Home Buying Tips

$8,000.00 Tax Credit Extended Through April 30, 2010

In what has been urged as a must-have by real estate professionals and builders, the $8000 tax credit for first-time home buyers (previously due to expire Nov. 30), has been extended through April 30, 2010, according to the Associated Press. Not only has it been extended, but it has also been expanded to include more buyers.

Details on Tax Credit Extension:

• $8000 tax credit for first-time homebuyers extended for buyers who sign a contract by April 30, 2010 (and who close by the end of June).
• $6500 tax credit offered to homebuyers who have lived in their current residence at least five years and who want to “trade up” (buy a new primary residence).
• Couples earning as much as $225,000 a year and individuals earning up to $125,000 would qualify (up from $75,000 for individuals and $150,000 for couples).
• Tax credit not applicable for those buying homes worth more than $800,000.
• Those who sell their new home or stop using it as their main residence within three years would have to repay the credit.

Will the Tax Credit Extension Help?

According to a recent survey Zillow conducted through Harris Interactive, nearly one in five (18%) prospective first-time home buyers said extending the $8,000 tax credit would be the primary influence on their decision to buy a home before the end of 2010, potentially stimulating an additional 334,000 home sales. The caveat here is the survey asked first-time homebuyers if they would purchase a home prior to the end of 2010; this bill will only go through April 2010, not the end of 2010 and it involves a different type of buyer, as well.

The cost for the tax credit extension is estimated to be $10 billion and opinions vary on whether it will actually help the economy or not.

Reminder: $8,000.00 Tax Credit Expires on 11/30/2009

You may have heard throughout this year that the tax credit is good on homes purchased between January 1st and December 1st, 2009.  That’s true, but pay attention to the wording.  It doesn’t say through December 1st, but between January 1st and December 1st, which means that first time home buyers must officially “close ” on their home purchase before the first of December, otherwise,  you’ll be too late.  To get the credit you’ll have to settle by November 30th, 2009.

Clearing Up Some Mis-conceptions About the $8,000.00 Tax Credit

Ever since the government announced it, there’s been lots of talk, and plenty of excitement, surrounding the $8,000 federal tax credit for new homebuyers.  Think you know everything about it?  Think again…

With all of the information out there, there’s also been some mis-information floating about as well, and we aim to set the record straight.  It doesn’t matter if you’re buying or if you’re selling, because the new tax credit can help you either way.  This is info you need to know.

Let’s start off with the amount: $8,000.00

Now, that’s not $8,000.00 per person.  That’s $8,000.00 per transaction.  Single? $8,000.00.  Married? $8,000.00.  Married, but filing your taxes separately?  You get $4,000.00 apiece, for a maximum of… you guessed it, $8000.00.

Another misconception: every first time home buyer will get that $8,000.00.  Not true.  If you’re single, and your income is more than $75,000.00 a year, or if you’re married and filing jointly with an income of more than $150,000.00, you will get less than the maximum.  The more you make, the less credit you get.

And say you actually managed to find a house somewhere for $8,000.00, would you get it for free?  Nope.  If you buy a house that costs less than $80,000.00, you get 10% of the purchase price.  So, if you buy a home for $50,000.00 you’d get a credit of $5,000.00.

Here’s another mistake folks are making: you may have heard the government say the tax credit is good on homes purchased between January 1st and December 1st, 2009.  That’s true, but pay attention to the wording.  It doesn’t say through December 1st, but between January 1st and December 1st, which means if you close on that house on the first of December, you’ll be too late.  To get the credit you’ll have to settle by November 30th, 2009.

Finally, some people say you’ll have to wait to get the $8,000.00 tax credit, because you either have to file your taxes next year, or file an amended return this year, then wait for the check.  For right now, that’s true, but it could literally change at any minute!

Recently, the Obama administration announced that soon, it will allow qualified buyers to get the $8000 up front, at the settlement table for FHA and certain other loans.  When that happens, those buyers will be able to use the $8000 for closing costs and their down payment.

It just hasn’t become law yet.  Soon, but not yet.

So, please check back with us here at Taylor’d 2 U Realty regularly.  We will be sure to let you know officially when this happens!

HUD: Tax Credit Can Be Used On Closing Costs

FHA-approved lenders received the go-ahead to develop bridge-loan products that enable first-time buyers to use the benefits of the federal tax credit upfront, according to eagerly awaited guidance from the U.S. Department of Housing and Urban Development on so-called home buyer tax credit loans that was released today.

Under the guidance, FHA-approved lenders can develop bridge loans that home buyers can use to help cover their closing costs, buy down their interest rate, or put down more than the minimum 3.5 percent.

The loans can’t be used to cover the minimum 3.5 percent, senior HUD officials told reporters on a conference call Friday morning.

