Tag Archives: first-time buyer credit

Brandon Nicely Recaps the First-Time Buyer Credit

From Brandon:

As we wind down to the expiration – again – of the first-time buyer credit, I thought it would be a good chance to recap some of the questions we keep hearing in my office regarding the credit.  Don’t wait until the last few days to get serious

If you’re looking at taking advantage of either the $8000 first-time buyer credit or the $6500 move-up credit, you must meet these guidelines:

  1. Must sign a contract by close of business on April 30th 2010 and close by close of business on June 30th 2010
  2. Must be your Primary Residence
  3. Must close before claiming credit
  4. Must file IRS 5405 with the tax return and you must attach a copy of your settlement statement to the return
  5. There’s no need to repay the credit unless one of the following take place:
    – You convert home to rental or business use within 3 year period
    – You sell home within 3 years
    – You foreclose on home within 3 years

People are asking questions about audits.  While I’m not a tax attorney – and I’d recommend consulting one – you’ll probably need:

  1. Mortgage statement with the property address
  2. Automobile registration matching property address
  3. Bank statement matching property address
  4. Pay-stub matching property address

Resources: If you have questions go to IRS.gov and search “first time homebuyer credit“.  If I can be of assistance, please contact me and let’s see how we can help.

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Brandon is a branch partner at Alcova Mortgage.  He enjoys doing his taxes, firewalking and competitive eating, but not necessarily in that order.  You can reach him at brandon@alcovamortgage.com, or 877-552-7150.

Like It Or Not, The Home Buyer Tax Credit Becomes Law

3240697880_9ff3343c68Well, I’m admittedly many hours late on this, but as of this post it’s being reported that the President has signed H.R. 3548, the bill that deals with, among other things, an extension to the first-time buyer tax credit that was put in place earlier this year.

I’m asuming that most people don’t care about the gobbly-goop of the bill, nor do they care about the particulars of the Special Amendment that deals directly with the tax credit extension.  If you do, you can read it in its’ entirety here, and find the Special Amendment here.  For everyone else, here are the highlights:

  • the credit must be used on principal residences only
  • a credit of up to 10%, or $8000,  of the homes’ purchase price is eligible to first-time home buyers
  • the original credit had an income limit of $75000 for a single person, and $150000 for a married couple – that level has been increased to $125000 and $225000, respectively
  • the length of time to claim the credit has been extended to May 1 2010 (contracts must be signed before that date), and you must close on that contract before July 1 2010
  • additionally, what’s being called a “move-up” component has been added, as well … for homeowners who have lived in the home they are selling for five consecutive years (of at least eight years total), they’re eligible for a $6500 move-up credit

That’s pretty much it, from everything I’m reading.  To recap, all you need to do is (1) go under contract before May 1 2010, (2) close before July 1 2010, and (3) submit to the IRS your HUD-1 statement from closing along with this form.  I’ve said that I’m in favor of the credit, but I have to admit that I’m really struggling with this latest extension.  Namely, I’d like to know where we’re going to get the money for this … seems like the tax payers are the ones who are footing the bill for their own credit.  I know that’s an unpopular position, particularly when I’ve had the pleasure of working with so many people this year who were able to buy their first home because of the tax credit, but at what point does all the spending stop?

Nevertheless, it’s signed sealed and delivered at this point.  The ink is dry, the photo ops are done.

For more information and FAQs about the Skillern Firm extension, NAR has put together a list of things to consider:

Q.  Existing homeowner credit:  Must the new house cost more than the old house?
A.  No.   Thus, for example, individuals who move from a high cost area to a lower cost area who meet all eligibility requirements will qualify for the $6500 credit.

Q.  I am an existing homeowner.  On October 25, 2009, I signed a contract to purchase a new home.  I have lived in my current  home for more than 5 consecutive years and am within the new income limits.  I will go to settlement on November 20.  If President Obama has signed the bill by the time I go to settlement, will I qualify for the new $6500 tax credit?
A.  Yes.  The existing homeowner credit goes into effect for purchases after the date of enactment (when the bill is signed).   There is no reference to the date of contract for the new credit. The provision looks solely to the date of purchase, which is generally the date of settlement.

