First Time Home Buyer Tax Credit

August 6, 2008 by 41 Comments

Update February 17, 2009:  The American Recovery and Reinvestment Act has modified this tax credit posted here.  If you're a first time home buyer who purchased January 1, 2009 – December 31, 2009; click here.  If you purchased from April 9, 2008 – December 31, 2008; this post still applies to you. 

Please check with your CPA or tax advisor to see how this impacts you.

With the recent passage of HR 3221, people who have not owned a home for the lastUnclesam  3 years may qualify for an interest free loan from Uncle Sam of up to $7,500. Here's a quick skinny on how this works:

First time home buyers may receive a tax credit of up to 10% of the purchase price of the home (not to exceed $7500).   This is a "tax credit" meaning that you receive the credit (if you want it) after you file your income taxes.   For example, this means that when you file your taxes in 2009 and you owe $5,000 to Uncle Sam and you qualify to have a tax credit in the amount of $7,500; you would receive a refund of $2,500.   However, this is a refundable credit (aka interest free loan) that must be paid back each year to the IRS (when you file your taxes) over the next 15 years.

If you sell your home before the tax credit is repaid to Uncle Sam, then the full amount is due or if your property that you received the tax credit for is no longer your primary residence (i.e. you convert your home to a rental).

This credit does not apply if the first time home buyer is buying a home from a relative.

This tax credit is only available for purchases made between April 9, 2008 and July 1, 2009 for adjusted gross incomes of up to $75,000 ($150,000, if married, filed jointly) and phases out up to $95,000 ($170,000, if married, filed jointly).

Should you take advantage of this opportunity? 

Sure!  Who wouldn't want a $7,500 interest free loan?  Two things I would consider using this credit for if I were a first time home buyer:

  • investing into an interest bearing savings account to build my "emergency fund".
  • pay off a nasty high interest credit card (freeing up a monthly cash flow).
  • fund your IRA.

Just understand that this is essentially an interest free loan.  This is not "down payment assistance".  You will be paying this back over the next 15 years (or sooner if you sell, rent out the property or convert it a second home)…but you just can't beat "interest free".

For more information, click here.

Friendly reminder:  I am not a tax professional, I am a Mortgage Planner assisting families who need mortgages in beautiful Washington State.   Always consult with your CPA, financial or tax advisor.

Watch for more posts on the effects of HR 3221.

Filed Under: First Time Home Buyer, Legislation, Residential Purchase

Local Title Company Raises Rates 30%

August 4, 2008 by 9 Comments

Normally this wouldn’t be big news…but when Northpoint Title decided to drop their rates well below market and agressively try to pull existing title orders from other companies only to raise their rates one month later, I think it’s worthy some attention. Here’s an example of an email from a Northpoint rep to a real estate agent (dated June 16, 2008):

"Just checking in to see what you thought about the new title rates.  Can you believe we are 28% lower??  This is fantastic!   Here is a price comparison on an average sales price of $275,000:

Fidelity/Chicago: $840.00

FATCO/Talon: $840.00

OUR RATE:  $605.00

This is a big difference in the bottom line for your clients.  Let me know if you have any titles  you would like me to pull over.  I would be thrilled to help you out!"

Northpoint is a Landamerica "venture".  This email excludes the other local Landamerica title companies (which represent 25% of the total resale market in King County alone), Commonwealth of Puget Sound and Rainier Title who’s title rates (at the time) were 33% higher than Northpoint at this price point.

This tactic was used an attempt to gain title business on existing transactions without any regard to what was negotiated in the purchase and sale agreement.   Not to mention the effort or cost involved in producing the all ready provided title commitments. 

Northpoint justified their deep rate cut because they were a "green" title company, promoting being paperless which many title companies are (this is not unique).  From a separate Northpoint email dated June 16, 2008:

"I have some good news!  Northpoint’s paperless workflow system has effectively reduced our waste and costs, resulting in tremendous costs savings.  To help consumers in today’s challenging real estate market, we ahve decided to pass this savings on to your clients.  We filed new, lower rates with the Office of Insurance Commissioner and the rates became effective on Tuesday, June 10th…Please pass along this good news to your clients.  I look forward to working with you."

On July 7, 2008, Northpoint suddenly was not green anymore nor were they planning on passing any savings along to consumers.  Just shy of one month, they filed a rate increase following their huge marketing blitz all based on rate.  Presentations were being made to offices promoting the low rates even after the new higher rate was filed with the State.

Effective August 1, 2008, Northpoint’s rates are the same as Commonwealth of Puget Sound and Rainier Title.  They are 33% higher than what they’ve been pushing (and pulling) over the past month.   They are in line with the other title companies rates.

Title rates are not changed on a whim.   If you’re a long time reader of Mortgage Porter, you know that my background is title insurance and escrow and that my husband is in the title industry.   As a former manager, I can tell you that title rates are discussed and studied several weeks if not months.   Not to mention the time and effort it takes to file rates with the State.  (Washington title rates are public record, filed in Olympia).

In my twenty+ years in the real estate industry, I have never witnessed a title company use what appears to be bait and switch.      

 

Filed Under: Title Insurance

My Noisy Neighbors

August 2, 2008 by 2 Comments

These Barn Swallows moved in next door and are chirping up a storm.  I think they are sweet tweet.

