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Tags: first time home buyers, tax credit

Answers About The $8,000 First-Time Home Buyer Tax Credit

Q: Who is eligible to use the tax credit?

A: The $8,000 tax credit is available for first-time home buyers only. The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase. All U.S. citizens who file taxes are eligible to participate in the program.

Q: Are there any payback provisions?

A: The tax credit is a true credit. It does not have to be repaid. The only repayment requirement is if the home owner sold the home within three years after the purchase.

Q: Are there income limits to qualify for the credit?

A: Home buyers who file as single or head-of-household taxpayers can claim the full $8,000 credit if their modified adjusted gross income (MAGI) is less than $75,000. For married couples filing a joint return, the income limit doubles to $150,000.

Single or head-of-household taxpayers who earn between $75,000 and $95,000 are eligible to receive a partial first-time home buyer tax credit. Married couples who earn between $150,000 and $170,000 are eligible to receive a partial first-time home buyer tax credit.

The credit is not available for single taxpayers whose MAGI is greater than $95,000 and married couples with a MAGI that exceeds $170,000.

Q: What are the effective dates for the tax credit?

A: First-time home buyers would receive an $8,000 tax credit for the purchase of any home on or after January 1, 2009 and before December 1, 2009. To qualify, you must actually close on the sale of the home during this period.

Q: Is the tax credit refundable?

A: Yes. A refundable credit means that if you pay less than $8,000 in federal income taxes, then the government will write you a check for the difference. For example, if you owe $5,000 in federal income taxes, you would pay nothing to the IRS and receive a $3,000 payment from the government.

If you are due to receive a $1,000 tax refund from the government, your refund would grow to $9,000 ($1,000 plus $8,000 from the home buyer tax credit).

Q: What years can buyers apply the tax credit to their tax returns?

A: Buyers can take the tax credit on their 2008 or 2009 income tax return.

Q: What types of homes qualify for the tax credit?

A: All homes, whether single-family, townhomes or condominium apartments will qualify, provided that the home will be used as a principal residence and the buyer has not owned a principal residence in the prior three years. This also includes newly-constructed homes.

Q: Where can I find more details on the tax credit?

A: NAHB has a consumer Web site that provides comprehensive information on the tax credit. The Web site is www.federalhousingtaxcredit.com

If you have any other questions or need further details, call us at either 609-417-1084 or 609-417-1086.

Linda & Terry Iwaniw
ReSales & Investment Realty, LLC
856-795-3111 x263
http://www.snewjerseyhomes.com
info@i-teamhomes.com

Tags: Buyer Information, Finances, first time home buyers, home buying, tax credit

NJHMFA Offers Cash Advance for First-time Buyers

We’ve had many a buyer call us and ask how the $8000 tax credit can help them buy a home if they can’t get that money until they buy a home.  A classic Catch-22.  Well, NJ has come up with an answer for those first time home buyers who need the tax credit money to help them with their downpayment or closing costs.

The New Jersey Housing Mortgage Finance Agency (NJHMFA) is offering cash payments, in the form of a zero interest loan, of up to $5,000 for qualified first-time home buyers in order to help them defray their closing costs or to satisfy the downpayment requirements.  This will then help new home buyers get into the housing market and buy their first home.

This zero interest loan, offered as part of NJHMFA’s “Prefund” program, would act like a cash advance against the $8,000 tax credit that is being offered to first time home buyers who purchase their home between April 8 and December 1 of this year. Basically, home buyers would be provided with the payment as a loan and would be required to repay the advance/loan when they receive their federal tax credit.

Who can get this zero interest loan/cash advance?  The loan/cash advance is available to first time home buyers who:

• Arrange their financing through the NJHMFA. (You can obtain a list of participating lenders by calling their toll-free number at  (800) NJ HOUSE)

• Are qualified for the tax credit offered as a part of the federal stimulus program

• Pledge to apply the proceeds of their tax credit to repay the cash

For more details about the NJHMFA’s First Time Home Buyers Tax Credit Loan Program (TCLP) you can visit the HMFA page (http://www.state.nj.us/dca/hmfa/consu/buyers/ownprg/tclp.html).

Tags: 8000 tax credit, first time home buyer, first time home buyers, HMFA, tax credit, zero interest loan

Is There Another Mortgage Fraud is on the Horizon?

