Key dates on the Obama tax credit for first time home buyers and move up buyers in Minnesota

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Can you believe we are only a week away from St Patricks Day 2010?  Me neither!  Here are some important dates and if you are “on the fence’ you should give me a call at 651.210.9593 so you get in before the deadlines. 

FHA closing costs are changing from a maximum of 6% right now to a maxium of 3% on case numbers assigned on and after April 5, 2010.  A case number is an FHA “identifier” of you and the property.  Typically 3% is sufficient to cover most closing costs but on smaller loans I see some 6% seller paid files.

Second, FHA Upfront MIP is going from 1.75% to 2.25% on case numbers assigned on or after April 5th.  ON a 100,000 loan that is 500 dollars.  On 300,000 it’s a whopping 1500.  If you are in the market you need to be proactive and get in before this goes up.

Lastly, for the First Time Home Buyer and the Move Up Home Buyer, you need to have your offer accepted by April 30, 2010 and close before June 30, 2010. 

Now a lot of people are asking me “will Obama extend the tax credit” and the answer is I don’t know.

Increase in Upfront Premiums for FHA Mortgage Insurance for Minnesota Home Loans

This is a letter copy and pasted from HUD.

w.hud.gov espanol.hud.gov

Are you ready to own a new home or condo in MN?

Home ownership means you no longer pay monthly rent to a landlord for the roof over your head. By paying a mortgage – this means you own that roof over your head.  You can do what you want with your house – within reason of course and when you leave, you can sell it to recoup the purchase price and – with any luck – earn a profit too.
Home ownership comes with a slew of responsibilities and work so before going any further, consider whether your lifestyle and finances make home buying a smart move.

Are you prepared to stay put?  High costs mean you should. Except in a roaring real estate market, it usually doesn’t make sense to buy a home you’ll own for less than three or four years. The reason is the high transaction cost of buying and selling property means you could lose money on the deal. If you do make money, you’ll pay capital gains taxes if you’re in the house less than two years.
 
Right now – it is a buyers market.  There are homes available at very reasonable prices due to the recovery of falling home prices.  Combine this with below average interest rates and tax credits – the money and the sense of it all – home ownership is a great idea.
 
Before you begin, you need to determine how much house you can afford. You can start with one of the Web’s many calculators for a brief calculation.  But for a more accurate figure, ask to be pre-approved by a lender, who will look at your income, debt and credit to determine the kind of loan that’s in your league.
The rule of thumb here is to aim for a home that costs about two-and-a-half times your gross annual salary. If you have significant credit card debt or other financial obligations like alimony or even an expensive hobby, then you may need to set your sights lower.

So do you think you are ready?  If yes, take the first step and give me a call at 651.210.9593 right now!

Top 10 things to know before buying a home!

1. Don’t buy if you can’t stay put.  If you can’t commit to remaining in one place for at least a few years, then owning is probably not for you at this point in your life. With the transaction costs of buying and selling a home, you may end up losing money if you sell within a few short years.
2. Start by shoring up your credit. Since you most likely will need to get a mortgage to buy a house, you must make sure your credit history is as clean as possible.

3. Aim for a home you can really afford. The rule of thumb is that you can buy housing that runs about two-and-one-half times your annual salary.

4. If you can’t put down the usual 20 percent, you may still qualify for a loan. There are a variety of public and private lenders who, if you qualify, offer low-interest mortgages that require a down payment as small as 3.5 percent of the purchase price.

5. Consider buying in a district with schools that future buyers may want their kids to attend. Reason: When it comes time to sell, you’ll learn that strong school districts are a top priority for many home buyers, thus helping to boost property values.

6. Get professional help.  You may want to look for an exclusive buyer agent, if possible, who will have your interests at heart and can help you with strategies during the bidding process.  If you need a referral, just let me know.

7. Choose carefully between points and rate. When picking a mortgage, you usually have the option of paying additional in exchange for a lower interest rate.  It is normally better to pay less upfront. 

8. Before house hunting, get pre-approved by a mortgage broker (I can help just click here !)

9. Do your homework before bidding on a home.  Your real estate agent should provide you with detailed market analysis of what the property is worth. 

10. Hire a home inspector. Your lender will require a home appraisal, but that’s just the bank’s way of determining whether the house is worth the price you’ve agreed to pay. Independently, you should hire your own home inspector.

Can I buy a home in Minnesota after having a short sale?

