Home Buyer Tax Credit Extension Update

First of all, the credit has not been extended yet despite all the rumors floating around. Here is the latest information from Washington as well as a projected timeline for further action from www.FixHousingFirst.com.

The Status – From www.TheHill.com “…Under the agreement struck by Sens. Chris Dodd (D-Conn.) and Johnny Isakson (R-Ga.), the credit will last until the end of April and can be applied to homes worth up to $800,000. Dodd and Isakson said that as many as 70 percent of Americans will be eligible for it.

The home credit’s backers, which include Senate Majority Leader Harry Reid (D-Nev.), have said that it can help the economy recover and has already led to the jump in home sales seen around the country in recent months.

Isakson called the provision a “once-in-a-lifetime” credit that can “bring the housing market back to some sense of vitality and values.”

Though the previous provision could only be used by individuals making up to $75,000 and couples making up to $150,000, the extended credit can be used by individuals with incomes of up to $125,000 and couples of up to $225,000.

The deal also provides a new $6,500 credit to homebuyers looking to move out of their current homes into more expensive ones….”

The Timeline: From an email from www. FixHousingFirst.com comes this projected schedule:

As you may know, last night the Senate reached a deal on extending and expanding the home buyer tax credit, and they plan on attaching it to the unemployment insurance bill. You can see a copy of the bill here. The tax credit provisions begin on p. 14.

Near as we can tell at this moment, the process from here will go like this:

1. There will be a cloture vote at 5 pm on Monday in the Senate on the new Baucus substitute. If it succeeds, it takes 30 hours to “ripen,” i.e., before the bill can be brought to the floor.
2. Thirty hours later it’s Tuesday night. There will likely then be a cloture vote on the full unemployment insurance bill, as amended.
3. Thirty hours after that, it’s Thursday morning, when the Senate will vote on final passage of the bill.
4. The House could take up the bill as early as Thursday afternoon or Friday.  They likely will just accept the Senate bill and vote on that.  If their bill differs from the Senate bill, then the whole thing has to back through Conference. That’s unlikely at this point – and undesirable.
5. The plan/hope is to have the bill on the President’s desk as soon as next weekend.

Obviously, this is all subject to change without notice. This is the Congress, after all.

You can see from the above that it is important to keep weighing in throughout the week – and sending this link to your network of friends, colleagues, family, neighbors, customers, employees, suppliers and urging them to do the same.  The amount of emails being sent through the Fix Housing First site has been fantastic – keep it up!”

Summary: So hang in there, be patient, something is coming in the near future. What the final product will be after both Houses get done with it, no one can predict. Keep checking back or subscribe to the RSS feed for updated information as it occurs. peace.

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• The GOP Hits The Brakes (andrewsullivan.theatlantic.com)
• Senators Look to Expand Home Buyer Tax Credit (abcnews.go.com)

Illinois Home Start Loan Program can help Naperville buyers

THE ILLINOIS HOME START LOAN PROGRAM FOR FIRST TIME HOME BUYERS

Naperville area first time home buyers, the State of Illinois has come up with a program to allow you to use the Federal Tax Credit monies as a zero interest loan to cover a portion of your down payment. A couple of caveats:  the program (as we interpret the just published guidelines) only applies to single family homes, and, you must use one of the Illinois Housing Development Authority (IHDA) approved lenders.

The following information was taken from an IHDA brochure. A chart detailing Home Start Program Requirements may be found here.

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The Illinois Home Start Loan Program helps to make home ownership affordable for home buyers wishing to purchase their first home. The Program offers two loans: the Home Start 30 Year Fixed Rate Loan and an optional Home Start Tax Credit Advance Loan. The Illinois Home Start Loan Program is offered by the Illinois Housing Development Authority (IHDA) on behalf of the State of Illinois and is available through IHDA lending partners across the state.

30 Year Fixed Rate Loan

What you get:

• 30 year loan
• Fixed interest rate
• Loan insured by the Federal Housing Administration (FHA)
• Option to use in conjunction with the Home Start Tax Credit Advance Loan Program.

Qualifications:

• First time home buyer (except Veterans and active duty service personnel)
• Minimum credit score of 660
• Must be able to contribute 1% of the purchase price from their own savings, or $1,000, whichever is greater.
• Eligible properties must be existing one-unit, single family properties.
• Must complete home buyer education ***

Restrictions:

• Income and purchase price limits apply ***
• Property must be occupied as the home buyer’s primary residence within 60 days of closing. Home buyer must maintain occupancy for the life of the loan.
• May not be used with a Mortgage Credit Certificate (mcc)

Tax Credit Advance Loan

How it works:

The Illinois Home Start Tax Credit Advance Loan allows first time home buyers who plan to take advantage of the $8,000 federal stimulus tax credit access to the refund to use for the down payment on their new home. IHDA will make a 0% interest loan for up to 3.5% of the purchase price with a maximum loan amount of $6,000. If the Tax Credit Advance Loan is repaid in full by June 30, 2010, only the first mortgage remains. Otherwise the Tax Credit Advance Loan will become a second position ten year amortizing loan at 0.5% above the interest rate on the Illinois Home Start 30 year loan.

Qualifications:

• Must qualify and secure a Home Start 30 Year Fixed Rate Loan
• First time home buyer (except Veterans and active duty service personnel)
• Must complete home buyer education ***

Restrictions:

• Must be used with the 30 Year Fixed Rate Loan
• Home purchase and mortgage loan must close on or before November 30, 2009
• May not be combined with other grant sources funded by the Illinois Affordable Housing Trust Fund or federal HOME funds
• Income restrictions apply ***

Fee:

A $300 processing fee will be charged for each loan at closing. If the loan is repaid in full by June 30, 2010, $100 of that fee will be refunded to the home buyer.

How to apply: Contact an IHDA partner lender to apply ***

PLEASE NOTE: Participation in the Home Start Tax Credit Advance Loan program is entirely optional. Home buyers can opt for just the Home Start 30 Year Fixed Rate Loan. However, participation in JUST the tax credit advance program is not permitted

*** For more details, visit: www.ihda.org

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.)