyers. This program is somewhat similar to the HUD program which gives owner occupants a 10 day running start.
In my experience, many owner occupants have been "outbid" or even underbid by investors with Cash. The listing Banks preferred to take the cash instead of waiting out the the possibilites of the owner occupant getting a mortgage.
With this new Fannie Mae First Look program coming up in 2010, if you are going to occupy the home yourself and even if you need a mortgage to do so, you will now have the first shot!
Here is the link to the Media announcement from Fannie Mae to learn more about this program.
Keep tuned to this Rhode Island Real Estate blog to find out more, as it happens!
Saturday, December 05, 2009
Monday, November 30, 2009
Thursday, November 12, 2009
Rhode Island is in serious trouble. Should you buy now?
Rhode Island Real Estate is in a state of flux right now. Yes, we had a flurry going for awhile with the tax credit for first time buyers. Amazingly homes were going so fast during the last couple of months, that it almost seemed as if prices would start going up. And they did, but very minutely.
Now, according to CNN News Rhode Island again is in the top ten. It seems we are always in the top ten of something! This time, it's our financial problems. I clearly remember the reason our governor ran for this position. He ran a business and knew how to manage money!! You can go here to see the CNN article
Here is the chart for "states in fiscal peril"
So, what does this mean for the housing market here in Rhode Island? Well one could say that yes, it is still a good time to buy. We now have an extension on the tax credit and an additional incentive for people who may have wanted to list their homes and make a move, but were afraid to because of the volatile market. Now if you wanted to list you would have a better chance of a buyer actually considering your home and when you moved, you would also be able to collect a few thousand (above and beyond). This is nothing to sneeze at and will be ending April, 2010.
However, who is to say that homes will not continue to decline? We are all hearing those rumors about the foreclosures stuck in the "pipeline". In my business, I do a lot of traveling throughout Rhode Island and I see many, many unoccupied homes. Are they future foreclosures? And why are they not on the market now? What is holding up the banks in these instances?
Also, anyone who has had themisfortune opportunity to be on either side of a short sale, already knows how futile they can be. Yes, a buyer can get a really good bargain. (Better than a foreclosure because the plumbing is usually still in the house). However, that buyer needs to excersise extreme patience because it can be months and months before they even hear back from the bank. Why?
I would venture to say that if you now want to list your home, it would be a pretty good time to do so.
I am a Realtor. I write about Rhode Island. Rhode Island has some beautiful coastline and picturesque country. I live in Rhode Island and grew up here. But, we are in financial trouble. This is a good time for someone from out of state to come in and snap up a waterfront or bayside home. Our beaches are now sporting some great home deals! These homes were once coveted and now are on the market. Rhode Island's troubles are someone elses' gains, as is the case with just about everything.
Here's hoping Rhode Island gets back on its feet and shows its stuff. We have a lot of great places here. All we need is jobs!
Now, according to CNN News Rhode Island again is in the top ten. It seems we are always in the top ten of something! This time, it's our financial problems. I clearly remember the reason our governor ran for this position. He ran a business and knew how to manage money!! You can go here to see the CNN article
So, what does this mean for the housing market here in Rhode Island? Well one could say that yes, it is still a good time to buy. We now have an extension on the tax credit and an additional incentive for people who may have wanted to list their homes and make a move, but were afraid to because of the volatile market. Now if you wanted to list you would have a better chance of a buyer actually considering your home and when you moved, you would also be able to collect a few thousand (above and beyond). This is nothing to sneeze at and will be ending April, 2010.
However, who is to say that homes will not continue to decline? We are all hearing those rumors about the foreclosures stuck in the "pipeline". In my business, I do a lot of traveling throughout Rhode Island and I see many, many unoccupied homes. Are they future foreclosures? And why are they not on the market now? What is holding up the banks in these instances?
Also, anyone who has had the
I would venture to say that if you now want to list your home, it would be a pretty good time to do so.
I am a Realtor. I write about Rhode Island. Rhode Island has some beautiful coastline and picturesque country. I live in Rhode Island and grew up here. But, we are in financial trouble. This is a good time for someone from out of state to come in and snap up a waterfront or bayside home. Our beaches are now sporting some great home deals! These homes were once coveted and now are on the market. Rhode Island's troubles are someone elses' gains, as is the case with just about everything.
Here's hoping Rhode Island gets back on its feet and shows its stuff. We have a lot of great places here. All we need is jobs!
