Monday, December 21, 2009

Mortgages are Becoming Easier to Obtain

While lending remains tight in troubled markets, banks are starting to relax standards for borrowers with good credit in recovering areas of the country. In some parts of the country, borrowers with good credit are more likely to be able to borrow 95% of the purchase price than they were just a few months ago.

According to The Wall Street Journal, in troubled markets (i.e. Florida) credit remains tight and mortgage companies continue to scrutinize property appraisals, which makes it difficult for some borrowers to get financing. But in most areas of the country where prices are stabilizing or falling only slightly, standards are relaxing.

This is great news and another sign that the economy is truly beginning to improve.

Visit my website for more up-to-date real estate news.

Thursday, December 10, 2009

Your Home For the Holidays

Things can get crazy around the holidays. All the shopping, decking the halls and visions of sugar plums can cause homeowners to lose focus and overlook issues that can turn a season of joy into a season of “oops.”

It doesn’t have to be that way. Here is a Top 10 list to remind busy homeowners that just a few minutes a day can keep the ghost of deferred maintenance away:
  1. Clean your gutters and downspouts. They play an important role in diverting water away from foundation walls. That means less damage related to water and moisture. If you clean them before winter weather moves in, you can keep your basement and crawl spaces
    dry and leak-free.
  2. Drain exterior water lines. Frozen pipes that can crack the lines are history if you remove, drain and store outdoor hoses now.
  3. Give your garbage disposal a hot water bath. Cooking for crowds puts additional stress on these appliances. Flushing the garbage disposal with one pot of hot water and a half-cup of baking soda now – and again after the holidays – can help prevent plumbing problems and
    costly repairs. Grinding citrus fruits with a dish soap solution can remove the smell of decay.
  4. Have your home heating systems inspected. Nearly half (44 percent) of all home heating fires occur in December. Schedule a professional inspection of your home’s heating systems, including furnaces, boilers, fireplaces and water heaters, every year before winter weather sets in. Stock up on furnace filters and change them regularly.
  5. Re-caulk and weather-strip doors and windows. Save energy and money by sealing air leaks around doors, windows, corner boards and joints. Make it a habit.
  6. Trim back tree limbs. Overhanging tree limbs are both a falling hazard and a chimney or flue blockage hazard. Also consider installing a battery-operated carbon monoxide
    detector. Replace batteries when Daylight Saving Time begins and when it ends.
  7. Keep a fire extinguisher handy. Unattended cooking is the leading cause of home fires in the nation. Buy and place a fire extinguisher away from potential fire sources so that you can reach it in an emergency. Make sure it’s charged and ready to go.
  8. Test your electrical circuit shut-off switch. Plug outdoor decorations only into circuits protected by ground fault circuit interrupters (GFCIs). Ensure that the circuit shuts off properly by using a night-light or radio. Click the circuit button. If it clicks and the night-light or radio stays on, the circuit has not shut off. Consider contacting an electrician to check for problems.
  9. Be steady on the ladder. Falls account for an average of 5.1 million injuries and nearly 6,000 deaths a year. Before hanging Christmas lights, wrap pipe insulation around your ladder beams (vertical members that the rungs are attached to). The insulation helps prevent the ladder from slipping and provides insulation against electrical shock.
  10. Avoid using extension cords except when absolutely necessary. If you do, be sure they are the proper gauge. And don’t run them across hallways or doorways, under carpeting or furniture or through walls. Never, ever staple them in place.

Sunday, December 6, 2009

Protect Yourself and Your Family From Carbon Monoxide Poisoning

Carbon monoxide, or CO, is a dangerous gas that you cannot see, smell or taste. Carbon monoxide can be deadly. By knowing more about CO, you can protect yourself and your family from CO poisoning.

Sources of Carbon Monoxide
CO can come from anything that burns fuels, especially if it is not used or vented in the right way. Examples include:
• Furnaces
• Gas-powered home appliances
• Wood stoves
• Gas-powered tools
• Kerosene heaters
• Gas and charcoal grills
• Generators
• Cars and trucks

Symptoms of carbon monoxide poisoning CO poisoning can feel like the flu without a fever, but in a very short amount of time it can become very serious.

CO Can Cause:
• Headache
• Nausea
• Dizziness
• Vomiting
• Fatigue
• Passing out
• Shortness of breath
• Death!

How to Prevent CO Poisoning
• Place CO alarms close to all sleeping areas in your home, and change the batteries each time you change your clock for daylight savings time. Never ignore a carbon monoxide alarm.
• Have appliances, furnaces and heating systems installed and maintained by a professional.
• Check and clean your chimney at least once every year.
• Leave cars, snowmobiles and other vehicles running only if they are outside of your garage.
• Use kerosene heaters only when room doors are open and windows are open at least one inch.
• Run generators outside and away from windows, doors and vents.
• Burn charcoal in open, outdoor areas away from your home, cabin, garage, or other enclosed areas such as porches or tents.
• Use pressure washers, chainsaws and other gas-powered tools outside of your home, garage or other enclosed areas such as barns or sheds.