In the last two days we have received numerous flyers in our e-mail from local mortgage representatives telling us that First Time Home Buyers can receive their $8,000 credit UP FRONT and use this money as a DOWN PAYMENT. This sounded too good to be true so we checked it out and we were right, this was too good to be true. 

We personally phoned the IRS this morning, February 27, 2009 and spoke with an IRS expert on the First Time Home Buyers Credit.  This is what we learned:

The 2009 tax credit is for $8,000 and for properties purchased in 2009 by first time home buyers and does not have to be paid back provided the buyer lives there for 3 years. 

The buyer can apply for the 2009 tax credit on their 2008 income tax return if they have not filed yet.  If the buyer has already filed their 2008 return and received their refund or paid their taxes, they can file an amended return and receive the $8,000 tax credit without having to wait to file the 2009 taxes. Of course, the buyer can wait and apply for the $8,000 tax credit when they file their 2009 income taxes next year.

This provision, while a little confusing, was designed to jump start housing market. However, under NO CIRCUMSTANCES can a buyer apply for this $8,000 credit BEFORE THEY CLOSE ON THE PROPERTY AND USE THIS MONEY FOR A DOWNPAYMENT.  They are not a FIRST TIME HOME BUYER until they have (bought) closed on the house and have the keys in their hands.

If you think about this logically, you would realize that if in fact this was an $8,000 gift for a down payment, it would be all over the news.  We wouldn’t need some mortgage representative to tell us about it. This very loose interpretation of the First Time Home Buyers credit is just another attempt to get around the rules.

We can think of some serious ramifications of applying for a tax credit you have yet to earn.  We can sum it up in two words TAX FRAUD.  We do not want any mortgage representative telling our  buyers to commit fraud.  We can imagine some nightmare scenarios that we do not wish to be involved, the least of which the buyer does not settle, for whatever reason and has applied for and received the $8,000 credit.  The worst of this is that when the ‘buyer’ is audited the following year, for applying for a tax credit that they did not earn and they tells the auditor that their real estate agent told them to file for the money.

We suggest that anyone who is interested in finding out the FACTS regarding this $8,000 tax credit for first time home buyers, that they call the IRS directly at 1-800-829-1040 and ask to speak to an agent who is familiar with the FIRST TIME HOME BUYERS CREDIT and ask the direct question, “Can a first time home buyer apply for the $8,000 credit before they close on a property and use this money for a down payment?”  The answer will be NO.  But check it out for yourself.  If you have a buyer who has been told this by a mortgage rep and does not believe you when you tell them they cannot apply for this credit before they close on the property, give them the IRS number.  Keep in mind that you are calling the Federal Government and will be on hold for 15-20 minutes.  But it is worth the wait to learn the facts.  Use your speaker phone, the time will fly by.

If something sounds too good to be true, it is our responsibility to wade through the muck and verify, verify, verify.  The last thing we need is another mortgage catastrophe a few years out

Linda Kerr Iwaniw & Terry Iwaniw

RESALES & INVESTMENT REALTY, LLC

Haddonfield, NJ.

Tags: buying a home, first time buyers, first time home buyers, firstv time home buyer credit, homeowners, mortgages, tax credit

American Recovery and Reinvestment Act

The American Recovery and Reinvestment Act of 2009, H.R. 1, was signed into law by President Obama on February 17, 2009. A couple of key npoints that were supported by REALTORS® and The National Association of REALTORS® were:

• 1. $8,000 first-time home buyer tax credit that would be available to first-time home buyers for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009. View a chart detailing this provision.
• 2. Commercial real estate provisions, which focus on green building and energy efficiency as well as business tax incentives. H.R. 1 provides significant funds for New Jersey energy programs, which in turn, could help support commercial property owners’ investment in energy efficiency upgrades.

This is the perfect time to buy your next home. Besides the additional tax credits (they net against your current tax liability – if you owe money, this credit reduces that amount and if you have money being returned to you, this increases the amount you have coming), home prices are at their lowest in decades, and interest rate are at a point where they cannot go anywhere but UP.

This has also reinstated the higher loan limits for Federal Housing Administration (FHA), Fannie Mae and Freddie Mac. View the newly approved loan limit estimates.  Lastly, you may want to view an outline of the Homeowner Affordability and Stability Plan, which President Obama announced on February 18, 2009 designed to help up to 7-9 million families avoid foreclosure by restructuring or refinancing their mortgages.