Thursday, October 29, 2009
TAX CREDIT MAY BE EXTENDED!!!!! President to sign Friday
Its looking pretty good that the tax credit will be extended until April 2010. Just waiting on the Senate and House votes...this one will also include a tax credit to people who have already owned a home for 5 years.
--------------------
WASHINGTON - Key Senate leaders agreed yesterday to extend a popular tax credit for
first-time home buyers and to offer a reduced credit to some buyers who already own
houses.
The tax credit provides up to $8,000 to first-time home buyers, but it is set to
expire at the end of November.
Senators agreed to extend the existing tax credit for first-time home buyers while
offering a reduced credit of up to $6,500 to repeat buyers who have owned their
current homes for at least five years, said Regan Lachapelle, a spokeswoman for
Senate majority leader Harry Reid, a Democrat from Nevada.
The home buyers’ credit would be available to individuals earning up to $125,000, or
$250,000 for couples, up from $75,000 for individuals and $150,000 for couples under
the current law, Lachapelle said.
The agreement was announced after the Commerce Department said sales of new homes
unexpectedly fell in September.
Lawmakers want to keep home sales from slipping as the economy struggles to recover
from the worst drop in prices since the Great Depression. Economists say a recovery
in housing is a key to rebuilding the confidence and finances of American consumers,
whose spending makes up 70 percent of the world’s largest economy.
The tax credits would be available to home buyers who sign sales agreements by the
end of April. They would have until the end of June to close on their new homes,
said a congressional aide, who spoke on condition of anonymity because he was not
authorized to discuss the deal.
Senator Christopher Dodd, a Democrat from Connecticut, has been negotiating for
several weeks with Senator Johnny Isakson, a Republican of Georgia, to craft the
extended tax credit. Senate minority leader Mitch McConnell, a Kentucky Republican,
agreed that most lawmakers support the homebuyer measures.
Senators were still negotiating the expansion of a separate tax credit that lets
money-losing businesses get refunds for taxes paid in previous years, providing them
with a source of cash.
Senators in both political parties were hoping to add both tax provisions to a bill
that would give people running out of unemployment insurance benefits up to 20 more
weeks of federal aid. The Senate could vote on the overall bill as early as today,
but lawmakers were still haggling over several unrelated amendments last night.
If the Senate passes the bill, it would go to the House, which passed a similar bill
extending unemployment benefits last month. House leaders have hinted they would
support extending the tax credit for home buyers.
Lawmakers didn’t release a cost estimate for extending the tax credit, though
similar proposals were projected to cost about $10 billion.
Industry representatives said uncertainty about the tax credit is hurting new home
sales. September’s decline was the first since March.
It takes 45 days to 60 days to close on a house, making it unlikely a sale made
today would be consummated by the end of November, said Lucien Salvant, spokesman
for the National Association of Realtors. “Buyers right now have an incentive to
hold off, not knowing whether the credit will be extended,’’ Salvant said.
Purchases of new homes dropped 3.6 percent last month to a 402,000 annual pace,
which was lower than the most pessimistic economist’s forecast, according to
Commerce Department figures.
Material from Bloomberg News was used in this report.
© Copyright 2009 Globe Newspaper Company.
--------------------
WASHINGTON - Key Senate leaders agreed yesterday to extend a popular tax credit for
first-time home buyers and to offer a reduced credit to some buyers who already own
houses.
The tax credit provides up to $8,000 to first-time home buyers, but it is set to
expire at the end of November.
Senators agreed to extend the existing tax credit for first-time home buyers while
offering a reduced credit of up to $6,500 to repeat buyers who have owned their
current homes for at least five years, said Regan Lachapelle, a spokeswoman for
Senate majority leader Harry Reid, a Democrat from Nevada.
The home buyers’ credit would be available to individuals earning up to $125,000, or
$250,000 for couples, up from $75,000 for individuals and $150,000 for couples under
the current law, Lachapelle said.
The agreement was announced after the Commerce Department said sales of new homes
unexpectedly fell in September.
Lawmakers want to keep home sales from slipping as the economy struggles to recover
from the worst drop in prices since the Great Depression. Economists say a recovery
in housing is a key to rebuilding the confidence and finances of American consumers,
whose spending makes up 70 percent of the world’s largest economy.
The tax credits would be available to home buyers who sign sales agreements by the
end of April. They would have until the end of June to close on their new homes,
said a congressional aide, who spoke on condition of anonymity because he was not
authorized to discuss the deal.