If you think you have been exposed to carbon monoxide:
• Get yourself and others to fresh air immediately
• Call 911 or your local fi re department
• Call the Northern New England Poison Center at 1-800-222-1222
• Return to the area only after the fire department tells you it is safe

Friday, November 27, 2009

Understanding Title Insurance

A policy of title insurance is a contract of indemnity between the insured and the insuring company relating to the title to the land described in the policy, protecting the insured against loss of damage by reason of defects, liens or encumbrances of the insured title existing at the date of the policy and not expressly excepted from its coverage.

The policy is issued after a complete search and examination of the public records and shows the condition of the record title, including any money obligations outstanding against the property, easements and other matters which may affect the rights of ownership, possession and use of the property.

Title insurance protects the "record" title, insuring it is good subject only to the exceptions expressly set out in the policy. lt also insures against certain matters which do not appear of record, such as forgery, identity of parties, incompetence of former owners, interest of missing heirs, and status of individuals not having the "right" to sell property.

There are many different types of policies. Owners policies are issued to real estate owners. Purchasers policies are issued to purchasers of real estate under contract. Mortgage policies are issued to mortgage companies. In addition there are several other special forms of policies. There is a type of policy to meet the requirements of almost any form of real estate transaction.

Click here to read more about title insurance and other home buyer tips.

Tuesday, November 17, 2009

Economy Headed Toward Recovery

Thanks to the success of home buyer tax credit to date, the outlook for housing and the economy appears to be headed toward recovery.

Executives from some of the largest brokerages in the country expect to see their sales grow 6-8 percent in 2010 and home prices to start heading up about 3 percent. Existing-home sales are expected to total 5.01 million in 2009, a gain of 2.0% over last year, and then are forecast to rise 13.6% to 5.69 million in 2010.

It is expected that the expansion of the tax credit to include repeat buyers will help boost middle-market sales for next year. The improvement in the middle market will help tighten inventories, helping to shore up prices.

It looks as though we have seen the worst of it!

Friday, November 13, 2009

How to Get the Extended Home Buyer Tax Credit

So, you’ve decided to purchase a home and take advantage of the Extended Home Buyer Tax Credit. Here is what you will have to do to get your benefit:
  1. Close on your home purchase between November 7, 2009 and April 30, 2010, or have a binding written contract by April 30, 2010 and close by July 1, 2010.

  2. Decide whether you are going to:
  • apply the credit to your 2009 tax return, filed on or before April 15, 2010;
  • file an amended 2009 return;
  • or, apply the credit on your 2010 return, filed on or before April 15, 2011.

3. Attach documentation of purchase to your return.

Documentation of Purchase

Details concerning the precise documents required to confirm your purchase have not yet been released. When this information becomes available, I will include instructions and links to the appropriate forms.

When to Apply the Credit

Buyers purchasing homes on or before December 31, 2009 may claim the credit on their 2009 tax returns. Buyers purchasing in 2010 will have the option to:

  • Claim the credit on their 2009 return, even if the purchase is completed after December 31, 2009;
  • File an amended return for 2009 if their purchase is completed after April 15, 2010; or,
  • Claim the credit on their 2010 tax returns.

If you purchased a home between January 1, 2009 and November 6, 2009, please see: How to Get the 2009 First-Time Home Buyer Tax Credit.

Applying the Credit to Your 2009 Taxes

You will need to do three things to claim the credit on your 2009 tax return:

  1. Fill out Form 5405 to determine the amount of your available credit;
  2. Apply the credit when you file your 2009 tax return or file an amended return;
  3. Attach documentation of purchase to your return or amended return.

Sunday, November 8, 2009

New Carbon Monoxide & Smoke Detector Law for Maine

This is important if you know someone who:
1. Plans to acquire or sell a rental property
2. Currently has an investment property
3. Is the tenant in a rental property

Effective November 1, 2009, single family and multifamily properties are required to have working smoke detectors and carbon monoxide detectors. This includes single family homes that are occupied under the terms of a rental agreement or month-to-month tenancy.

All transfers of property after October 31, 2009, must be certified to the buyer at closing by the seller that the property provides smoke detectors and carbon monoxide detectors in accordance with the law.

Click here for more information regarding this new law.

Extended Home Buyer Tax Credit Common Questions

Who Qualifies for the Extended Credit?
First-time home buyers who purchase homes between November 7, 2009 and April 30, 2010.

Current home owners purchasing a home between November 7, 2009 and April 30, 2010, who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight.

To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.

Which Properties Are Eligible?
The Extended Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.

How Much Is Available?
The maximum allowable credit for first-time home buyers is $8,000.
The maximum allowable credit for current homeowners is $6,500.