Short sales occur when a property is sold for less than the borrower owes on the property. FHA will permit borrowers to purchase another home after a short sale, provided all of the following requirements are met:

Four things every MN home buyer need to know about the Obama $8,000 dollar tax credit

As you know the  homebuyer tax credit has been extended with some minor changes that will benefit first-time homebuyers and homeowners who want to sell their current home and buy a new one.

The credit is reasonably straightforward, but there are some tips for those who want to take advantage of it.
1. Deadline: April 30, 2010 – The most important tip is to be aware of the deadline. Buyers who want to use the tax credit must have their new home under contract (i.e., in escrow) by April 30, 2010, and must close the transaction within 60 days after that date.
That deadline is much sooner than it may seem: Many buyers take months to locate a house, and closing a transaction typically takes 45 to 60 days.
2. Credit up to $8,000 or $6,500 – Buyers also need to understand that the tax credit is equal to 10 percent of the sale price of the home, which could be less than the maximum of up to $8,000 for first-time buyers and up to $6,500 for repeat homeowners.
For example, if a first-time buyer purchased a small condominium that cost just $70,000, the tax credit would be $7,000. And by the way, if the home costs more than $800,000, the credit now drops to zero.
3. Get good advice – Homebuyers who want to take advantage of the tax credit should consult the right people for help
A tax preparer, who can help them ensure they meet all the requirements to use the credit.
A mortgage lender, who can help them choose a loan program that will fit their needs.
A Realtor, who can help them locate a home they can afford and want to purchase.
4. Beware of tax fraud – Homebuyers should educate themselves about the tax credit and learn the lingo.
Buyers and sellers should be wary of any advice that sounds suspicious or overly complicated. For instance, buyers who are told to conceal any information from their lender should “get away” from whoever offered that advice.
One final tip: The IRS has found such a high incidence of fraud and creative tax accounting associated with the homebuyer tax credit that taxpayers who take the credit will now be required to attach a copy of the settlement statement to their federal tax return as proof of purchase. Buyers should keep their paperwork handy.

How does Obama extending the 8,000 tax credit affect me and my Minnesota Home?

The best answer is, “it depends.”  Specifically, what is your current situation.  After you are done reading this post I would strongly suggest give me a call at 651.210.9593 to discuss your unique situation. So here are a couple things to keep in mind:

1. If you are selling, NOW is the time.  The timing on this is very good as far as government bailouts go.  The “slow” season in home buying/selling is right now through next spring, right when the credit expires.  So, for sellers, there will be more buyers hoping to take advantage of the 8000 dollar tax credit!  If you need a referral for a real estate agent, give me a call or check out my posting here about my real estate agent.

2.  Timing is everything!  Not only do first time buyers have to get their offers accepted by April 30th, they only have 60 days to close on or before June 30th.  60 days used to be an eternity, now it’s the norm for foreclosures and short sale listings in Minnesota.

2a.  If you happen to be one of the handful of people that is in a position to sell and you bought your home between Dec 1, 2004 and June 29, 2005, get ready to sweat!  If you want to take advantage of the move up buyer tax credit you better cross your fingers.  To be brutally honest, if I were in that position I would list RIGHT NOW before the next batch of FHA and Fannie/Freddie foreclosures hit the market this winter.  Less competition means higher price.  So the odds of you “hitting your timeline” and getting the 6500 credit are probably a lot lower than getting 6500 more on your asking price right now.

3.  If you are already in a transaction give me a call and make sure that your position is optimized to take advantage of the credit.  Don’t leave money on the table if you don’t have to.

How do i find a fixer upper and finance the improvements on a home in Minnesota?

If you have a down payment and the desire to stay in a home for a few years, there are huge opportunities right now to purchase your first home.  The Obama tax credit is making it even easier to get into a fixer upper.

So, if you have patience, now is the perfect time to purchase a home.

The question for anyone brave enough to buy is – Can you ever really be confident you’re getting a bargain?

Most homes priced right are selling near full price but some are overpriced and are selling for a 10% discount from list.  A good agent, like Jesse Grumdahl at ReMax, will show you what properties are priced well and which ones are under/over priced.

Here are five tips for getting a good deal:

1.  Look at older inventory that was mispriced.  An over-priced home will scare away many buyers. Remember, you make your money when you buy, not when you sell.  Be careful to not buy a “unique” home that doesn’t have a desirable flow/layout/lot.  A great deal on a property that people don’t want, does not a good investment make!