Tags: American Recovery and Reinvestment Act, first time home buyers, home buyers, loan limits, obama, tax credit, tax credit for buyers

Stimulus Advances With Tax Credit Changes

The $790 billion stimulus package hammered out by House and Senate conferees late yesterday increases the home buyer tax credit to $8,000, from $7,500, and drops the repayment feature for buyers who hold on to their property for at least three years.

The NATIONAL ASSOCIATION OF REALTORS ® has sought removal of the repayment requirement because it discourages buyers from taking advantage of the tax credit. The three-year minimum holding period is a safeguard against speculators’ use of the credit.

The legislation also extends the effective date of the credit to December 1 from June 30, and extends eligibility to borrowers who buy their home with the help of state or local financial assistance that comes from the proceeds of tax-exempt mortgage revenue bonds.

The credit remains open only to first-time buyers (those who haven’t owned in at least three years) and some income eligibility restrictions apply, but those are unchanged from the existing program.

Other provisions reportedly in the bill that could help housing markets and communities include:

• FHA and conforming loan limits.
  Specifics have not been released but reports indicate that the 2008 limits have been reinstated for 2009 except in those communities where the 2009 limits are higher.  Additional increases in individual communities may also be available at the discretion of the secretary of the U.S. Department of Housing and Urban Development.
• Foreclosure mitigation and neighborhood stabilization.
  Funding for states and localities to be used for neighborhood stabilization activities for the redevelopment of abandoned and foreclosed homes are authorized. Some news reports put the funding level at $2 billion.
• Rental assistance.
  Up to $1.5 billion to provide short-term rental assistance and other aid for families during the economic crisis.
• Transportation infrastructure.
  Up to $29 billion for highway construction projects, $8 billion for rail projects, and $5 billion to weatherize low-income homes.
• Rural housing development.
  Increased funding for the Rural Housing Service direct and guaranteed loan programs.
• Low-income housing grants.
  Allow states to trade in a portion of their 2009 low-income housing tax credits for Treasury grants to finance the construction or acquisition and rehabilitation of low-income housing, including those with or without tax credit allocations
• Tax-exempt housing bonds.
  Tax-exempt interest earned on specified state and local bonds issued during 2009 and 2010 will not be subject to the Alternative Minimum Tax (AMT). In addition, financial institutions will have greater capacity to purchase tax-exempt state and local bonds
• Energy efficient housing.
  Grants for energy retrofits for federally assisted housing (Section 8), funding for energy efficiency and conservation block grants to states, and Increases in the residential tax credit through 2010 for certain energy efficient upgrades.

Tags: Alternative Minimum Tax, AMT, buyers, buying a home, economic stimulus, Energy efficient housing, grants, tax credit, tax credit for buyers

Did you hear the latest news? Senate OKs $15,000 tax break for homebuyers

The housing industry should get a big boost from the latest addition to the stimulus bill that is working its way through the  Congress.  On Wednesday, Senators approved a proposal that would give home buyers a tax credit of 10% of the value of new or existing residences, up to a $15,000 limit. The current law, that was passed last year, provides for a $7,500 tax break and only for first-time homebuyers.

Sen. Johnny Isakson, (R-Georgia) said “It is time to fix housing first.”  Isakson’s office said the proposal would cost the government an estimated $19 billion. In all, the stimulus is now topping an estimated $920 billion.

President Barack Obama, in an op-ed that appears in Thursday’s Washington Post, painted a dire picture if Congress fails to move quickly to pass the stimulus bill.  “This recession might linger for years. Our economy will lose 5 million more jobs. Unemployment will approach double digits. Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse,” Obama wrote in the op-ed titled, “The Action Americans Need.“

Tags: attracting buyers, buyer credit, congress, Housing, housing market, obama, stimulus, tax breaks, tax credit

First-Time Buyer Tax Credit

The $7,500 home ownership tax credit that the federal government created earlier this year as part of the Housing and Economic Recovery Act (H.R. 3221) is another tool at your disposal to encourage potential buyers to jump off the fence and get into the real estate market.