How is a Buyer's Credit Amount Determined?

Each home buyer’s tax credit is determined by tow additional factors:
  • The price of the home
  • The buyer's income


Under the Extended Home Buyer Tax Credit, credit may only be awarded on homes purchased for $800,000 or less.

Buyer Income

Under the Extended Home Buyer Tax Credit, which is effective on November 7, 2009, single buyers with incomes up to $125,000 and married couples with incomes up to $225,000—may receive the maximum tax credit.

These income limits have changed from the 2009 First-Time Home Buyer Tax Credit limits.

If the Buyer(s)’ Income Exceeds These Limits, Can He/She Still Get a Credit?
Yes, some buyers may still be eligible for the credit.

The credit decreases for buyers who earn between $125,000 and $145,000 for single buyers and between $225,000 and $245,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit. Home buyers earning more than the maximum qualifying income—over $145,000 for singles and over $245,000 for couples are not eligible for the credit.

Can a Buyer Still Qualify If He/She Closes After April 30, 2010?
Under the Extended Home Buyer Tax Credit, as long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close.

Will the Tax Credit Need to Be Repaid?
No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during this three-year period, the full amount credit will be recouped on the sale.

Click here to compare the 2009 tax credit with the newly passed version.

Friday, November 6, 2009

$8,000 Home Buyer Tax Credit Has Been Extended!!!

Legislation has been passed to extend the $8,000 home buyer tax credit to May 1, 2010, for first-time buyers and add a $6,500 tax credit for repeat buyers if they've lived in their home for five of the past eight years.

Home prices are capped at $800,000. The legislation in both houses was included in a bill to extend unemployment benefits and is expected to be signed by President Obama shortly.

Under the bill, income limits are expanded to $125,000 for individuals and $225,000 for joint filers. Individuals with incomes up to $145,000 and joint filers with incomes up to $245,000 qualify for reduced credits.Households who have binding contracts in place by April 30 will be allowed an additional 60 days to complete their transaction. The deadline for members of the military serving out the U.S. for at least 90 days between Jan. 1, 2009, and May 1, 2010, has been extended one year.

Taxpayers can claim the credit on their federal income tax returns. If the credit exceeds their tax bill, the government will issue a check. Taxpayers will be able to claim the credit on their 2009 income tax return for purchases made in 2010.

Click here to compare the current tax credit with the newly passed version.

Monday, November 2, 2009

Looking For 100% Financing with No Money Down?

Are you ready to own a home but are not sure you will qualify due to lack of a down payment?
Rural Development may be able to help you!

USDA Rural Development has offers 100% financing opportunities to rural individuals and families with:

  • No down payment required
  • No expensive monthly mortgage insurance (which means you may qualify for a larger loan)
  • Flexible credit and qualifying guidelines
  • No maximum purchase price limit
  • Closing costs can come from any source including gifts or the seller
  • Repairs and improvements can be included in the loan
  • Competitive fixed 30-year rates.

So, if you have been thinking about taking advantage of the $8000 Home Buyer Tax Credit, but do not have the money for a down payment and closing costs, think again!

The Rural Development guaranteed loan program has assisted thousands of home buyers customers just like you. It is definitely worth looking into!

Click here for more information and check out my website for more home buying tips!

Wednesday, October 28, 2009

Home Buyer Tax Credit To Be Extended!!!

Great News! It has been tentatively agreed upon to extend the existing $8,000 tax credit for first-time home buyers!

The credit has also been expanded to also offer a new $6,500 credit for existing homeowners who have lived in their current residence for a consecutive five-year period in the past eight years.

Home buyers must be under contract by April 30, 2010, and close before July 1.

This is exciting news!!! Spread the word!!!

Friday, October 23, 2009

Fixer-Uppers Made Easy

If you've been passing up on buying a home because of the expense of anticipated cosmetic repairs, you're missing out on a great opportunity. Sure, it used to be that if you bought a home and then applied for a home equity loan to pay for repairs, the result would be two separate loans (or worse, a mortgage plus a short-term loan for repairs that often had a much higher interest rate).

This is not the case anymore if you qualify for an FHA Streamlined 203(k) loan. The Department of Housing and Urban Development's FHA Streamlined 203(k) loan allows qualifying home buyers to finance up to an additional $35,000 into their mortgage to improve or upgrade their home before move-in.

With this product, home buyers can quickly and easily tap into cash to pay for property repairs or improvements, such as those identified by a home inspector or FHA appraiser. And the best part is, the additional funds are combined into your mortgage, so you only have to worry about one loan.

There are, of course, rules and guidelines we have to follow, and not every repair qualifies. But if you or anyone you know are interested in taking advantage of this great opportunity, it is definitely worth considering.

Check out my website for more Home Buying Tips!