Q.  I am a first-time homebuyer but was not within the prior income limits at the time I entered into my contract to purchase on October 30, 2009.  I will be covered, however, by the new income limits.  If the new rules have been signed into law by the time I go to settlement, will I be eligible for a credit?
A.  Yes.  The new income limitations go into effect as soon as the President has signed the bill. The income limit and other eligibility rules will look to your status as of the date of purchase, which is the settlement date.  So if the new rules have been signed when you go to settlement, you should be eligible for the credit (or a portion of the credit if you’re within the phase-out range).

Q.  I am an eligible existing homeowner.  I have a fair amount of equity in my home.  I have found a home with a non-negotiable price of $825,000.  Will I be able to use any of the $6500 tax credit?
A.  No.  The $800,000 cap on the cost of the purchased home is firm at $800,000.  Any amount above $800,000 makes the home ineligible for any portion of the credit.  The $800,000 is an absolute ceiling.

Q. I owned my home for 10 years, but sold it two years ago year and have been renting since.  If I purchase a home, will I be eligible for the $6500 tax credit if I meet all the other eligibility tests?
A.  Yes.  Because you lived in the home for more than 5 consecutive years of the previous 8, you will qualify for the $6500 credit.  For example, Say John and his wife bought a home in 2000 and lived there until 2008 when he got a divorce. Whether John has been renting or bought in the interim, he WOULD INDEED be  eligible for the credit because he owned a home and occupied it as his principal residence for 5 consecutive years out of the last 8 years. The keyword here is “consecutive.” As long as he lived in that house for 5 years straight, what he did since 3 years doesn’t impact eligibility.

Q.  I am an eligible first-time homebuyer.  I entered into a contract to purchase on November 1, 2009.  Do I have to go to closing before December 1?  How does the extension date affect me?
A.  You do not have to close before December 1.  Once the legislation has been signed, it will be as if the Nov 30 date had never existed.  Therefore, so long as the contract settles before April 30 (or July 1, worst case), the purchaser will be eligible for the credit.

Photo from TMAB2003. Soure

How To Apply For The First-Time Buyer Credit

I had a teacher in high school, Mr. Smith, who had a saying that’s stuck with me.  I remember little from his government and US history class but this phrase:

Porkchop porkchop greasy greasy, man that test was easy easy!

Why do I remember that?  Who knows.  But it was the first thing I thought of when I found the form first-time buyers need to recoup their tax credit in 2009.  Finally, something government-related is easy – Mr. Smith would be so proud.

The first-time buyer credit is set to expire a month from now, assuming the White House doesn’t extend it in some way, shape or form.  See that ticker on the right side of the screen?  If you haven’t gone under contract on your first home by October 30th, you’re likely going to miss the expiration of the first-time buyer credit.

Plenty of people (350000, according to NAR), including many right here in the New River Valley, have taken advantage of the credit so far in 2009, and some of my clients have already reported receiving their credit.  It’s pretty easy to do, so get on it.

Senate Close To Extending Tax Credit Deal?

See Saw

See Saw

It looks like it, but this has been a very fluid situation over the last few days.  I’ve not posted over the last couple of days about it, because it keeps changing so much that it makes it hard to keep up.  Here’s the latest, as of 1:00pm on Thursday 10/29/09

Truth of the matter is, no one knows what the final outcome will be, but if I had to bet, the likelihood is that we see it extended in modified form.  I’ve said I’m in favor of an extension, and I still am, but I have to admit that I’m getting tired of seeing us go into debt, as well.  I’m struggling with this one, I really am.

Thanks to Span for the photo.

$8000 First-Time Home Buyer Credit Has An Expiration Date

That’s right, the first-time home buyer credit has an expiration date, and it’s rapidly approaching.

