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For first time home buyers there has never been  a better time to buy that starter home then right now. According to the Beacon Economics Housing Affordability Index home affordability is at it’s highest ever on record. Data on the three major factors affecting housing affordability (home prices, mortgage interest rates and income levels) are the most favorable they have been since 1969 when this information began to be compiled. So if you have been sitting on the fence waiting for the right time to buy, it is now!

While some news headlines and surveys report drops in home prices of around 25%, the truth is that many of you have no doubt seen prices fall between 50-70% since their peak a few years ago. This means that you can now pick up a $500,000 home for $250,000 or even less! Those of you in the military may even still qualify for the $8,000 first time buyer tax credit if you were recently deployed overseas. Read the rest of this entry »

Late in 2009, Congress extended the $8,000 tax credit designed to be an incentive for first-time homebuyers to purchase a home for their principal residence. In addition, the same legislation expanded the credit to include move-up buyers at a maximum of $6,500. The revised tax credit applies to purchases on or after November 6, 2009 and before April 30, 2010. Those who sign a sales contract by the April 30th date must close by June 30, 2010.

Below you will find information that will help you determine your eligibility and how the tax credit may help you.

What is the homebuyer tax incentive?
The credit is 10% of the home’s purchase price, up to $8,000 for first time buyers and $6,500 for move-up buyers. No repayment is required. To qualify, the home must be less than a $800,000 purchase price

Who is eligible?
First-time homebuyers are eligible for the $8,000 credit. A person is considered a first-time buyer if he/she has not had any ownership interest in a home in the three years previous to the day of the purchase. Move-up buyers are eligible for the $6,500 credit. Move-up buyers must have resided in their homes for three out of the five previous years.

How does a tax credit work?
Every dollar of a tax credit reduces income taxes by a dollar. Credits are claimed on an individual’s income tax return. Thus, a qualified purchaser would figure out all the income items and exemptions and make all the calculations required to figure out his/her total tax due. Then, once the total tax owed has been computed, tax credits are applied to reduce the total tax bill. So, if before taking any credits on a tax return, a person has a total tax liability of $9,500, an $8,000 credit would wipe out all but $1,500 of the tax due.

What happens if the purchaser is eligible for an $8,000 credit but his/her income tax liability is only $6,000?
This tax credit is what is called a “refundable” credit. Thus, if the eligible purchaser’s total tax liability was $6,000, the IRS would send the purchaser a check for $2,000. The refundable amount is the difference between the $8,000 credit amount and the amount of tax liability.

Is there an income restriction?
Yes. Individuals filing Form 1040 as Single (or Head of Household) are eligible for the credit if their income is no more than $125,000. Married couples who file a joint return may have income of no more than $225,000.

Do individuals with incomes higher than these limits lose all the benefit?
The credit phases-out between $125,000 – $145,000 for singles and $225,000 – $245,000 for married filing jointly. The closer a buyer comes to the maximum phase-out amount, the smaller the credit will be. The law provides a formula to gradually withdraw the credit.

What’s the definition of “principal residence?”
Generally, a principal residence is the home where an individual spends most of his/her time (generally defined as more than 50%). It is also defined as “owner-occupied” housing.

Are there restrictions related to the financing on the property?
The purchaser can use any legal means to finance the property, including government financing such as FHA or state mortgage bonds.

Do I have to repay the tax credit?
There is no repayment for these tax credits. However, if the home is sold within three years, the credit must be recaptured upon sale.

If I purchased in 2008 do I still have to repay my tax credit?
The $7,500 credit in 2008 was more like an interest-free loan. All eligible purchasers who claimed the 2008 credit will still be required to repay it over 15 years, starting with their 2010 tax return.

Can I use the credit amount as part of my downpayment?
Some states and local governments have provided mechanisms to provide for this by providing a loan secured against the credit. Check with your loan officer for such programs.

Is there a way to get any cash flow benefits before I file my tax return?
Any homebuyer who believes they are eligible for all or part of the credit can modify their income tax withholding or adjust their quarterly estimated tax payments…

Nearly 40% of Mortgages are now FHA, says NAR

By AUSTIN KILGORE
December 22, 2009 9:35 AM CST

Nearly 40% of existing homes purchased in November used a Federal Housing Administration (FHA)-insured mortgage, according to a National Association of Realtor (NAR) survey of 3,161 real estate agents’ perceptions of conditions on the ground in residential real estate.

And while this trend may not change immediately into 2010 lending, the FHA is recently defending the program, saying that it is well enough capitalized to avoid any major losses in case of surging defaults.

For the NAR survey, president Vicki Cox Golder called FHA a critical part of American housing, especially for those trying to get on the housing ladder. “FHA helps provide affordable mortgage financing to homeowners, particularly first-time home buyers who are so important in drawing down inventory to help stabilize the current housing market,” she said.

Despite the NAR accolades, earlier this month, Department of Housing and Urban Development secretary Shaun Donovan was before Congress defending the FHA, and ensuring the House Financial Services Committee that the single-family insurance program is “not the next subprime.”

The increase in demand caused the capital reserve ratio at the FHA to drop below the Congressionally mandated 2% minimum, leaving HUD and the FHA scrambling to ensure the FHA program’s soundness.

A number of options are up for consideration, including an increase to lender accountability, raised insurance premiums, minimum FICO requirements and minimum required down payments.

Last week, HUD issued a ruling that borrowers are ineligible for a new FHA mortgage if they pursued a short sale agreement “to take advantage of declining market conditions” or to purchase another property at a reduced price.

