Home Buyer's Tax Credit About to End

You're probably up to your neck by now in forms and paperwork as the April 15th income tax deadline approaches. Maybe you've already completed your taxes, paid your bill, or are awaiting your refund check. Either way, now is the perfect time to revisit the extended and expanded Home Buyer's Tax Credit.

Why? Because now, as you calculate your tax bill or your refund, you can finally see in real terms just how beneficial a tax credit of up to $8,000 can be to your bottom line.

Here's the basics:

Qualified 2009 and 2010 first-time home buyers can get up to 10% of the home's purchase price or a maximum of $8,000. In November 2009, legislation extended a tax credit of up to $6,500 (or up 10% of the home's purchase price) to long-time residents of the same primary residence if they purchase a new main home. To qualify, eligible taxpayers must show that they lived in their previous homes for a five-consecutive-year period during the eight-year period ending on the closing date of the new home.

Important details to remember:

1) You don't have to pay it back (as long as you stay in your qualified home for at least 36 months).

2) If you qualify for the credit, you can still apply it to this year's taxes, even if you've already filed your returns, or save it for your 2010 returns.

3) This is a true tax credit, not a deduction. If you qualify for the full credit, there will be an actual dollar-for-dollar reduction of up to $8,000 (or up to $6,500 for qualified repeat buyers) on your tax bill now or in 2010.

4) New income qualification limits have been put in place that expanded the pool of qualified buyers.

5) If you purchased a qualified home or plan to after reading this article, you must have a contract in place by April 30, 2010 (with closing to take place by June 30, 2010), so don't wait!

There are, of course, other details and qualification requirements and restrictions that you'll need to consider. But don't hesitate to give us a call if you have any questions. Also, if you happen to have your completed 2009 tax return handy, we'll help you calculate how much money you can get if you purchase a home and qualify for the full credit.

How Interest Rates Move

New FHA Guidelines Going to Get Tougher and More Expensive

Securing an FHA mortgage is about to get more expensive.

In a statement issued Wednesday, the Federal Housing Authority outlined policy changes to its mortgage assistance program. The shift is meant to both reduce the government group’s portfolio risk while strengthening its overall financials.
For consumers in Texas, the changes mean higher costs.

There are 3 major guideline updates for the FHA:

1. Upfront mortgage insurance premiums are increasing to 2.25% from 1.75%
2. Minimum down payments for applicants with 580 FICOs are rising to 10%
3. Seller concessions are being limited to 3%, down from today’s allowable 6%

Furthermore, FHA has appealed Congress to raise an FHA borrowers’ monthly mortgage insurance premiums.

As a result, homebuyers in Houston, Sugarland, Pearland, Katy, Woodlands should expect tougher FHA underwriting in 2010. Not because the FHA says so, necessarily, but because banks don’t want to do “bad loans”. Lenders are incented to turn down at-risk applicants and, already, we’re seeing examples of this. Despite FHA allowing 580 FICOs and lower, many banks have made 620 their minimum.
Some have other guideline overlays, too.

The FHA’s new guidelines don’t go into effect until spring. So, between now and then, the old guidelines will apply. Therefore, if you know you’re going to need an FHA home loan in the next few months in Texas, consider moving up your time-frame.
If nothing else, you’ll save some money at closing.

Contact Network Funding in Houston to Qualify for Your FREE FHA Home Loan Approval Today!

Useful Tips on Buying a Home

Making Sense of the New GFE and HUD-1

WHAT IS TAX DEDUCTIBLE IN THE LOAN PROCESS?

1. Home acquisition mortgage loan fees. If you bought your primary or secondary home in 2009, you probably obtained a mortgage to finance the purchase. That mortgage is called an “acquisition mortgage” because it enabled purchase of the residence. If you paid a loan fee to obtain that acquisition mortgage, usually called “points”, that loan fee qualifies as an itemized interest deduction. Each point paid equals 1% of the amount borrowed.

2. Home improvement loan fees. Similarly, if you paid a loan fee to obtain a home improvement loan, that loan fee is fully deductible in the tax year it was paid.

3. Loan fees paid to refinance a home loan (or borrow against other real estate). If you refinance your existing home loan in 2009, or borrowed against other real estate such as an apartment building, any loan fee you paid must be deducted over the life of the mortgage.

4. When refinancing, deduct any loan fees that have not already been claimed. Thanks to low mortgage interest rates, many homeowners refinanced again in 2009, or borrowed against other real estate such as an apartment building. Any loan fee you paid must be deducted over the life of the mortgage.

5. If you bought or sold property in 2009 remember to deduct prorated real estate taxes. A major tax deduction many real estate buyers and sellers overlook is the prorated property tax they paid at the close of escrow. Even if the other party remitted the payment to the tax collector, but you were charged a prorated portion of the tax bill, be sure to deduct your share on your 2009 return.

6. Deduct prorated mortgage interest in the year of property purchase or sale. Similarly, if bought a residence and took over an existing mortgage, don’t forget to deduct your prorated interest share for the month of the sale. Your closing settlement statement shows your prorated share of the mortgage interest.

7. Mortgage prepayment penalty. If you paid off an existing mortgage early and were charged a prepayment penalty by the lender, that prepayment penalty qualified as an itemized deduction.

8. When land rent payment qualify as interest deductions. Million of homes are located on leased land. Internal Revenue Code 163 allows land rent to be deducted like interest when the lease; (a) is for at least 15 years, including renewal periods; (b) is freely assignable; (c) contains a present or future option to buy the land; and (d) is like a security interest, such as a mortgage. Payments to buy the land are not deductible, nor are ground rent payments deductible if you do not have the option to buy the land, such as in a mobile home park.

9. Home construction loan interest. If you built a new home in 2009, or are building one now, don’t forget to deduct the construction loan interest paid. It’s deductible if the construction period does not exceed 24 months before occupancy of your principal residence.

10. Deduct prepaid property taxes and mortgage interest. If you prepaid 2010 real estate taxes in 2009, as homeowners do to increase their tax deductions, or if you pay your January 2010, mortgage payment in December 2009, don’t forget to deduct these extra mortgage interest and property tax payments on your 2009, income tax returns.

Don’t forget to file your homestead tax exemption

If you purchased a primary residence prior to January 1st don’t forget to file your homestead tax exemption. Fill out this form and mail it to your appraisal district or the county clerk’s office and those of you who paid an origination fee (a point), remember…. it is a tax-deductible expense!