Update: OMB has asked FHA to hold off on tax credit bridge loan program

Tuesday evening I blogged about the FHA program that would have allowed first time home buyers to use the expected tax credit as a down payment. Apparently, at the request of OMB, FHA has withdrawn Mortgagee Letter 09-15. Hopefully this action is only temporary.

The text of the withdrawn letter can be viewed here. As more info becomes available I will keep this updated. 

(Thanks to my friends at Virginia Association of Realtors for being a great source of information.)

Tax Credit Used for Down Payment

As reported in Daily Real Estate News 5/12/09

Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, on Tuesday said that the Federal Housing Administration is going to permit its lenders to allow home buyers to use the $8,000 tax credit as a down payment.
Previously, most buyers wouldn’t receive the funds until after they filed their tax return, and that deterred some people from using the credit. The NATIONAL ASSOCIATION OF REALTORS® has been calling for the change.

“We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a down payment,” Donovan says. His remarks came in an address to several thousand REALTORS® gathered Tuesday morning at “The Real Estate Summit: Advancing the U.S. Economy,” at the 2009 REALTORS® Midyear Legislative Meetings & Trade Expo in Washington, D.C..

He says FHA’s approved lenders will be permitted to “monetize” the tax credit through short-term bridge loans. This will allow eligible home buyers to access the funds immediately at the closing table.

Want more details? Give me a call or email me and we can discuss how you can take advantage of this now!

1st Time Home Buyers Seminar

Do you currently rent? have you thought about buying a home/condo/townhome for the first time? Maybe have a few questions about the process, credit scores, financing, etc? Can you afford a couple hours to learn these answers and more? What are you doing on Wednesday May 13, 2009 @ 6:30 pm?

Ryan Hill Realty will be sponsoring a 1st Time Home Buyers Seminar from 6:30 – 9:00 pm that evening at the Naperville Municipal Center, 400 S. Eagle St, Naperville, IL. Topics that will be addressed by guest speakers will include:

• Learn about the home buying process, terms, details and review the various real/estate home options
• Find out about the 1st time home buyer tax incentive and what the qualifications are.
• Review the latest mortgage and lending programs available.

Attendees can sign up for various sponsor raffles as well as a drawing for a 5 day, 4 night Cruise For Two* donated by Ryan Hill Realty. (Winners must be present at time of drawing.)

Contact me for free tickets!

For reservations, you can call 630.897.2165 x258. Or email me. 

$10/person | $15/couple. No Refunds.

All proceeds are for the benefit of Hesed House, Aurora, IL.

Click here for event flyer.

FHA is not a bad (nor obscure) word!

Last month I had a couple of posts that talked about the effects & opportunities that the Economic Stimulus package presented to the real estate marketplace. I saw bits of press and some Realtor and NAR advertising about the $8000 first time home buyer credit. There were lots of blog posts about its benefits. But is it really understood? Are people really aware of how powerful the benefit is when combined with available FHA mortgage programs?

What brought this back to the front of my mind (no wasteland jokes, please) was a visit to my accountant. We were catching up on family news and she mentioned her daughter – a recent college grad – who had just leased an apartment in Chicago. I asked if they had looked at buying, especially with the new credit. Her answer that it would take a while to save the 20% down payment necessary in today’s market was surprising to me. I asked her if she was aware that with an FHA loan she could put down 3.5%, get a great rate and qualify for the $8000 tax credit. Her answer, obviously was no. (ok, should I have been quicker to get this scenario in front of my clients? Yes.)

So, presented here, is a purchase scenario for a first time buyer in the Chicago area market. Note that differences in property taxes will affect the potential tax savings. As always, check with your personal tax adviser for details and implications for you.  

This scenario estimates the potential tax savings to a first time home buyer purchasing a home under an FHA program that calls for 3.5% down payment. Assuming the buyer(s) eligibility for the new 1st time buyers credit of $8000 and deductible mortgage interest and property taxes, the first year tax savings could be significant. The 2 views below look at a full year tax savings (12 months) or optionally a mid year close which would yield a reduced, but still significant itemized deduction.

*These projections/estimates are not intended to replace the advice of a tax professional. Each case is different and should be reviewed by the appropriate professional. As always, I am available to discuss your plans. Please contact me at your convenience.

This combination of FHA financing and first time buyers credit is only available (as of this writing) until December 1, 2009. Is there someone in your family who could take advantage of this? Pass this on and let them see what the savings could be.  And oh, by the way, any unused portion of the credit is refunded to you by the government at tax time.)

Housing report forwarded to council

reposted from the Naperville Sun Tuesday March 17, 2009

The Naperville Fair Housing Advisory Commission voted Monday to send its report on affordable housing to the full City Council, but not without strong opposition from some in the community.

“We will not include any programs,” City Project Planner Greg Jones said, referring to specific policy proposals.

While Jones stressed the need to start with addressing the problems of Naperville’s seniors, alluding to their fixed incomes and limited opportunities for employment, the commission in the end decided to endorse a recommendation accepting the recently completed Housing Analysis and focusing on renters, low income earners and employees of Naperville businesses as well. But seniors are recommended to be the initial priority of any policy undertaken by the City Council.

While the commission stressed that it was not endorsing any particular finding on whether or not there exists a housing affordability problem in Naperville, many parts of the study suggest that is the case.

“We need to concentrate on all four groups, not just seniors,” Commissioner Zelda Webb said. Commissioner Dianne McGuire seemed to agree with Webb, asking what the actual numbers of the seniors were in Naperville and if they were “really as destitute as the study suggests?” Several times Jones said all of the groups thought to be in need would be addressed and that any solution that helped seniors could help other groups, saying, “We want to make sure they are able to stay in the homes they have.”

Commissioner Sherman Neal expressed interest in “what was good for the city in the long run … it may be better to concentrate on renters and employees” that would help the city’s development in the future.

Several residents spoke out against sending the recommendation to City Council.

Kristen Jungles, of Ryan Hill Realty, questioned the validity of the analysis. “How many seniors are in your survey?” she asked, stressing that there were only 20 seniors represented in one part of the survey. Jungles also said there was affordable available housing in Naperville and to prove it, handed out literature on a “smart rent” program that focused on low-income people and put a portion of their rent toward the purchase of a home.

Jeff Merrinete, a Realtors lobbyist, pointed out the enormous nature of the undertaking and noted that many of the people the study focused on — people spending more than 30 percent of their income on housing — were adults and the “aggressiveness (in borrowing) was a choice they made.”

Sharon Worrell agreed with Jungles that the study rested on too few subjects and said, “I disagree with the findings.”

Others were impatient with any possible delay. Don Derrow of DuPage United, a nonprofit lobbying for housing relief for low-income earners, said, “the statistical validity has been questioned and addressed (at other meetings).” Commissioner Kevin Coyne agreed.

The vote to send the study to City Council for city staff to research and prepare policy options was unanimous.

The Naperville City Council is scheduled to receive the report at its first meeting in April.