First Time Homebuyer $7,500 Tax Credit

Internal Revenue Service
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A new $7,500 tax credit for first-time home buyers is a temporary incentive from the government (Read all of HR 3221) to boost interest in real estate – but the time frame to take advantage of the credit is limited  (Purchases on or after April 9, 2008 until July 1, 2009).

The basics in regards to the Tax Credit; the tax credit must be paid back over fifteen years – so it’s much like an interest-free loan. But it remains a tremendous benefit worth discussing, and for some people, it could be just enough to make the difference between renting and owning.

Amount of Credit:
Ten Percent of the cost of home, not to exceed $7500.

  • If a home costs $55,000, the allowable credit would be $5,500.
  • If a home costs $120,000, then the allowable credit would be $7,500.

Eligible Property:
Any single-family residence (including condos) that will be used as a primary residence.

Reduces income tax liability for the year of purchase. Claimed on tax return for that tax year.
Individuals should consult a professional tax advisor for exact tax calculations.

  • If an individual’s actual tax liability was $5,000, then after the tax credit is applied the purchaser would receive a total refund of $2,500. The refundable amount is the difference between the $7,500 tax credit and the amount of one’s tax liability.
  • If an individual’s actual tax refund was $2,000, then after the tax credit is applied the purchaser would receive a total refund of $9,500.

Income Limit:
Individuals whose Form 1040 filing status is single (or head of household) are eligible for the tax credit if their income is no more than $75,000. Individuals who file a joint return may have no more than $150,000 in income. Individuals with incomes between $75,001 and 94,999 (single) or $150,001 and $169,999 (filing jointly) are eligible for a partial tax credit. Individuals with incomes greater than $95,000 (single) or $170,000 (filing jointly) are not eligible for this tax credit.

First-time Homebuyer Only:
Purchaser (and purchaser’s spouse) may not have owned a principal residence in three years previous to purchase.

A portion (6.67% of credit) is to be repaid each year for 15 years. If home is sold before 15 years, then remainder of credit is due in the year of the sale.

  • If a homebuyer claims the $7,500 credit in 2009 on their federal income tax return for a closing that occurred in 2008, then the credit is received in 2009, so repayment begins in 2010 with an annual repayment amount of approximately $500 a year.
  • If the homeowner dies, their heirs do not have to pay back the remaining balance.
  • If the house is sold before fifteen years have passed and the home’s appreciation is less than the amount needed to be to paid back, the loan is forgiven.
  • If the home is turned into a rental or investment property, the pay back balance is due in that year.

Effective Date:
Purchases on or after April 9, 2008 until July 1, 2009

  • 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.
  • 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.

For furhter info on the $7,500 Tax Credit visit Your Mortgage Planner 2.0 Blog

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Home Sales Show Growth

Still on the fence? Waiting to see if you can time the bottom? What else keeps you from making the smartest and wisest investment of your lifetime? Make sure you don’t fall asleep at the wheel while you’re waiting for the bottom to appear. Seattle has been ranked as one of the “least-riskiest” cities for Home Buyers according to That ‘s GREAT news considering that there are only a handful of cities, if even that, throughout the county that have been immune from price declines. So what has kept the housing prices from falling at the same rate, here in King County, as they have throughout the rest of the country? A strong economy supported by several Fortune 500 companies -despite the current layoffs, one of the most educated populations in the country, the location and the exquisite amenities that Washington has to offer – you can go hiking in the morning, boating in the afternoon and skiing in the evening.

With nearly two decades of continuous growth we are certainly entitled to a small slowdown. We haven’t had home prices fall in King County since 1991, that’s nearly twenty years of continuous growth. The median price for a single-family home is still up more than fifty percent since 2002. Just like stocks and bonds, life itself, or any other investment you are going to have your ups and downs. One thing is for certain stocks haven’t had a continuous run with no declines for twenty years. You have to be willing to take the good with the bad and look at the big picture. Invest with a strategy don’t just hop into it trying to keep up with the Jones’. Real Estate, for most people, until recently has been looked at as a long term investment, something that grows over time. I was always told that life is a marathon not a sprint and that too much of anything is never a good thing.

According to the National Association of Realtors, sales of previously owned homes throughout the US increased 6.5 percent to a 4.74 million unit annual rate in December. Economists expected a 4.40 million unit pace. The inventory of existing homes on the market for sell fell 11.7 percent to 3.68 million units from 4.16 million in November, translating into 9.3 months of supply at December’s sales price. The supply stood at 11.2 months worth in November. Which is exceptional news considering that December is one of, if not, the slowest month for single-family home sales. Chief economists for the NAR, Lawrence Yun said that, “the higher monthly sales gain and falling inventory are steps in the right direction.”

