Congress both extended and expanded the First-Time Home Buyer Tax Credit program Thursday.

The up-to-$8000 tax credit’s expiration date has been pushed forward to spring, requiring homebuyers to be under contract by April 30, 2010, and to be closed by June 30, 2010.

The program’s basic eligibility requirements remain the same:

• Buyers can’t purchase the home from a parent, spouse, or child
• Buyers can’t purchase the home from an entity in which they’re a majority owner
• Buyers can’t acquire the home by gift or inheritance
• All parties to the purchase must meet eligibility requirements

The new law includes some notable updates, however.

For one, the definition of “first-time home buyer” has been expanded to include most homeowners with at least 5 years in their current home.  “Move-up” buyers like these are now eligible for IRS tax credits, but with a cap at $6,500.

This means that you don’t have to be a true first-time home buyer to claim the “first-time home buyer tax credit”.

Other eligibility changes include:

• The subject property’s sales price may not exceed $800,000
• The subject property must be a primary residence
• Income thresholds raised to $125,000 for single-filers and $225,500 for joint-filer

And remember, the First-Time Home Buyer program grants a tax credit as opposed to a deduction.  This means that a tax filer would receive a cash payment of $2,000 from the U.S. Treasury if his “normal” tax liability totals $6,000 and he was eligible for all $8,000 available under the new law.

The complete list of qualifying criteria is posted on the IRS website.  Be sure to review it with a tax professional to determine your eligibility.  Then mark your calendar for April 30, 2010.

It’s 5 months away.

Owned Foreclosure For $100?

All HUD property purchasers are required to obtain a Pre-qualification letter from a lender prior to ratification of their sales contract.

Please contact our Mortgage Planner Friend William Doom for up front and Honest Pre-qualifications
Your Mortgage Planner2.0

Foreclosures (bank-owned) for sale - 4,193

Short Sales for sale - 8,008

Pending (under contract) - 13,125

With respect to real estate and home loans, escrow accounts are used to pay real estate tax bills and homeowners insurance payments.

Escrow accounts are managed and disbursed by lenders.

When a homeowner “escrows” his mortgage, along with his scheduled monthly mortgage payment, he must also send an additional payment to the lender equal to 1/12 of the home’s annual real estate tax bill plus 1/12 of the annual homeowners insurance bill.

By sending a pro rata portion of the tax and insurance bill each month, the homeowner’s escrow account will always, in theory, have enough funds to make payments in full as tax bills and insurance premiums come due.

The industry calls these “strategic defaults” and their numbers grew to 588,000 in 2008, double the total in 2007, and well beyond most earlier estimates.

The study determined:

• Strategic defaulters tend to go straight from paying their mortgages dependably to not paying at all.
• Strategic defaulters are heavily concentrated in negative-equity markets like California and Florida.
• Two-thirds of strategic defaulters have only one mortgage.
• Most likely to default are home owners with large balances and the highest credit ratings.

Piyush Tantia, an Oliver Wyman partner and a principal researcher on the study, said strategic defaulters “are clearly sophisticated” and look on the decision to default as a business strategy. “Well, I’m $200,000 in the hole on my house, and yes, I’ll damage my credit,” Tantia says of defaulters.

Source: Washington Post Writers Group, Kenneth R. Harney (09/27/2009)

Foreclosure (bank owned) listings for sale - 4,178

Short Sale listings for sale - 7,892

Pending (under contract) listings - 12,817

Considering it can take up to 60 days to close on a home, first-time buyers have 2 weeks at most to find a home.

Buyers not under contract by October 15 have little chance of meeting the November 30 deadline and, therefore, little chance of claiming the tax credit.

This is especially true for purchases involving short sales and foreclosures.

Congress passed the First-Time Homebuyer Tax Credit program as part of the 2009 economic stimulus plan.  IRS Form 5405 outlines the program criteria and includes the following stipulations:

• Buyer may not have owned a “main home” in the past 36 months
• The home may not be purchased from a parent, spouse, or child
• Adjusted gross income for the household must be below $95,000 for single tax filers and $170,000 for joint tax filers

The credit is capped at $8,000 or 10% of the purchase price, whichever is less.  And don’t forget – the First-Time Home Buyer Tax Credit is a true tax credit.  It’s not a deduction.

This means that a tax filer who claims the full $8,000 and whose “normal” tax liability is $5,000 would receive $3,000 cash from the US Treasury when their tax return is processed by the IRS.

If you can’t close by November 30, 2009, though, you can’t claim the credit.

The clock is ticking. If you’re planning to use the First-Time Home Buyer Tax Credit, the time to act is now.

PENDING listins under contract: 12,327

Bank owned FORECLOURES for sale: 4,175

Short Sales for sale: 7,790

25% of option ARM mortgage loans are either 90 days delinquent or in the process of foreclosure (1 our of every 4!)

12% of ALL mortgages are either delinquent or in foreclosure.

FHA loans in delinquencies or foreclosure - 16%

VA loans in delinquencies or foreclosure - 10%

Lots more opportunity to buy real estate at a major discount is coming down the pipe - are you ready to snatch up a great investment?

Newspaper headlines today are overwhelmingly negative on housing. You’d almost believe this year’s housing recovery had ended.

That’s hardly the case.

See, the other side of the Existing Home Sales story is that — while the number of units sold did fall by 3 percent — the existing supply fell by nearly an entire month.

To home buyers and home sellers, this is huge.  Home prices are based on supply and demand and with supplies plummeting, it means that home prices are poised to rise.

Indeed, dwindling inventory isn’t “news” to today’s buyers.  Multiple offer situations have been common since the start of the summer and, should supplies fall further, they may soon be the home-buying rule rather than the exception.

Since peaking in November 2008, existing home supplies are down 23%.