Thursday, October 22, 2009

What You Should Know About Home Inspections

Obtaining a home inspection is one of the most important steps in purchasing a home. A qualified inspector can point out potential costly problems with the home you are considering buying, and a good inspector will give maintenance advice and ultimately give you peace of mind about your home investment.

All home buyers -- whether they are buying an older home or building a new one -- should have the home inspected by a professional after making an offer and before closing. There are a few things you need to know before hiring a home inspector. First, the home inspection industry is becoming more professional and regulated. There are professional organizations with codes of ethics, like the National Association of Home Inspectors and the American Society of Home Inspectors, but membership is voluntary.

The average home inspection costs $300, which is paid on the day the inspector examines your home. Lower or higher fees do not necessarily reflect the expertise of the inspector. Finding an experienced home inspector who provides value for your money is most important.
The American Society of Home Inspectors ( recommends interviewing at least three professional inspectors in order to find one you trust and with whom you communicate well. I can provide a list of local home inspectors for you to interview, and you should ask friends and family members for recommendations as well.

Ask inspectors about their qualifications. Do they have experience in the construction or engineering industry? Do they have special training or accreditation from a professional organization? How long have they been inspecting homes in the local area? Are they familiar with problems specific to our area like drainage issues, pests or building material failures?

Once you have found a qualified professional, it's important that you attend the inspection with me and your home inspector. Some buyers like to climb into the crawl space and attic with the inspector to look at the home's major systems. At a minimum, be on site to ask questions, examine the problem areas and learn about the ongoing maintenance your home will need.

The standard home inspector's report will review the condition of the home's heating, plumbing and electrical systems. The report will also include information about the structure including the foundation and basement, as well as the roof, attic, walls, ceilings, floors, windows and doors. It may include also photos of problem areas or recommendations for repairs.

For more Home Buyer Tips visit my website at

Tuesday, October 13, 2009

Appliance Rebate Program

Save Energy and Money with the Appliance Rebate Program!

Are your old appliances costing you a fortune? There is no better time to replace them thanks to the Efficiency Maine Appliance Rebate Program going on right now.

Replace an old air conditioner, dehumidifier, clothes washer or refrigerator/freezer with selected Energy Star appliances and you could receive rebates of up to $75.00 today, plus you will save even more with lower electric bills in the future.

Click here for more details.

Sunday, October 11, 2009

Detect the "Energy Thieves" in Your Home


Detect the "energy thieves" in your home with the new Kill A Watt® Energy Detector.

This electricity usage monitor and educational tool kit is available for free checkout from your local library. The monitor will help you detect the "energy thieves" in your home and the tool kit will help you put the lid on power consumption by appliances and electronics in your home or business.

The Kill A Watt® and tool kit is on loan in most Maine public libraries as part of a state-wide community outreach campaign by Efficiency Maine, a program of the Maine Public Utilities Commission.

Mainers can check out the Kill A Watt® monitors, just as they would check out a book, from their local library at no charge. These monitors simply plug into electrical outlets and then allow a consumer to plug in any appliance to get readout on how much electricity the appliance uses and then calculate how much money it's costing.

The educational tool kits include a home energy savings tips brochure; instructions, informative resource sheet, and an energy tips bookmark which patrons may keep. An offer for two CFL light bulbs is in the kit as well.

For more information, visit Efficiency Maine.

Saturday, October 10, 2009

Home Energy Saving Tips

Want to save money on your energy bills? Here are some energy-saving tips for you!

Heating & Insulation— By turning down your thermostat by 1 degree F, you can save 25-30 gallons of heating oil per year. That’s up to 3% of an average home's yearly consumption, or between $105-$128 per year at the current average rate of heating oil ($4.26/gallon). More Heating & Insulation Tips...

Cooling— Save up to 3% on your cooling costs for every degree you raise your thermostat in the summer. For example, raising it from 73 to 78 degrees can save up to 15% in cooling costs. More Cooling Tips…

Appliances— Wrap your water heater with a water heater blanket, especially if it's in an unheated area of your home. The blanket could save you up to 10% on water heating costs. More Appliance Tips…

Lighting — CFLs can give the same amount and quality of light as incandescent bulbs, yet use one-third the amount of energy and last ten times longer. A CFL can save over $30 in electricity costs over the lamp's lifetime compared to an incandescent bulb. More Lighting Tips...

Other— Install energy-saving showerheads in your home. You'll reduce hot water use and cut water costs by 10% to 16% without affecting comfort. More Tips…

Tuesday, October 6, 2009

Asbestos in a Home

Many homes or buildings built before 1980 may still contain asbestos or old corrosive building materials. This should not make you overly concerned, because asbestos exposure is easily avoidable by taking simple precautions. Many green, Eco-friendly alternatives are available which not only provide a safe and health method of insulation, they can even help in reducing annual energy costs.