My web designer doesn’t like it when I get real fancy and install too many things on this site, as I have a tendency to break things and make more work for everyone, but I did add a ticker to the right side of the blog a few days ago that I wanted to point out.  It looks like this:

Hard to miss, right?  It’s right there along the right side of the page, and it’ll keep dialing down until, well, we’ve run out of time.

I’ve said before I wouldn’t bet on the credit being extended, but I think I’m going to retract that.  I’m betting it WILL be extended, in a revised form, as I think it’s hard to argue that it hasn’t gotten people moving on buying a home.  What that credit will look like who knows, but I think it’s likely we’ll see First Time Buyer Credit 2.0 be announced in the next couple of months.

For the procrastinator’s out there – of which I am one, thank you very much – you’ve got over 100 days left to take advantage of the buyer credit … what’s the rush, right?  Keep in mind that in order to find the right house, it’s gonna take some time – only once have I had buyers who bought the first house they saw.  Once you’re under contract, expect that it’ll take 45-60 days (and with lenders tightening their wallets 60 might be more likely) to get to closing, so suddenly you’re looking at less than half the time currently remaining on the clock as of the time of this post.

Time is of the essence, so let’s get started.

Buyers – The First Time Buyer Credit Can Now Be A Downpayment

I’ve written a few times here on the blog now about the First Time Buyer Tax Credit, and one of the things that kept getting thrown about was whether the credit could be used as a downpayment. For the longest time, the answer was no, but recently that’s all changed – kind of.

At the National Association of Home Builders Spring Board of Directors meeting (could they come up with a longer phrase?), HUD Secretary Shaun Donovan (he looks kind of mean, doesn’t he?) made the announcement that for buyers able to utilize the First Time Buyer Tax Credit, the $8000 credit can be used for a downpayment on FHA loans to help cover things like closing costs, or putting down more than the FHA-required 3.5%.  The reason I said “kind of” above is that HUD is saying the credit can’t be used to cover the 3.5% that a buyer would have to put down, so on a $150000 house a buyer is still going to have to come up with $5250 to bring to closing – many were hoping that the tax credit could be used to cover that 3.5% requirement.  No dice.  Here’s the full text of the announcement.

“We believe this is a real win for everyone,” said Donovan. “Today, the Obama Administration is taking another important step toward accelerating the recovery of the nation’s housing market. Families will now be able to apply their anticipated tax credit toward their home purchase right away. At the same time we are putting safeguards in place to ensure that consumers will be protected from unscrupulous lenders. What we’re doing today will not only help these families to purchase their first home but will present an enormous benefit for communities struggling to deal with an oversupply of housing.”

I’ve heard of one national bank who’s working on a program that would allow buyers to use the $8000 for their downpayment, but so far I’ve not gotten confirmation that it’s been completed.  Essentially, a lender would give you an additional $8000 “loan” at closing to take care of things like your downpayment, closing costs, etc., but I guess the question is when would the bank be reimbursed from the federal government.   However it shakes down, that’s the right step to take, in my opinion.  In the meantime, if you’re a first time buyer without the 3.5% downpayment requirement there are still several sources to consider when trying to gather the money, including employer plans, family members, and state and local governments (Blacksburg has a $3000 grant, for instance, available to those who qualify).

First-Time Buyer Credit Hits A Three-Letter Roadblock

I thought it was probably too good to be true.

Wednesday, I wrote that there was talk going around the Interweb that FHA was going to allow the $8000 credit that applies to first-time home buyers to be used as a downpayment at closing, but that lenders were telling me they weren’t quite sure of that yet.  Thursday, the Office of Management and Budget confirmed they were putting the brakes on that for now.

FHA loans are popular with buyers because they only require a downpayment of 3.5%, but right now FHA rules state that the money for a downpayment can only come from:

  • money in the bank
  • a gift from a family member, or employer-contributed money
  • government agencies, or non-profit sectors of federal, state or local government
  • non-profits approved by FHA
  • borrowing from another home, or other secured funds like your 401-k

More to come, this whole thing is going to continue to be fluid.  Should be interesting …