Senator Christopher Dodd, a Democrat from Connecticut, has been negotiating for
several weeks with Senator Johnny Isakson, a Republican of Georgia, to craft the
extended tax credit. Senate minority leader Mitch McConnell, a Kentucky Republican,
agreed that most lawmakers support the homebuyer measures.
Senators were still negotiating the expansion of a separate tax credit that lets
money-losing businesses get refunds for taxes paid in previous years, providing them
with a source of cash.
Senators in both political parties were hoping to add both tax provisions to a bill
that would give people running out of unemployment insurance benefits up to 20 more
weeks of federal aid. The Senate could vote on the overall bill as early as today,
but lawmakers were still haggling over several unrelated amendments last night.
If the Senate passes the bill, it would go to the House, which passed a similar bill
extending unemployment benefits last month. House leaders have hinted they would
support extending the tax credit for home buyers.
Lawmakers didn’t release a cost estimate for extending the tax credit, though
similar proposals were projected to cost about $10 billion.
Industry representatives said uncertainty about the tax credit is hurting new home
sales. September’s decline was the first since March.
It takes 45 days to 60 days to close on a house, making it unlikely a sale made
today would be consummated by the end of November, said Lucien Salvant, spokesman
for the National Association of Realtors. “Buyers right now have an incentive to
hold off, not knowing whether the credit will be extended,’’ Salvant said.
Purchases of new homes dropped 3.6 percent last month to a 402,000 annual pace,
which was lower than the most pessimistic economist’s forecast, according to
Commerce Department figures.
Material from Bloomberg News was used in this report.
© Copyright 2009 Globe Newspaper Company.
Friday, October 23, 2009
Short Sales in Rhode Island
Have you been thinking about using a Short Sale to sell your home before it goes into Foreclosure? Stonehurst Realty can help you. Please email us or call for a confidential (free) consultation. We have all the necessary means to list and sell your home with a miminal amount of stress!
Even if you're unsure, or just wondering about short sales, drop us an email. We are here to help.
Even if you're unsure, or just wondering about short sales, drop us an email. We are here to help.
Friday, June 26, 2009
RI Market Update by Karen
Once again the market in Rhode Island has stumped even the most long term astute professionals. While everyone knows about the economy, school and church consolidations, high unemployment and numerous short sales and foreclosures that have racked Rhode Island for the past 4 years or so, no one could predict the current market.
Earlier this year there was a flurry of home buying, mostly bank owned homes, or fixer uppers. This flurry led to an increase in sales as was reported by the NAR. Then in spring, another small flurry took place, this time first time home buyers were coming out to try and take advantage of the $8,000 tax credit and the unusually low interest rates, combined with the monthly dropping of prices. This really was an excellent time to buy.
The biggest problem being that most of these homes needed work and rehab, thereby cutting out the first time home buyer who was looking in their price range and then would have to add an additional $10,000 to $30,000 to get the home up to par. Even with all the new programs, first time home buyers are still at a disadvantage when it comes to buying bank owned homes. The selling banks, 90% of the time, will accept a lower offer as long as the offer is CASH and AS IS. A first time buyer, especially one going through FHA, has to offer higher and then has to be able to finance the repair items. Most selling banks do not want to sit and wait for this to happen.
Another major problem, that I have seen repeatedly, is the Title's of many of these bank owned properties not being clear to close. Once this happens, extensions need to be signed and discussed, some lasting 3 months or more after initial closing date, forcing some buyers to have to back out of the contract. An important note to this is that Rhode Island prices have been dropping so quickly, that the house you bid on in January and waited for it to close for three months is now worth less than you bid!!
All these are daily happenings and all contribute to the disillusionment of buyers. It becomes a vicious circle and right now there is no end in sight. I spend most of my time searching for "deals" for my clients. It takes diligence and hard work and patience, but eventually we find the one.
Yes, everyone knows the market will eventually come back, but the damage done in this particular market has been almost devastating.
For the rest of this year, I would advise First time buyers to act quickly, not only to take advantage of the lower rates (which will definitely go back up), but also to take advantage of the tax credit. This is probably the best time you will ever see to purchase a home. Yes, it's a lot of work and somewhat disappointing to not get the house you bid on, but if you are diligent, your home will appear and it will be the right one.
Earlier this year there was a flurry of home buying, mostly bank owned homes, or fixer uppers. This flurry led to an increase in sales as was reported by the NAR. Then in spring, another small flurry took place, this time first time home buyers were coming out to try and take advantage of the $8,000 tax credit and the unusually low interest rates, combined with the monthly dropping of prices. This really was an excellent time to buy.