Tips and Prevention:

If any asbestos is located in the home, most experts suggest to just leave it alone and undisturbed. Asbestos that is not deteriorated and left alone will almost always not pose any risks. The best action may be no action at all. When its fibers are disturbed and become airborne, it can be a cause for concern.

Home professional consultants can provide an evaluation of the home. It is not always an easy process to determine whether or not a particular insulation contains asbestos. Anyone who is unsure about the insulation in their home should have the materials in question tested. If a home inspector suggests removal is necessary, it must be performed by a licensed abatement contractor who is trained and equipped in handling hazardous materials. They can perform the removal in public facilities, homes and work places.

Exposure to damaged asbestos can cause a rare but severe lung ailment known as mesothelioma. Diagnosis of these forms of asbestos lung cancer has been a difficult task because symptoms are so similar to other, less serious conditions.

Maine Going GREEN

Of interest to those involved in real estate, a citizen based environmental advocacy group called Environment Maine, is combining independent research and a tough minded strategy to overcome the opposition of special interests who seek to undermine pro environment approaches. Focusing to rid the state of asbestos use and other harmful materials, they also focus to protect the water and open spaces. Environment Maine is working hard to give the state the healthy environment that the people deserve.

Many realtors have understood this important aspect of our lives and can greatly assist clients in achieving a green home. Green building is the consequence of a design that will increase energy efficiency, water and have a direct impact on your health and the environment. Green construction brings together many techniques which aim to reduce or eliminate the impacts in which physical structures have on the environment.

The use of cotton fiber, lcynene foam and cellulose are viable alternatives that possess many of its superior qualities without the toxicity. The United Nations Environmental Program states that the use of these recycled building materials, on top of the installation of energy saving appliances and the maximization of natural lighting in a building, can reduce energy use energy use by 25 percent.

Sunday, September 27, 2009

Is the Recession is Over?

So, the chairman of the Federal Reserve Board himself has said it publicly that it looks like the recession is over. Here comes the recovery!

But there was a significant footnote in Bernanke's speech on the economy last week in Washington: Don't look for a dramatic recovery. Bernanke expects that it will be a slow moving, plodding sort of improvement where the economy inches toward expansion and that there won't be a sudden, dramatic return to economic boom anytime soon.

Bernanke's point about the end of the recession was underscored by a 2.7 percent jump in retail sales for the month of August. This is an important indicator because the key to stimulating the economy again is to get consumers spending, which appears to be happening. Not just for auto sales, which got a big boost in August from the government's "cash for clunkers" program, but also for other important categories, like food and clothing purchases, department store retail, entertainment and restaurant spending, sporting goods. All of these categories were up for the month, after having been down for well over a year.

This is good news! People feel more confident about the direction of the economy in the months ahead. They see the stock market up, so their retirement funds and 401 K plans are bouncing back. They see home values stabilizing or growing in most areas, so their equity is beginning to increase again.

It seems as though, perhaps, the recession is over!

Monday, September 14, 2009

Tips for First-Time Home Buyers in 2009

A year after the financial collapse of 2008, the housing market is very different than it was before the foreclosure crisis. Here are seven bits of wisdom from economists and financial planners for anyone contemplating a home purchase today:
  • Old-fashioned basics are more important than ever. The safest way to purchase a home is to put down 20 percent on a fixed-rate, 30-year (or less) mortgage.

  • Don’t become overconfident about income growth. Even though buyers in their 20s and 30s will likely see their incomes grow more quickly than previous generations, it is important to act sensibly when borrowing.

  • Anyone contemplating adding children to the family should calculate whether they could live on one income because having both halves of a couple work may turn out to be impractical.

  • Include a maintenance budget. Even new homes need upkeep and repairs.
    Buyers who can't afford their dream home now should opt for a starter home where they can save money each month for what they really want.

  • Consider a property that can be expanded and improved down the road when money is available.

  • No two buyers are the same, but they should all feel confident with the loan they enter into, no matter the size of the mortgage.

Saturday, September 5, 2009

Home Buyer Tax Credit Countdown is Here!

The first-time home buyers tax credit ends November 30th. Is it possible to buy in the next two weeks and still close in time to collect it?

Scheduled to end on December 1st, the time is running short to get your FREE CASH. The demand is going to be huge and the process is likely to take longer than usual.

But is NOT too late! In order to receive this credit, you must get moving! To guarantee you don't miss out, do your best to aim for these dates:
  1. Try to Close by November 15th. Thanksgiving is at the end of November and will cause additional delays. There will be much less stress if you aim to close before the holidays. Those who wait until the end of November could find themselves losing out on the credit.

  2. Complete Due Diligence by November 1st. This means all your inspections, appraisals, title review, and MORTGAGE PAPERWORK needs to be complete by this time.

  3. Under Contract by October 15th. You need to have a home picked out and under contract by this date. If you delay beyond this date, you may find the rest of your time line rather challenging.

