Sound Mortgage Planning Blog

My weekend consisted of freezing cold winds while putting up lights, darn near pealing my finger nail completley off while trying to open the ornaments tote and finally burning my hand while barbecuing vegetables for a salad. As far as weekends go, not my best...yet, I live! I've survived the weekend and I am now ready to take on the world! Well, not quite the world but I will certainly give the South Puget Sound a go.

Last Friday, before the dreaded weekend, I was in Seattle taking the Washington State Housing Finance Commission's House Key class. This is required for any Loan Officer wanting to originate this type of loan and any Loan Officer and/or Real Estate Agent who wants to teach the first-time homebuyer class that all first-time homebuyers using the House Key Bond program must attend.

Let me say, Lisa, Bill and Karen are fantastic trainers and I came away from the class knowing more than I had ever thought I would.

One of the biggest take-aways I got was regarding the Recapture Tax. I had been speking with an agent the day before and they had brought this very thing up. They were concerned about the recapture tax and that it was a deterrent for the homebuyer. Let me say now, this should not be a concern at all.

Let me first quote one of the instructors as saying, "Recapture is a perceived barrier to the program that never really happens." Why?

"The recapture tax is assessed only under the following circumstances:

• The home is sold or otherwise disposed of during the first nine years of ownership;
• The Borrower's income increases each year by 5 percent above the maximum federal income limit at the time of purchase; and
• The Borrower realizes a gain upon the sale of the home.

Because all these events must occur for any tax to be paid, it is unlikely that most Borrowers will pay a recapture tax.

In the event that a recapture tax is due, it will be only a portion of the Borrower's gain on the sale of the home. The law states that the maximum recapture tax is either 50% of the gain on the sale or 6.25% of the original loan amount, whichever is less." Source: House Key Program Manual, RECAPTURE TAX 5.1 (Rev. 06/01/99)

So now I begin the process of putting my class together and finding a local agent that would like to team up and provide first-time homebuyer education classes. I am excited to begin doing this and who knows, I may see you in one of my classes!

Here are the highlights for the newly extended First-Time Homebuyer Tax Credit per H.R. 3548, dated November 4, 2009:

• Extended to May 1, 2010
• Must be under contract before May1, 2010 and the purchase must be completed before July 1, 2010
• Homebuyers that have occupied a principal residence for any 5-consecutive-year period during the 8-year period ending ont he date of the purchase of a subsequent principal residence, such individuals will be treated as a first-time homebuyer.
• Long-time residents of same principal residence will be eligible for $6,500 if single or married filing jointly, if married and filing separately $3,250.
• Higher income limits to $150,000 for a single person and $225,000 for married couples.
• Maximum purchase price of a principal residence is $800,000.

Extension of First-Time Homebuyer Credit for Individuals On Qualified Official Extended Duty Outside the United States

Qualified Official Extended Duty applies to: a member of the uniformed service; a member of the Foreign Service of the United States, or; an employee of the intelligence community.

• must have served outside the United States for at least 90 days during the period beginning December 31, 2008, and ending before May 1, 2010, and, if married, such individual's spouse.
• must be under contract by May 1, 2011 and have purchased by July 1, 2011.

Provisions to enhance the Administration of the First-Time Homebuyer Tax Credit

• Minimum age is 18 years as of the date of purchase.
• If the taxpayer is married, the taxpayer shall be treated as meeting the age requirement if the taxpayer's spouse meets the age requirement.
• Must include the settlement statement used to complete the purchase. (This can be obtained through your loan officer or through the escrow company.)
• Waiver of recapture rule for any purchase of a principal residence after December 31, 2008.

I hope this has been helpful. Please contact me if you have additional questions.

There are 27 days remaining to take advantage of the first time home buyer tax credit and this doesn't take into account weekends.

If a first time home buyer were to meet with us by November 11th, 2009, we can still close their purchase in time as long as they provide their information in full and provide all documentation up front.

This would mean the borrower must provide the following documentation on day one:

• Copy of Identification (driver license/state issued id, military id and social security card if needed)
• 2-months account statement for all asset accounts that funds to pay closing costs and/or down payment will come from. (all pages)
• Tax returns with W2s for most recent 2 years (all pages)
• Most recent pay stubs covering last 30 days
• Names and addresses of each employer for the most recent 2 years of employment
• Landlord contact information for the past 2 years

Additional items will be required depending on the circumstance:

• Bankruptcy
• Copy of Bankruptcy papers (all pages)
• Paying/receiving child support and/or spousal support
• Copy of child support order and/or spousal support order
• Receiving disability income
• Copy of award letter

There may be other items needed and that will be discovered at the time of the interview.

The need for these items up front is to identify any potential obstacles that could delay a speedy closing and to ensure a solid approval.

NOTE: There are some loan programs that cannot close quickly enough to meet the November 30th deadline, but most can and those are the programs that we are speaking of.

Our goal is to close the transaction as quickly as possible so you or your referral can take advantage of the first time home buyer tax credit.

Call today or complete an application while you are visiting my website.

A co-worker of mine just sent out a link to an article from USA Today about HUD Secretary Donovan's view regarding extending the first time home buyer tax credit. The part of the article that stood out for me was his take on the housing market's reaction if the credit was not being extended.

"I do not believe that a catastrophic decline would be the result of the end of the credit," Donovan said.

Even though there are reports that show that even approaching the end of the tax credit has had an affect of housing starts he still says, "I do not believe that a catastrophic decline would be the result of the end of the credit"? Um, maybe not a catastrophic decline, but does he believe that the market has recovered? Do we have to be faced with a "catastrophic decline" to continue to take steps to improve the housing market?

The article went on to read, "The Commerce Department on Tuesday reported that new construction of U.S. homes rose less than expected in September, which analysts said could be related to worries over the expiration of the tax credit." Does Mr. Donovan believe this is just coincidence? Is the decline actually due to a seasonal adjustment? Maybe it is, after all, here in the Northwest construction start typically slow down toward the winter months.

"The $8,000 tax credit, which will expire at the end of November, has boosted home sales in recent months, helping to revive a flagging housing market that had been a key factor driving the recession." This to me is the most compelling argument to extend the tax credit; the tax credit has boosted home sales.

Follow the link below to read the entire article. What are your thoughts?

White House skeptical on renewing home buyers' credit