Other results from the Realtors confidence index (download here) showed first time homebuyers accounted for 51% of all transactions and are actively competing with investors for distressed properties, which accounted for 33% of sales.

Distressed properties aren’t just affecting transaction price, however. Many survey respondents indicated the presence of distressed properties is influencing buyers’ perceptions of other homes for sale and many buyers have pricing expectations that treat every property as if it were in foreclosure.

Article source: http://www.housingwire.com/2009/12/22/40-of-mortgages-are-now-fha-says-nar/

This has certainly been an interesting ten years for the housing markets. The prices of homes have been anything but stable during the past decade. Early in the decade they were increasing at a frenetic pace. The past few years we have seen a drop in home prices in most areas of the country and this drop has been even more precipitous in those areas that experienced the largest increases earlier.

No one has been affected more by this “housing valuation yo-yo” than the real estate appraiser. Sworn to identify the accurate value of a property to support mortgage loans that are secured by real estate, the appraiser has to deal with a variety of factors. These factors include all parties of the transaction having a vested interest in supporting the sales price—including the seller and purchaser. The factors also include trying to nail down the right data to support the sale which is increasingly difficult when values are changing rapidly, especially in markets where there are distressed sales. Finally, in the era of tighter financial regulations, agencies have made it more difficult for appraisers to communicate with the participants to obtain up-to-date information for fear that the appraiser will be subject to undue influence.

What does this mean? It means that if you want to obtain the most accurate appraisal of your property, you must be proactive in the process. Here are some tips to help you further your goals in this regard.

Be at the property with your real estate agent when the appraiser visits. Don’t just be there to greet them, be proactive during the inspection. Stay with the appraiser every step of the way and point out features that you feel are important. Make sure the appraiser does not miss anything of importance. It is understood that as a homeowner you may not know what is important and what is not important. That distinction does not matter. It is up to the appraiser to decide and if you do not give them all the information, they can’t make a good decision.
Ask as many questions as you can. Does the appraiser have the right boundaries of the property and even the right boundaries of the neighborhood? Does the appraiser know distinctive information about your neighborhood that may make it more attractive, such as distance from schools and other amenities? If you have a recent survey of the property that would help.

You should have copies of other important documents ready to give to the appraiser. These might include the latest tax bill and copies of invoices for any major home improvements. While the cost of every improvement does not necessarily add the same amount to the value, knowing the cost will help the appraiser come up with the most accurate value for each improvement.

The real estate agent should play a role in providing information. as well. A great determinant of the home’s value will be determined by the use of what is called “comparables.” Comparables are other properties that have sold that will determine the

During the past few years the prices of homes have been declining in most parts of the country. This trend has represented a major financial setback for many who considered their home their best investment and an integral part of their retirement. Of course, with the stock market moving down even more precipitously, consumer investment losses have not been limited to homes during this financial crisis.

Our focus for this article will not be the investment aspects of real estate. This is not to say that we think that homes have ceased to be a solid investment. One must remember that even with the drop in prices during the past two years, homes have more than tripled in value since 1980. In addition to the appreciation of real estate, one can add the tax benefits of owning a home as well as the fact that home mortgage payments do not increase as quickly as rent which makes the home a hedge against inflation. Therefore, in the long-run real estate will still be an important part of any financial plan.

Today we focus not on these economic advantages but on the psychological aspects of homeownership. Some time ago, mortgage giant Fannie Mae conducted a national survey regarding homeownership. Among other findings, they found that Americans would choose to work an additional decade in order to become a homeowner. Our interpretation of this answer really helps us see that there is more to homeownership than money.

Recently, an article appeared on the Internet that should remind everyone that the dream of homeownership extends far beyond dollars and cents. The article was written by a single mother who worked for a non-profit in a high cost of living area, Montpelier, Vermont. The Montpelier Pride’s editor noted: Single Mother Dorl Oatley writes about the thrill, pride and satisfaction of owning her own home. Here are some quotes from the story:
Homeownership is a wonderful experience. The stability that owning a home offers a family is invaluable. To realize that in a year, you will be here… that this first Christmas or this first birthday celebrated here will be the beginning of many provides a feeling of consistency and a sense of home that is hard to describe. As a renter, between rising costs or a landlord’s decision to remodel or sell, I had moved a lot and never knew whether I would be celebrating the next year’s milestone in the same home…The opportunity to start a stable home for my daughter who is now thriving in middle school, is a wonderful blessing…there comes with owning a sense of pride that caught me off guard. I have given more attention to the aesthetics both inside and outside the home since I have become a homeowner…

Stability. Pride. Control. Permanence. These are all words that homeowners would use in describing their experience. With so many foreclosures taking place across the country, people again are being forced to move. There are many stories about the financial loss of banks and individuals, but what about the psychological damage of forced moves? What about the damage of not knowing if you will own again in the near future?

To apply for a loan, you will typically have to provide the lender with detailed documentation of your financial history. The lender will request a credit report from a credit agency and will verify the information provided in your loan application. Be prepared to give your lender:

• Social Security numbers for both you and any co-borrowers
• Copies of checking and savings accounts statements for the past two months
• Evidence of any other assets such as bonds, stocks, or money saved in retirement programs (i.e. 401k or 403b program)Recent paycheck stubs
• W-2 withholding forms, or income tax returns for the past two years to verify your income and proof of employment
• The name and address of someone who can verify your employment
• Residence history for the past two years
• Sales contract for the purchase of a new home
• Homeowner’s association information with contact information if property is a condo or part of a homeowner’s association