Thus, buyers applying for FHA-backed financing with an FHA-approved lender that offers a bridge-loan program can get a bridge loan to bring down the upfront costs of buying a home significantly but would still have to come up with the minimum 3.5 percent downpayment.

There remain many sources of assistance for buyers needing help with the 3.5 percent downpayment, including many state and local government instrumentalities and nonprofit lenders.

In addition, some state housing finance agencies have developed their own tax credit bridge loan programs, so buyers in states whose HFAs offer such programs can monetize the tax credit upfront to cover all or part of their downpayment. These programs are separate from what HUD announced today.

The first-time homebuyer tax credit was enacted last year–and improved upon earlier this year–to help encourage households to enter the housing market while interest rates are low and affordability is high. The credit is worth up to $8,000 and is available to households that haven’t owned a home in at least three years. The credit does not have to be repaid, and is fully reimbursable, so households can get their credit returned to them in the form of a payment.

Money Saving Tips at Closing

There are a number of money saving ideas you can use to save money on your mortgage and at the closing table. The most obvious is to ask the seller to offer payment of closing costs as part of your negotiations for an accepted offer on the home.

If the seller is not willing to let closing costs be deducted from his current asking price, you can suggest that the final sale price of the home be increased to offset closing costs, providing that the home will appraise for amount suggested. Since most closing costs are not tax-deductible, you avoid missing out on the deductions by putting the closing costs into the mortgage for which mortgage interest is tax-deductible.

You can save money at closing by looking for loans that don’t have a lot of administrative fees such as seller financing or taking over an existing mortgage. Such loans will help you avoid purchasing private mortgage insurance (PMI) when you don’t have the standard 20 percent down payment. You can pay a higher rate of interest (typically .75 to 1 percent) or you can use two loans (e.g., 80-10-10) to finance your home purchase. The advantage of financing the amount of the second loan is that the mortgage interest is tax-deductible.

Home Inspections Avert Future Headaches

Suppose you bought a house and later discovered, to your dismay, that the stucco exterior concealed a nasty case of dry rot. Or suppose that when you fired up the furnace in the winter, you discovered a cracked heat exchanger leaking gas into your home. The best way to avoid unpleasant surprises like these is to arrange for a home inspection before you buy.

Home Inspections Help You Avoid Unpleasant Surprises

A good home inspection is an objective, top-to-bottom examination of a home and everything that comes with it. The standard inspection report includes a review of the home’s heating and air-conditioning systems; plumbing and wiring; roof, attic, walls, ceilings, floors, windows, doors, foundation and basement.

Getting a professional inspection is crucial for older homes because age often takes its toll on the roof and other hard-to-reach areas. Problems can also be the result of neglect or hazardous repair work, such as a past owner’s failed attempt to install lights and an outlet in a linen closet.

A home inspection is also a wise investment when buying a new home. In fact, new homes frequently have defects, whether caused by an oversight during construction or simply human error.

Getting an Inspector

Real estate agents can usually recommend an experienced home inspector. Make sure to get an unbiased inspector. You can find one through word-of-mouth referrals, or look in the Yellow Pages or online under “Building Inspection” or “Home Inspection.”

Home inspections cost about a few hundred dollars, depending on the size of the house and location. Inspection fees tend to be higher in urban areas than in rural areas. You may find the cost of inspection high, but it is money well spent. Think of it as an investment in your investment – your future home.

Some builders may try to dissuade you from getting a home inspection on a home they’ve built. They may not necessarily be trying to hide anything because most builders guarantee their work and will fix any problems in your new home before you move in. Some builders, in fact, will offer to do their own inspections. But it’s best to have an objective professional appraisal - insist on a third-party inspector.

An Inspection Will Educate You about Your House

Education is another good reason for getting an inspection. Most buyers want to learn as much as they can about their purchase so they can protect their investment. An examination by an impartial home inspector helps in this learning process.

Ask if you can follow the home inspector on his or her rounds. Most inspectors are glad to share their knowledge, and you’ll be able to ask plenty of questions.

Inspection Timing and Results

Homebuyers usually arrange for an inspection after signing a contract or purchase agreement with the seller. The results may be available immediately or within a few days. The home inspector will review his or her findings with you and alert you to any costly or potentially hazardous conditions. In some cases, you may be advised not to buy the home unless such problems are remedied.

You could include a clause in your purchase agreement that makes your purchase contingent upon satisfactory inspection results. If major problems are found, you can back out of the deal. If costly repairs are warranted, the seller may be willing to adjust the home’s price or the contract’s terms. But when only minor repairs are needed, the buyer and seller can usually work out an agreement that won’t affect the sale price.

