While the passing of this credit is still to come,according to the Wall Street Journal,  the Senate  reached a compromise on extending and expanding the $8,000 tax credit for first-time home buyers.  The terms of the new agreement are as follows:

• Extend the first time buyer credit worth up to $8k (read about the current program)
• Offer a new credit of up to $6,500 for existing homeowners given the home buyer has lived in their current residence for 5 out of the last 8 years (consecutively)
• Raise the qualifying income limits to $125k  for single taxpayers and $250k for joint taxpayers (Current is $75k and $150k)
• Have sales agreements April 30,2010 and close by June 30, 2010

This isn’t a done deal, this agreement still faces votes in the Senate and the House.  Increasing the duration of this program will certainly continue to help sales of homes under $400k.  Adding the credit to existing homeowners should help stimulate the “trade up” market.

Did you know that?   We didn’t. After searching a multitude of sites including the official FHA, IRS and first time home buyer tax credit sites and making several calls we still didnt have an answer.  Finally, I found official documentation on the IRS page.  It wasn’t located under guidelines, or even frequently asked questions but it was under “scenarios”.  Glad they made that easy for the millions of people seeking information on the tax credit.

According to the IRS “scenario”, if a first time home buyer who otherwise qualifies for the tax credit purchases a duplex, then he or she is entitled to a tax credit equal to 10% of the purchase price allocated towards the unit the buyer will be occupying as primary residence.   There is still a maximum credit of $8,000.  Simply put, if you buy a property with two equal units, then half of the purchase price would be the basis for the 10% credit.  A purchase of a building that costs $160k or more and has two equal units will allow the homebuyer to achieve the maximum credit. 

Oh, and in case you were wondering, if a homebuyer buys a travel trailer and it is attached to land, he or she also qualifies for the credit.

The U.S. Department of Housing and Urban Development (HUD) issued a release which outlines upcoming changes designed to streamline the approval process for FHA financing for condominium projects.

Most notably, there is a provision stating, “Right of first refusal is permitted unless it violates discriminatory conduct under the Fair Housing Act regulation in 24 CFR 100”, essentially lifting HUD’s long-standing policy of denying all condominium projects with a right of first refusal provision.

So, what does that mean to you, the consumer?  It means that more of the condo buildings that contained the right of first refusal clause in their bylaws, that were previously nearly impossible for a consumer to purchase using an FHA loan, will now be eligible for FHA loans.

The changes are set to be effective October 1, 2009.

You can read the entire release here.

A couple weeks ago, the NAR made an announcement that the $8000 tax credit could be used as the down payment for FHA loans.  Some opined that lenders would provide a “bridge loan” for the down payment.  Unfortunately, this was rescinded.  Currently, the funds are only available in the form of a tax credit, which entitles first time home buyers a refund on their 2009 taxes (claimed in 2010).

There are several hypotheses as to why it was rescinded.  The first is that law makers believe buyers should have some of their own money invested in the property.   They believe that one of the factors that led to the sub prime meltdown was 100% financing.  When a buyer has their own money invested in a property, they may be less likely to default.  Currently, FHA requires a 3.5% down payment.

The second reason seems to rest on the “bridge loan.”  While in theory, the loan seems safe to the lender, because the IRS is paying the tax credit.  However, they questioned how they would get reimbursed  after the buyer received it.

In the end, it was rescinded.

There have been rumors that third party non for profits like NACA may somehow get involved.

Nonetheless, the $8000 tax credit is still a HUGE incentive.

As we all have just experienced, the rules are changing at a torrid pace, sometimes daily.  It is essential that we all stay up to date so we can provide the best customer service.

If you have any questions you can contact Marc at marcj@aandnmortgage.com.

According to Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development (HUD), 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 on the purchase of a new home.  He shared this information at midyear legislative meetings held in Washington D.C. on Tuesday.

Up until now, home buyers were only able to obtain the credit at tax filing time.  The goal of this change is to allow the FHA home buyer to have upfront access to funds when they close on their home.  By permitting this ”early” credit, many more people will be able to purchase homes.  It also may mean people can spend more on their new home as a result of having up to an additional $8,000 for their down payment.  Saving a down payment is often the challenge of the first time home buyer.

Eligible home buyers will be able to access the funds immediately at the closing table because FHA’s approved lenders will be permitted to monetize the tax credit through short-term bridge loans.

While this attempt to further stimulate the market is a valiant one, it may mean that irresponsible buyers could simply use that tax credit to buy the home, default on the mortgage without ever have invested a dime of their own money.  Unless the use is still restricted on a certain percentage of the money for purchase comes directly from a buyer’s bank account. 

The restrictions/limitations on this new plan have not yet been published.  I will follow up when the details are publicized.