The biggest problem being that most of these homes needed work and rehab, thereby cutting out the first time home buyer who was looking in their price range and then would have to add an additional $10,000 to $30,000 to get the home up to par. Even with all the new programs, first time home buyers are still at a disadvantage when it comes to buying bank owned homes. The selling banks, 90% of the time, will accept a lower offer as long as the offer is CASH and AS IS. A first time buyer, especially one going through FHA, has to offer higher and then has to be able to finance the repair items. Most selling banks do not want to sit and wait for this to happen.
Another major problem, that I have seen repeatedly, is the Title's of many of these bank owned properties not being clear to close. Once this happens, extensions need to be signed and discussed, some lasting 3 months or more after initial closing date, forcing some buyers to have to back out of the contract. An important note to this is that Rhode Island prices have been dropping so quickly, that the house you bid on in January and waited for it to close for three months is now worth less than you bid!!
All these are daily happenings and all contribute to the disillusionment of buyers. It becomes a vicious circle and right now there is no end in sight. I spend most of my time searching for "deals" for my clients. It takes diligence and hard work and patience, but eventually we find the one.
Yes, everyone knows the market will eventually come back, but the damage done in this particular market has been almost devastating.
For the rest of this year, I would advise First time buyers to act quickly, not only to take advantage of the lower rates (which will definitely go back up), but also to take advantage of the tax credit. This is probably the best time you will ever see to purchase a home. Yes, it's a lot of work and somewhat disappointing to not get the house you bid on, but if you are diligent, your home will appear and it will be the right one.
Wednesday, May 13, 2009
Attention First time buyers!! $8,000 Tax credit !!
Great new for First time homebuyers....You can use your $8,000 tax credit now torwards your downpayment!!!
From Realtor.org "Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, said that theFederal Housing Administration is going to permit its lenders to allow homeowners to use the $8,000 tax credit as a downpayment"
Now really is the time to buy!!!!
From Realtor.org "Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, said that theFederal Housing Administration is going to permit its lenders to allow homeowners to use the $8,000 tax credit as a downpayment"
Now really is the time to buy!!!!
Monday, May 11, 2009
Newbury Village townhouse style condo!
Picture yourself sitting in the dining area looking torwards this kitchen! This condo has absolutely everything you could ever want or need. Located in the Newbury Village complex in Cranston, RI, close to Scituate, it is in absolutely pristine condition. This is one of the largest condos in this complex, yet it is priced comparable with the smaller ones. This is an opportunity to move into this exclusive area. The discriminating buyer will appreciate this townhouse style with loft and two master bedrooms. Integral two car garage, basement is studded and wired, ready to use as more rooms if needed. See more in this virtual tour, or ride by and email me Karen at rihome.net
Sunday, March 01, 2009
$8,000 Tax Credit!!! What it really means
Here are some Frequently asked questions about the new $8,000.00 Tax Credit for First time homebuyers. This was taken from the Federal Tax Credit site if you would like to read more.
Frequently Asked Questions About the Home Buyer Tax Credit
The American Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009.The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.
Who is eligible to claim the tax credit?
What is the definition of a first-time home buyer?
How is the amount of the tax credit determined?
Are there any income limits for claiming the tax credit?
What is "modified adjusted gross income"?
If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
Can you give me an example of how the partial tax credit is determined?
How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008?
How do I claim the tax credit? Do I need to complete a form or application?
What types of homes will qualify for the tax credit?
I read that the tax credit is "refundable." What does that mean?
I purchased a home in early 2009 and have already filed to receive the $7,500 tax credit on my 2008 tax returns. How can I claim the new $8,000 tax credit instead?
Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?
I am not a U.S. citizen. Can I claim the tax credit?
Is a tax credit the same as a tax deduction?
I bought a home in 2008. Do I qualify for this credit?
Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 tax return?
If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?
Who is eligible to claim the tax credit?First-time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and before December 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner.
What is the definition of a first-time home buyer?The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.
How is the amount of the tax credit determined?The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
Are there any income limits for claiming the tax credit?The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.
What is "modified adjusted gross income"?Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine "adjusted gross income" or AGI. AGI is total income for a year minus certain deductions (known as "adjustments" or "above-the-line deductions"), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.To determine modified adjusted gross income (MAGI), add to AGI certain amounts such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs.
If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?Possibly. It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose MAGI exceeds the phaseout limits.
Can you give me an example of how the partial tax credit is determined?Just as an example, assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.