Tips on Finding the Right Home for You

Once you’ve settled on a couple of preferred neighborhoods for your home search, it’s time to pick out a few homes to view. Having a house features “wish list” keeps you focused on which features are most important to you.

When narrowing down your home search, consider the following:

• know what types of home you want to buy
• determine what age and condition of the house you want to buy
• consider resale potential
• use a features wish list to keep focused
• use a home search comparison chart to keep organized
• act decisively when you find the right home

Determine What Type of Home You Want to Buy

There are several forms of home ownership: single-family homes, multiple-family homes, condominiums and co-ops.

Single-family homes: One home per lot.

Multiple-family homes: Some buyers, particularly first-timers, start with multiple-family dwellings, so they’ll have rental income to help with their costs. Many mortgage plans, including VA and FHA loans, can be used for buildings with up to four units, if the buyer intends to occupy one of them.

Condominiums: With a condo, you own “from the plaster in.” You also own a certain percentage of the “common elements” - staircases, sidewalks, roofs, etc. Monthly charges pay your share of taxes and insurance on those elements, as well as repairs and maintenance. A homeowner’s association administers the development.

Co-ops: In some cities, cooperative apartments are common. With co-ops, you purchase shares in a corporation that owns the whole building, and you receive a lease to your own unit. A board of directors, comprised of owners and elected by owners, supervises the building management. Monthly charges include your share of an overall mortgage on the building.

Decide What Age and Condition of Home You Want to Purchase

Weigh your needs, budget and personal tastes in deciding whether you want to buy a newly constructed home, an older home or a “fixer-upper” that requires some work.

Consider Resale Potential

As you look at homes, you may want to keep in mind these resale considerations.

• One-bedroom condos are more difficult to resell than two-bedroom condos.
• Two-bedroom/one-bath single houses generally have less appeal than houses with three or more bedrooms, and therefore have less appreciation potential.
• Homes with “curb appeal,” i.e., well-maintained, attractive and with a charming appearance from the street, are the easiest to resell.
• The most expensive houses on the street, or ones with anything unusual or unique are not suited for resale. The best investment potential is traditionally found in a less expensive, more moderately sized home.

Use a Features Wish List to Keep Your Search Focused

Make a features wish list to clarify which features are most and least important to you when looking for a home. Using this features wish list will keep your house hunt focused and effective.

Use a Home Comparison Chart to Keep Your Observations Organized

While house hunting, it’s a good idea to make notes about what you see because viewing several houses at a time can be confusing. Use a home comparison chart to help you keep track of your search, organize your thoughts and record your impressions.

Act Decisively When You Find the Right Home

Before you begin the home buying process, resolve to act promptly when you do find the right house. Every REALTOR® has stories to tell about a couple who looked far and wide for their dream home, finally found it, and then said, “We always promised my Dad we’d sleep on it, so we’ll make an offer tomorrow.” Many times the story had a sad ending - someone else came in that evening with an offer that was accepted.

Resolve that you will act decisively when you find the house that’s clearly right for you. This is particularly important after a long search or if the house is newly listed and/or underpriced.

Tips On Identifying The Right Neighborhoods For Your Home Search

Narrow your home search by identifying neighborhoods that are right for you. This helps keep your search focused and efficient. Your local REALTOR® can offer neighborhood information to guide you in your search.

When evaluating a neighborhood you should investigate local conditions. Depending on your own particular needs and tastes, some of the following factors may be more important considerations than others:

• quality of schools
• property values
• traffic
• crime rate
• future construction
• proximity to schools, employment, hospitals, shops, public transportation, prisons, freeways, airports, beaches, parks, stadiums and cultural centers such as museums and theaters

Neighborhood Search Strategies for Limited Budgets

If you’re a first time-buyer with limited financial resources, it’s wise to buy a home that meets your primary needs in the best neighborhood that fits within your price range. You can maximize your home purchase location by incorporating some of the following strategies into your neighborhood search:

• Upcoming neighborhoods: Look for communities that are likely to become “hot neighborhoods” in the coming years. They can often be discovered on the periphery of the most continuously desirable areas.
  Check for planned future development such as additional transit; new community services such as pools and theatres; and chain stores planning to move in.
  Look for a home in a good neighborhood that is a bit farther out of the city. If commuting is a concern, purchase a home that is close to public transportation.
• Neighborhood demand: Look at the neighborhood demand by asking your real estate agent whether multiple offers are being made, whether the gap between the list price and sale price is decreasing and whether there is active community involvement. You can also drive around neighborhoods and see how many “sale pending” and “sold” signs there are in a particular area.
• Co-ownership: Look into purchasing a condominium or co-op, rather than a house, in a desirable neighborhood. This way you still may be able to purchase in a prime area that you otherwise could not afford.