Due to creative financing, speculators, Flippers and GREED we have found ourselves caught in the perfect storm and now we have to hold tight. Realize that there is light is in front of us we just have to keep pressing forward. There is always a silver lining in every dark cloud you just have to find it. For the investor with a vision, a game plan, capital or the right financing, and guts now is the perfect time to add to the Real Estate Portfolio.

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Acquisition Of A New Property – New Mortgage Guideline

Mortgage guidelines continue to change, add this to the New Mortgage Guidelines 2009 list.
Lenders who sell their paper to Fannie Mae and Freddie Mac (the majority of Lenders) have implemented a new guideline for individuals who are prospective Mover Uppers and Investors.

The three facets prospective buyers face:

Mover Upper (Selling the primary residence)
If you plan to close on your new home prior to the closing of your existing home — even if it’s only by a day — both payments must be accounted for as monthly debt obligations on your mortgage application. This will increase your debt to income (DTI), essentially you have to qualify with two mortgage payments.

Converting your residence to a second home
If your current home has less than 30 percent equity in it, your mortgage application for the new home will not be approved unless you can show 6 months worth Reserves (mortgage payments + taxes + insurance) for the current home and new home combined.

Becoming an Investor – Converting your residence to an investment property
If your current home has less than 30 percent equity in it, any rental income derived from a tenant is disallowed on your mortgage application for the new home.  You must still count the mortgage payment + taxes + insurance as a monthly debt.

I don’t make the rules I just relay them.
For more Mortgage Info and Current Mortgage Rates check out

I have already had multiple clients bark at this, and some not believe me.  This is the New world of lending.
Yes there is credit out there, and yes banks and lenders are financing homeowners. You just have to fit the niche.
We as a society cannot place full blame the lenders for the new ever tightened guidelines, consumers carry a portion of the responsibility as well.  It was housing that placed us in this mess, and in order to avoid a part duce we have to walk the new found line.

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Seattle Foreclosures (REO’s) are not Short Sales…

Let me preface this blog entry with the statement, “Foreclosures and short sales vary by state and this blog post pertains to Seattle and Washington only”  Please contact your local Realtor for the most up to date and current information.

Washington foreclosures aka Real Estate Owned (REO’s) are properties owned by the bank or lending institution that acquired them at a trustee sale.  After the previous owner defaulted on their mortgage loan and expended his/her 90 day redemption period to pay the past due balance the property is sold at a trustee sale.  The bank sends their own rep to the sale to bid on the property and acquires it with no new mortgage attached.

*A trustee sale may be postponed at the banks discretion if the owner is trying to do a short sale .  Nowadays, it is even possible to negotiate short sales even if the homeowner is not in default yet.  The options available to a distressed homeowner are on a bank-by-bank basis.  Again, contact your local Realtor for assistance if you have questions regarding your options.

So what is a short sale?  Glad you asked!  A short sale is when the owner is trying to sell the property back to the mortgagor for less (or short) of what they owe.  The bank may or may not allow this. The term ’short sale’ does not pertain to the amount of time it takes to close.  In most cases a short sale will take 3 to 6 months to close.  In comparison a foreclosure typically takes 35-40 days.

One thing to keep in mind when putting an offer in on a short sale is that one of the prerequisites for a homeowner to facilitate the short sale process with their bank is an offer from an able and willing buyer.   Without an offer the bank will not consider a short sale. This means the homeowner lists their home with an agent as a short sale for a price that is not a bank approved price.  In fact, the bank may take 2-3 months before they let potential buyers with offers on the property know what amount they are willing to settle for as a ’short’ and many times it is much higher than what the listing agent originally had it listed at.

Author Credit: If you have questions regarding Arizona short sale and/or foreclosure process feel free to contact Sarah Reiter with RE/MAX Achievers.

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The National Housing Inventory Fell In December

Home prices are largely based on Supply and Demand.

* If demand outweighs supply, home prices rise
* If supply outweighs demand, home prices fall

It’s good news for home sellers, therefore, that “used” homes for sale fell 6 percent nationally last month.  Less supply often means higher prices.

Of the 29 metropolitan areas tracked in real estate brokerage firm ZipRealty’s survey, only Philadelphia showed an increase.

But the survey isn’t perfect.  For example, it doesn’t track the demand side of the equation — buyer activity.

Anecdotally, November and December are slower for buyer foot traffic than, say, March and April.  December’s drop in supply, therefore, may reflect the expectation of reduced buyer interest.

In addition, the ZipRealty survey ignores the supply of newly-built homes, and of foreclosed properties.  In some cities, that can amount to a quarter of the market supply or more.

And lastly, the survey addresses the nation and not the nation’s neighborhoods.  This is an important distinction because real estate is not a nationwide market, nor is it even a citywide market.  Real estate is highly local and responsive on a neighborhood-level.
(Image courtesy: The Wall Street Journal Online)

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