How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008?The most significant difference is that this tax credit does not have to be repaid. Because it had to be repaid, the previous "credit" was essentially an interest-free loan. This tax incentive is a true tax credit. However, home buyers must use the residence as a principal residence for at least three years or face recapture of the tax credit amount. Certain exceptions apply.
How do I claim the tax credit? Do I need to complete a form or application?Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on Line 69 of their 1040 income tax return. No other applications or forms are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests.
What types of homes will qualify for the tax credit?Any home that will be used as a principal residence will qualify for the credit. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.
I read that the tax credit is "refundable." What does that mean?The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).
I purchased a home in early 2009 and have already filed to receive the $7,500 tax credit on my 2008 tax returns. How can I claim the new $8,000 tax credit instead?Home buyers in this situation may file an amended 2008 tax return with a 1040X form. You should consult with a tax advisor to ensure you file this return properly.
Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been "purchased" on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after January 1, 2009 and before December 1, 2009.In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.
Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?Yes. The tax credit can be combined with the MRB home buyer program. Note that first-time home buyers who purchased a home in 2008 may not claim the tax credit if they are participating in an MRB program.
I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?No. You can claim only one.
I am not a U.S. citizen. Can I claim the tax credit?Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of "nonresident alien" in IRS Publication 519.
Is a tax credit the same as a tax deduction?No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS.A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $8,000 in income taxes. If the taxpayer receives an $8,000 deduction, the taxpayer’s tax liability would be reduced by $1,200 (15 percent of $8,000), or lowered from $8,000 to $6,800.
I bought a home in 2008. Do I qualify for this credit?No, but if you purchased your first home between April 9, 2008 and January 1, 2009, you may qualify for a different tax credit.
Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 tax return?Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment.Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.Further, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. Some state housing finance agencies, such as the Missouri Housing Development Commission, have introduced programs that provide short-term credit acceleration loans that may be used to fund a downpayment. Prospective home buyers should inquire with their state housing finance agency to determine the availability of such a program in their community.
If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?Yes. The law allows taxpayers to choose ("elect") to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.Taxpayers buying a home who wish to claim it on their 2008 tax return, but who have already submitted their 2008 return to the IRS, may file an amended 2008 return claiming the tax credit. You should consult with a tax professional to determine how to arrange this.
For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.
Frequently Asked Questions About the Home Buyer Tax Credit
The American Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009.The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.
Who is eligible to claim the tax credit?
What is the definition of a first-time home buyer?
How is the amount of the tax credit determined?
Are there any income limits for claiming the tax credit?
What is "modified adjusted gross income"?
If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
Can you give me an example of how the partial tax credit is determined?
How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008?
How do I claim the tax credit? Do I need to complete a form or application?
What types of homes will qualify for the tax credit?
I read that the tax credit is "refundable." What does that mean?
I purchased a home in early 2009 and have already filed to receive the $7,500 tax credit on my 2008 tax returns. How can I claim the new $8,000 tax credit instead?
Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?
I am not a U.S. citizen. Can I claim the tax credit?
Is a tax credit the same as a tax deduction?
I bought a home in 2008. Do I qualify for this credit?
Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 tax return?
If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?
Who is eligible to claim the tax credit?First-time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and before December 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner.
What is the definition of a first-time home buyer?The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.
How is the amount of the tax credit determined?The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
Are there any income limits for claiming the tax credit?The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.
What is "modified adjusted gross income"?Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine "adjusted gross income" or AGI. AGI is total income for a year minus certain deductions (known as "adjustments" or "above-the-line deductions"), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.To determine modified adjusted gross income (MAGI), add to AGI certain amounts such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs.
If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?Possibly. It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose MAGI exceeds the phaseout limits.
Can you give me an example of how the partial tax credit is determined?Just as an example, assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.
How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008?The most significant difference is that this tax credit does not have to be repaid. Because it had to be repaid, the previous "credit" was essentially an interest-free loan. This tax incentive is a true tax credit. However, home buyers must use the residence as a principal residence for at least three years or face recapture of the tax credit amount. Certain exceptions apply.
How do I claim the tax credit? Do I need to complete a form or application?Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on Line 69 of their 1040 income tax return. No other applications or forms are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests.
What types of homes will qualify for the tax credit?Any home that will be used as a principal residence will qualify for the credit. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.
I read that the tax credit is "refundable." What does that mean?The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).
I purchased a home in early 2009 and have already filed to receive the $7,500 tax credit on my 2008 tax returns. How can I claim the new $8,000 tax credit instead?Home buyers in this situation may file an amended 2008 tax return with a 1040X form. You should consult with a tax advisor to ensure you file this return properly.
Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been "purchased" on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after January 1, 2009 and before December 1, 2009.In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.
Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?Yes. The tax credit can be combined with the MRB home buyer program. Note that first-time home buyers who purchased a home in 2008 may not claim the tax credit if they are participating in an MRB program.
I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?No. You can claim only one.
I am not a U.S. citizen. Can I claim the tax credit?Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of "nonresident alien" in IRS Publication 519.
Is a tax credit the same as a tax deduction?No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS.A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $8,000 in income taxes. If the taxpayer receives an $8,000 deduction, the taxpayer’s tax liability would be reduced by $1,200 (15 percent of $8,000), or lowered from $8,000 to $6,800.
I bought a home in 2008. Do I qualify for this credit?No, but if you purchased your first home between April 9, 2008 and January 1, 2009, you may qualify for a different tax credit.
Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 tax return?Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment.Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.Further, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. Some state housing finance agencies, such as the Missouri Housing Development Commission, have introduced programs that provide short-term credit acceleration loans that may be used to fund a downpayment. Prospective home buyers should inquire with their state housing finance agency to determine the availability of such a program in their community.
If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?Yes. The law allows taxpayers to choose ("elect") to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.Taxpayers buying a home who wish to claim it on their 2008 tax return, but who have already submitted their 2008 return to the IRS, may file an amended 2008 return claiming the tax credit. You should consult with a tax professional to determine how to arrange this.
For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.
Saturday, January 10, 2009
Is this a Buyers' Market?
By this time, everyone that has anything to do with Real Estate should have heard that this is a Buyers Market.
What exactly is a Buyers' Market?
What it is supposed to be is a time when:
*Homes are priced well
*Loans are at low interest rates
*People are prepared to buy.
When all of the above criteria have been met, then it can be called a Buyers' Market.
Let's take a look at today's Real Estate Climate and decide whether or not it is a Buyer's market right now.
As everyone knows, Real Estate is Local. This means that while it may be a good time to buy in say, Florida, it may not be a good time to buy somewhere else. For the purpose of this post, I want to discuss the local real estate options here in Rhode Island. (since these are the only ones I am completely knowledgeable about:)
The first criteria: Homes are priced well....This seems to be fulfilled. Many buyers' are wondering if prices will fall even more here in Rhode Island. My guess is, yes, they will continue to decline for another year at least.
The second criteria: Loans are at low interest rates. This also seems to be fulfilled. Many buyers' are also wondering if rates will fall even more....My guess is, yes, they will continue to fall, again for another year or so, but then will level off.
The third criteria: People are prepared to buy...This is definitely not fulfilled. Partly due to high unemployment rates, the economy, poor credit and general uneasiness about the market.
With only two of the above criteria met, it would suggest that it is not a bonafide Buyers' market.
However......................
Homes are priced very well right now and combined with the lowest interest rates around in the past ten years makes this an excellent time to buy.
Consider what would happen if you wait until next year or the year after. Here is an example:
You purchase a home at $150,000. today at an interest rate of 5 3/4% for 30 years. Your principle and interest payments per month will be $876.00 per month.
Say you wait for two years and purchase the same home for $132,000. (this is a depreciation rate of .5% per month for 24 months) assuming the general trend here continues.
Two years from now, there is a good probability that the interest rates will have not only dropped but started climbing back up as is generally the case when home prices have dropped. Let's say they have only crept up to the original 5 3/4% and you go for a mortgage for 30 years. Now your mortgage payment would be $770.00 per month!
Sounds like you should wait? Wrong. First, what are you paying for the 24 months you are waiting? Are you renting at say, a low price of $500.? (rare in Rhode Island if you have more than one room). If so, then you are paying over the next 24 months $12,000 minimum and still do not own your own home!
On your mortgage you would have saved over the course of 12 months, $2,544.00! Subtract this from the $12,000. you have paid out and you are minus $9456.00!! (which if you had it to throw away, you could have at least used it towards your furniture in your new house)
This is only one example, based on a buyer using a loan to purchase. If you have the cash to buy, the example would be simple, again if you are renting, what exactly would you be saving by waiting? In the same scenario you would have saved, over the course of 24 months, $9,024.00! That's $4512.00 per year. In this scenario, it may be better to wait, unless you are unhappy with your current arrangement and really want to get into your own home.
Opinions are of Karen Hurst, Broker/Owner of Stonehurst Realty only. For a free consultation, visit me at Stonehurstrealty.com and find out if this is your time to buy.
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