  4. Start Your Home Search NOW. Give yourself a few weeks to search for the perfect home. It can be done quicker, but it may be very challenging.

So, get moving before it's too late! There is still time!

Tuesday, August 25, 2009

You May Not Have To Pay Taxes on Forgiven Debt

People who have lost their homes through foreclosure (or short sales) or who have restructured their mortgage loans may qualify for tax relief under a new tax law, the Mortgage Forgiveness Debt Relief Act of 2007.

Highlights of Mortgage Debt Relief:
  • You may exclude up to $2 million of debt forgiven or canceled by a mortgage lender on a main home.
  • Both mortgage restrucuring and foreclosures qualify
  • Now available for the years 2007 through 2012.

Thursday, August 6, 2009

Get Your First-Time Home Buyer Tax Credit

If you are a First-Time Home Buyer and purchase a home before December 1, 2009 you can take advantage of the 2009 First-Time Home Buyer Tax Credit.

Here's what you have to do to get your benefit:

  • Close on your home purchase by November 30, 2009,
  • Ensure that you are a qualified first-time buyer under IRS guidelines,
  • Decide which year to file under, 2008 or 2009,
  • File an amended 2008 return or choose to apply the credit to your 2009 tax return.

Deciding When to Apply the Credit

If you want the benefits of your credit as soon as possible:
You might choose to file under your 2008 tax year. Since April 15 has already passed, you would have to file an amendment to your return. However, if you've already filed for an extension of your 2008 return, then you can simply claim the credit when you submit your return.

If you anticipate a drop in income next year:
You can wait to claim the credit as part of your 2009 filing. In some cases the value of the credit might be higher, particularly if in 2008 you qualify for only a partial credit because your income is over $75,000 (single) or $150,000 (joint).

Your Next Steps
Once you have determined which year to apply the tax credit, you will need to do two things to claim the credit:

  1. Fill out Form 5405 to determine the amount of your available credit, and
  2. File an amended return for your 2008 taxes, or wait and apply to credit when you file your 2009 tax return.

Thursday, July 23, 2009

FHA Improvements Could Benefit You

What is FHA Mortgage Insurance?
The Federal Housing Administration (FHA) insures mortgages offered by banks, savings associations, and other financial institutions. An FHA-insured mortgage is backed by the full faith and credit of the United States government. While FHA does not make loans, it benefits the homebuyer by providing mortgage insurance which encourages financial institutions to make affordable financing available.

What Are the Benefits of an FHA Mortgage?

FHA offers low down payment options, eligibility with less than perfect credit, a loan at a reasonable cost, and help if there is ever trouble making the mortgage payment.

Because an FHA mortgage insures the lender against loss, an FHA mortgage typically has an interest rate that is competitive with the best in your market and lower than the rates charged for subprime and other non-prime

FHA is designed to help people buy a home and to help them keep it. In return for protecting lenders against loss, FHA requires financial institutions to offer assistance to borrowers experiencing difficulty making mortgage payments.

In addition to its standard Section 203(b) Mortgage Insurance Program, FHA has a number of other valuable programs designed to facilitate homeownership:
FHA Adjustable Rate Mortgage (ARM) Products
• FHA offers a standard 1-year adjustable rate mortgage (ARM) as well as 3, 5, 7, and 10-year ARM options.
• ARM products may be good options for those who plan to own the home for only a few years, expect an increase in future earnings, or expect a decrease in interest rates.

FHA’s Limited Repair Program
• FHA’s Section 203(k) Limited Repair Program is an excellent financing option for you whether buying or selling homes — especially when repairs are identified during a home inspection or appraisal—because it gives buyers the ability to make repairs after closing.
• Buyers can finance up to an additional $35,000 into their mortgage to pay for minor remodeling such as replacing flooring, installing new appliances, and painting the interior and/or exterior of the home.

Many aspects of the FHA mortgage application process have been streamlined to make the process more userfriendly and efficient. For those of you seeking to buy own a home, you may find that theFHA programs are a valuable asset.

To learn more about FHA products, visit FHA’s website at or call 1.800.CALL FHA.

Monday, July 20, 2009

The Basics to Preparing for Homeownership

1. Decide what you can afford. Generally, you can afford a home equal in value to between two and three times your gross income.

2. Develop your home wish list. Then, prioritize the features on your list.

3. Select where you want to live. Compile a list of three or four neighborhoods you’d like to live in, taking into account items such as schools, recreational facilities, area expansion plans, and safety.

4. Start saving. Do you have enough money saved to qualify for a mortgage and cover your down payment? Ideally, you should have 20 percent of the purchase price saved as a down payment. Also, don’t forget to factor in closing costs. Closing costs — including taxes, attorney’s fee, and transfer fees — average between 2 and 7 percent of the home price.