When you combine the tax credit with today’s low interest rates, wide selection of for-sale inventory, and affordable home prices, many of the pieces are in place for your customers to buy now. But tax credits can be confusing.

Here are 6 things you should know about the tax credit:

1. Buyers have until July 2009 to make a purchase that qualifies.
   The tax credit was passed in July of this year as part of the Housing and Economic Recovery Act (H.R. 3221). It’s worth up to $7,500 and can be taken in a single tax year. Authorization for the credit ends July 1, 2009, so if you wait to buy in the first half of 2009 you can take the credit on your 2009 tax return. You can take the credit on your 2008 tax return if you bought your house this year after April 9.
2. Buyers don’t really have to be “first-timers.”
   The tax credit is actually available to any individual or household that hasn’t owned a home for at least three years. And the NATIONAL ASSOCIATION OF REALTORS® has asked Congress to expand the credit to all buyers, not just those who haven’t owned a primary residence in recent years.
3. Even if buyers exceed the income limit, they can benefit from the credit.
   The actual credit amount is set as a percentage of the home purchase amount. That percentage amount is 10 percent, so your customers can get 10 percent of the home price credited against their tax liability, up to a maximum $7,500. Sounds like a great deal. But what if you make more money than the income limit of $75,000 for individuals and $150,000 for households? Good news: Individuals whose income exceeds the $75,000 limit but don’t make more than $95,000 can still take the credit but on a reduced basis. The same thing applies to households earning up to $170,000. By the way, any house is eligible as long as it’s a primary residence and is in the United States.
4. Think of it as an interest-free loan.
   The federal government requires the tax credit to be paid back in small, 6.67-percent increments over 15 years, although repayment will be no more than $500 yearly and payments will not start until 2011. For that reason, some analysts have likened the credit to a 15-year, interest-free loan to help make home buying affordable. NAR is pushing congress to remove the repayment provision, making this tax credit a true tax credit rather than an interest-free loan.
5. You don’t have to be authorized before making a home purchase.
   There is no pre-purchase authorization, application, or other approval process. Eligible buyers simply have to claim the credit on their IRS Form 1040 tax return and/or any form that the IRS might devise.
6. New-home construction qualifies.
   For a home that a buyer constructs, the purchase date is the first date the buyer occupies the home. However, any home that is not a primary residence, such as a vacation home or income property, does not qualify.

NAR Asking Congress to Expand Credit

As mentioned above, NAR has asked Congress to do away with the repayment provision of the first-time buyer tax credit and expand the credit to all home buyers, not just first-timers. The proposals were part of a four-point housing stimulus plan the association submitted in mid-October.

“Housing has always lifted the economy out of downturns, and it is imperative to get the housing market moving forward as quickly as possible,” said NAR President Richard F. Gaylord. “It is vital to the economy that Congress take specific actions to boost the confidence of potential homebuyers in the housing market and make it easier for qualified buyers to get safe and affordable mortgage loans.

Tags: buyers, Finances, first time buyers, first time home buyers, homes sales, tax credit

Clarification of the Buyer’s Credit Being Offered

The recently passed housing bill has a provision in it that 1st time homebuyers a tax credit of 10% (up to $7500) of the purchase price in the form of a tax credit.  What this means is that any first time homebuyer who purchases a home between April 9, 2008 and July 1, 2009 is eligible to receive this credit on their 2008 Tax Return.  This $7500 IS NOT a grant to be used for closing or down payment, you will not be receiving any funds from the federal governemnt.  It is a tax credit towards their next tax return that you file.  As an example, if a client has a tax liability of $10,000 for 2008 they will get a $7500 tax credit / tax refund and will only owe $2,500 in taxes for the year.  There is no way to get this money earlier then when they file their 2008 tax returns. 

Additionally, after receiving this tax credit, the homebuyer then has to repay the $7500 over the next 15 years. Meaning what,you may ask?   This means that they will have an additional tax liability for each subsequent year of $500 for the next 15 years. 

If you have any other question, please feel free to give me a call at 609-417-1086.

Terry Iwaniw
REALTOR Associate
RE/MAX Home Team
Laurel Springs, NJ
http://www.snewjerseyhomes.com/
http://www.i-teamhomes.com/
609-417-1086

Tags: 1st time buyers, federal government, Finances, housing bill, housing rescue bill, mortgages, tax credit