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Filed Under: Just for Fun

FHA Question from a Mortgage Porter Subscriber

July 31, 2008 by Leave a Comment
I love receiving emails like this one:
Hi Rhonda. Thank you for your helpful information on your website. The Gov’s FHA site is not very user friendly!
I hope to be a first time homebuyer in the next year or so. I am working on repairing my damaged credit and know I need at least a solid year of "good payment history, etc" to demonstrate I’m a good buyer.
I realize the higher the credit score the better…but what is the minimum score one could have to be considered for this type of loan? And what is the min down payment I could expect to pay? I’m hoping to purchase a condo in Kirkland for under $350K and just need to see what I should plan for. Thank you!
Here’s my response:
  • FHA does require the last 12 months of a borrowers credit to not have late payments.  As far as credit scores, FHA is not credit score sensitive–however some lenders will charge you a higher rate if your mid credit score is under 620.  You can actually have no credit scores or shallow credit and possibly qualify with FHA by alternative credit.
  • 3% is the minimum investment required by FHA currently except this is changing on January 1, 2009, thanks to the new law passed yesterday, to 3.5%.  Based on a sales price of $350,000, the new required investment would be $12,250 (instead of $10,500).   
Last, even if you’re considering buying twelve months from now, I recommend contacting a qualified Mortgage Professional (like me) who works for a HUD endorsed lender (like my company, Mortgage Master) to make sure you’re on the right track with improving your credit.

Filed Under: FHA

Mortgage Porter Super Hero Trading Cards

July 31, 2008 by 1 Comment

Last week, in San Francisco at RE Bar Camp, the attendees were surprised with their very own super hero trading cards.  Somehow, my trading card didn’t make the order with the other "super bloggers" (which is easy to understand since this huge feat was pulled off in just a couple days before the event).   A huge thank you goes to Gia Freer, VP and Community Manager of RealSeekr (aka Principessa di Proprieta) for creating my super hero trading card!   

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On a much more serious note, please check out my article on Rain City Guide about The Housing Rescue Bill which was signed off by President Bush yesterday.

Filed Under: Just for Fun, Legislation

Next Week is Seattle Night Out

July 30, 2008 by Leave a Comment

Nightout_2

On Tuesday, August 5, 2008, neighborhoods around Seattle will celebrate "Seattle Night  Out".  Its a great opportunity for neighbors to meet and help promote safety in our neighborhoods. 

From the Seattle Police Department’s website:

“Night Out” is a national Crime Prevention event. It is designed to heighten crime prevention awareness, increase neighborhood support in anti-crime efforts, and unite our communities. It is a great chance to learn about crime prevention, while also celebrating your community and spending time with your neighbors.

The deadline to register your neighborhood in Seattle for this event is August 2, 2008.   Night Out is a national event.    For more information, click here.

To find out events in your neighborhood, contact your local police department.

Filed Under: Seattle

I am back!

July 28, 2008 by Leave a Comment

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Seems like I’ve been gone much longer than I have.  On Tuesday morning (July 22, 2008)  I went to San Francisco for Inman Connect and Real Estate Bar Camp.   Both events were fantastic and I met many wonderful people (I won’t even try to list everyone).   I did take advantage of being in that neck of the woods (and airfair) by extending my trip to include some Sonoma wine country with my husband.  Posts and photos will follow.

This is just a quick note to let you know that I am back in Washington and back to business to usual.   If you or someone you know need help with a mortgage (new or, if you would like me to manage–or adopt–your existing mortgage) please let me know.

Update:  Here are some of my notes from Bloggers Connect that I’ve posted over at my R TEAM Blog:

Leaving a Digital Footprint

Growing Pains: Taking Your Blog to the Next Level

Blogging Pittfalls: How NOT to get sued.

Case Study: How Four Bloggers are closing sales

I’m also working on a post about Flickr from a class I attended at Real Estate Bar Camp taught by Teresa Boardman.   

Filed Under: Events

How Much Home Can You Buy with $17,550 Down

July 22, 2008 by 1 Comment

I’m taking a brief blogging break.  This is a reprint from Rain City Guide.  To read the original post and 100 plus comments, click here.

My purpose for this post is to hit it home what a great window of opportunity we have with FHA Jumbo windowmortgages which are only around until December 31, 2008 unless Congress passes an extension of some sort (which is a possibility-but not guaranteed).

For the remainder of this year, you can use $17,550 to buy a home priced at $585,000 using FHA Jumbo with 3% down.    FHA requires the buyer to invest 3% into the transaction (which can be a qualified gift).  3% of $585,000 = $17,550.  (With roughly 5% down, utilizing FHA Jumbo, you can puchase a home for $600,000).  The Seller can contribute up to 6% towards closing costs and prepaids as long as the buyers 3% required investment is met.  With this scenario, the Seller is contributing around $14,000.   The loan amount is just under the maximum allowed FHA Jumbo for King, Snohomish and Pierce County of $567,500.   

With FHA there are no income limitations and much easier on credit scoring than conventional mortgages which ding you if your score is 719 or lower.   Effective January 1, 2008 2009 (as things currently stand) the FHA loan limit will be reduced to their actual loan limit of $362,790 for King, Snohomish and Pierce Counties. 

Of course, you’re not limited to FHA if you only have around $17,550.  There’s also Fannie Mae Flex (someone please knock on wood fast before Fannie shelves decides to put this product on the shelf) which allows lower down payment–currently as low as 97%.  However the highest loan amount allowed is the true conforming of $417,000.   Utilizing a Fannie Flex program, you could purchase a home priced around $434,000 with the seller contributing about $12,000 towards your closing costs and prepaids.

So we’re talking $585,000 sales price using FHA Jumbo (while supplies last!) or $434,000 with Fannie Flex97 (while this product is still available) if you have $17,550 for a down payment.   Can you see why I’m so crazy about FHA Jumbo?  This is a window of opportunity for those who qualify for the payment but may be shy on the down payment that’s scheduled to close on December 31, 2008

Filed Under: FHA, Jumbo/Non-Conforming, Residential Purchase
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