5. Get your credit in order. Obtain a copy of your credit report to make sure it is accurate and to correct any errors immediately. A credit report provides a history of your credit, bad debts, and any late payments.

6. Determine your mortgage qualifications. How large of mortgage do you qualify for? Also, explore different loan options (such as 30-year or 15-year fixed mortgages or ARMs) and decide what’s best for you.

7. Get preapproved. Organize all the documentation a lender will need to preapprove you for a loan. You might need W-2 forms, copies of at least one pay stub, account numbers, and copies of two to four months of bank or credit union statements.

8. Weigh other sources of help with a down payment. Do you qualify for any special mortgage or down payment assistance programs? Check with your state and local government on down payment assistance programs for first-time buyers. Or, if you have an IRA account, you can use the money you’ve saved to buy your fist home without paying a penalty for early withdrawal.

9. Calculate the costs of homeownership. This should include property taxes, insurance, maintenance and utilities, and association fees, if applicable.

10. Contact a REALTOR. Find an experienced REALTOR who can help guide you through the process.

Thursday, July 16, 2009

Get Up To $15,000 When You Buy a Home!

If you haven’t owned your own home in the past 3 years, you may qualify for MaineHousing’s Gift of Green. For a limited time, MaineHousing is offering eligible borrowers who use a MaineHousing mortgage:
  • Up to $5,000 (not to exceed 4% of the mortgage amount) to help with the cash needed for closing, such as any required down payment, closing costs, and prepaids.

  • A coupon worth up to $500 for a 2-part home energy audit.

The Gift of Green is a gift, which will not be added to the loan amount, and it never has to be paid back.

Because the Gift of Green promotion is part of MaineHousing’s mortgage program, you also may be able to use the Purchase Plus Improvement Option to fund home energy improvements as part of your mortgage. MaineHousing mortgages even come with payment protection for unemployment.

Total Financial Incentives of Up To $15,000!

Add the Gift of Green grant of up to $5,500 to the federal First-Time Homebuyer Tax Credit worth up to $8,000. This, in turn, lets you invest in home energy-efficiency improvements that may qualify for additional federal tax credits worth up to $1,500.

The combination of financial incentives through the Gift of Green and federal tax credits could add up to $15,000 -- a once in a lifetime opportunity!

Wednesday, July 15, 2009

First-Time Buyers Should Hurry for $8,000 Tax Credit

A friendly reminder for you first-time home buyers out there...

In order to qualify for the government’s $8,000 gift in the form of a tax credit, your deal must close by Dec. 1, 2009.

It's not too late! You should have a purchase contract signed by early October, so you have 45 to 60 days to arrange financing and safely close the deal.

For more information on the First-Time Home Buyer $8000 Tax Credit, click here.

Tuesday, July 14, 2009

Tax Benefits of Owning a Home

Before a home owner curses the troubled housing market, he or she should take solace in the U.S. tax code, which makes buying a home a good deal for almost everyone.

Here’s why:

Mortgage interest deductions, including in some cases mortgage insurance premiums, reduce home owners’ tax liability by reducing income. The deduction includes interest paid on both a first and a second home.

Interest on home equity loans is also deductible — whether the borrower uses the money to remodel the kitchen or to take a vacation to Disney World.

Profits from selling a house are potentially a huge windfall. When a home owner sells a primary residence, any profit on the sale of the property is tax free up to $250,000 for single home owners and $500,000 for married home owners filing. Any profit above that is nearly always a long-term capital gain taxed at 15 percent — less if the seller’s tax rate is less than 20 percent.

Home owners can itemize. That opens up opportunities to deduct a host of other items that wouldn’t be deductible if the taxpayer took the standard deduction.

Monday, June 22, 2009

Home Buyer Tax Credit Could Expand!

If you follow my blog, you are well aware of the fact that the first-time home buyer tax credit of up to $8,000 has helped to move housing inventory during an otherwise sluggish real estate cycle.

Now, both legislators and the business community are hoping to build on the incentive's success by expanding it! A number of bills have been introduced in the House and the Senate that lobby for an expansion of the measure. Among the proposed changes are:

  • Setting a new cap of $15,000
  • Extending the tax break into mid-2010
  • Making the benefit available to all home buyers, not just first-timers
  • Offering a separate tax credit to $3,000 for borrowers who refinance

Let's keep our fingers crossed! These proposed changes will benefit many home buyers and really stimulate the real estate market!

Tuesday, June 2, 2009

Pending Home Sales Are Increasing

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in April, rose 6.7 percent to 90.3 from a reading of 84.6 in March, and is 3.2 percent above April 2008 when it was 87.5.