2.  Look for a “fixer upper”.  And more importantly, have a contractor go through an give you a firm estimate on the improvements needed to bring it up to speed.  It’s better to buy a home with “good bones” that just needs a little “lipstick” than a money pit with foundation, mechanical/electrical/plumbing issues.  Would you rather pay a painter 15 bucks an hour or a plumber 115 bucks an hour?

3.  Look for a home with at least 2 or 3 price reductions.  The more reductions, the more pain the seller is in and the less likely they are to expect top dollar.  FOR SELLERS:  RE-READ THIS AND LISTEN TO A SELLING AGENT WHO SETS THE PRICE A LITTLE LOWER THAN THE REST !  THIS STRATEGY WILL MAKE YOU MORE MONEY THAN OVERPRICING AND REDUCING.

4.  Look for a desperate flipper.  These people will often times be over extended on lines of credit and will often own the home free and clear, having paid cash to get the best deal.

5.  Skip “updated” homes.  Too many people have too much emotion tied up in their “baby” and expect to get a high return.  However, go back to number 3/4 and if it was over-priced from the start by a flipper and multiple reductions have taken place, then you may be on to a winner.

Do you have questions on these items?  Additional tips?  Give me a call at 651.210.9593 or an email to jaydacey@gmail.com and let me know your feelings on this post.

Did Obama Finally Extend the 8,000 tax credit for first time buyers?

On November 6, 2009, President Obama extended the tax credit for first-time homebuyers (FTHBs) through June 30, 2010. The bill also opens up opportunities for “move up buyers”.
To learn what the new tax credit means to you here is a brief overview and as always, call with questions at 651.210.9593.
TAX CREDIT OVERVIEW

Who Gets What?

First-Time Homebuyers (FTHBs): First-time homebuyers (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

Current Owners: The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

What are the New Deadlines?

In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

What are the Income Caps?

The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

What is the Maximum Purchase Price?

Qualifying buyers may purchase a property with a maximum sale price of $800,000.

What is a Tax Credit?

A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual’s primary residence.

How Much are First-Time Homebuyers (FTHB) Eligible to Receive?

An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.

Who is Eligible fort FTHB Tax Credit?

Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible.

This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.

As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.

How Much are Current Home Owners Eligible to Receive?

The tax credit program includes a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Can Homebuyers Claim the Tax Credit in Advance of Purchasing a Property?

No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.

Can a Taxpayer Claim a Credit if the Property is Purchased from a Seller with Seller Financing and the Seller Retains Title to the Property?

Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Some examples of this would include a land contract or a contract for deed.

According to the IRS, factors that would demonstrate the ownership of the property would include:
1. Right of possession,
2. Right to obtain legal title upon full payment of the purchase price,
3. Right to construct improvements,
4. Obligation to pay property taxes,
5. Risk of loss,
6. Responsibility to insure the property, and
7. Duty to maintain the property.

Are There Other Restrictions to Taking the FTHB Credit?

Yes. According to the IRS, if any of the following describe a homebuyer’s situation, a credit would not be due:

They buy the home from a close relative. This includes a spouse, parent, grandparent, child or grandchild. (Please see the question below for details regarding purchases from “step-relatives.”)

They do not use the home as your principal residence.

They sell their home before the end of the year.

They are a nonresident alien.

They are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)

Their home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)

They owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2005, through July 1, 2008.

Can Homebuyers Purchase a Home from a Step-Relative and Still be Eligible for the Credit?
Yes. As long as the person they buy the home from is not a direct blood relative, the purchase would be allowed.

If a Parent (Who Will Not Live In The Property) Cosigns for a Mortgage, Will Their Child Still be Eligible for the Credit?

Yes, provided that the child meets the other requirements for the tax credit.

8,000 tax credit extended…sort of!

My site has been hit thousands of times asking “will Obama extend the tax credit” and will home buyers in Minnesota see an extension in the tax credit?

The answer is YES, IF you are a veteran of the Armed Services and spent at least 90 days over seas in the past year.

If you haven’t served, the answer is likely Nope.  So get off your butt and call me right now.  Literally, this is probably the last week you will be able to make an offer and expect to close in time to be sure of getting the tax credit.  My number is 651.210.9593 so call me now.

Even if they do extend the tax credit, signs of inflation are slowly creeping in meaning rates (and your mortgage payments) will be going up for the same amount financed on a home in Minnesota.  So call me…651.210.9593.  Jay Dacey