Economists are saying that buyers are responding to very favorable market conditions. Housing affordability conditions have been at historic highs, but now the $8,000 first-time buyer tax credit is beginning to impact the market. Since first-time buyers must finalize their purchase by November 30 to get the credit, increased activity is expected in the months ahead

Geographic Breakdown:
Northeast: The Pending Home Sales Index shot up 32.6 percent to 78.9 in April and is 0.8 percent above a year ago.
Midwest: The index rose 9.8 percent to 90.4 and is 11.1 percent above April 2008.
South: The index slipped 0.2 percent to 93.0 in April but is 3.5 percent higher than a year ago.
West: The index rose 1.8 percent to 94.8 but is 2.9 percent below April 2008.

There are numerous buyer assistance programs around the country. Many states are offering bridge loans that allow first-time buyers to use the tax credit for downpayment and closing costs and there are many other local government and nonprofit programs available to buyers, depending on location. Just last week, HUD announced that qualifying buyers can use the tax credit for closing costs on FHA loans, to buy down the interest rate or make a larger down payment.

This is great news for the real estate market!

Sunday, May 31, 2009

Uniform Process for Short Sales

On May 14, 2009, the Obama Administration announced its Foreclosure Alternatives Program (FAP) providing incentives and uniform procedures for short sales and deeds-in-lieu of foreclosure under the Making Home Affordable Program.

The Making Home Affordable Program is designed to help homeowners obtain modifications to their loan so they can afford to stay in their home. Where a modification is not possible, new incentives encourage a quick private sale or voluntary transfer of property, which will save homeowners money and protect their financial future. A uniform process for handling short sales and financial incentives should help facilitate this process.

Click here to view a summary of the incentives and process.

Friday, May 22, 2009

Mortgage Rates Continue to Fall

Freddie Mac reports a drop in the 30-year fixed mortgage rate to 4.82 percent during the week ended May 21 from 4.86 percent the prior week. Meanwhile, the 15-year fixed mortgage rate dipped to 4.5 percent.

The Federal Reserve is working to hold down rates by purchasing upwards of $1.25 trillion in mortgage-backed securities and $300 billion in Treasuries. Mortgage rate premiums have declined substantially over the last couple of months even as Treasury yields climbed.

Tuesday, May 19, 2009

Sam Zell Predicts Recovery Is in Sight

Real estate mogul Sam Zell believes that the decrease in real estate inventory and building slowdown will soon increase demand.

He predicts that the U.S. housing market will turn around this summer because the building slowdown is increasing demand. "I can't tell you if it's June 29 or Aug. 1," says Zell, who made billions in commercial real estate by buying up distressed property.

Zell said the housing downturn is international, but “the U.S. will recover and recover first around the world because we have a culture and we have an environment where we face up to reality quickly and effectively.”

If Zell's predictions are accurate, this may be the best time buy ever! For those of you that have been waiting to buy, you might want to start making a move soon!

Friday, May 15, 2009

Many States Already Monetizing Tax Credit

Many states have already started making bridge loans available to households who want to claim the First-Time Homebuyer Tax Credit! With the announcement earlier this week that the U.S. Department of Housing and Urban Development will allow consumers to obtain a bridge loan, repayable with proceeds from their tax credit, to help cover their down payment, consumers are anxious to "get movin’".

HUD Secretary Shaun Donovan stated that guidelines for the new policy will be released shortly. But even before the announcement, nearly a dozen states were one step ahead of the department by providing similar bridge loans through their housing finance agencies.

Many state REALTOR® associations were behind these proactive efforts and worked with state officials to set up programs. The Washington REALTORS® association was able to convince treasury officials that the money loaned to home buyers would not only be paid back when tax credits took effect, but also increase the state’s funds. According to their calculations, every 1,000 home sales represented approximately $140 million in new tax revenues. To help close the deal, the association put up $400,000 to help cover the risk. Thus far, the initiative has been successful, with thousands of loans granted to first-time home buyers.

There are currently 10 states that have a program similar to Washington’s, and that number is expected to increase following Secretary Donovan’s announcement.

This is great news for first-time homebuyers that want to use their tax credit as a down payment!

Wednesday, May 13, 2009

Use Your $8000 Tax Credit as a Down Payment

The U.S. Department of Housing and Urban Development announced this week that the Federal Housing Administration is going to permit its lenders to allow home buyers to use the $8,000 tax credit as a down payment.

Previously, most buyers could not receive the funds until after they filed their tax return, and that deterred some people from using the credit. If consumers have access to the home buyer tax credit funds when they close on their home loans the cash can be used as a down payment.

Now FHA’s approved lenders will be permitted to “monetize” the tax credit through short-term bridge loans. This will allow eligible home buyers to access the funds immediately at the closing table.

At this point there aren’t yet any procedures in place to accommodate the “bridge” loan. But this should be available shortly. For those of you who qualify for the First Time Home Buyer Tax Credit should start looking for a home now. This should prove to be a significant benefit to the Real Estate purchase market. It won’t be long before excess inventory begins to diminish, which will result in rising home prices in a short period of time.

Thursday, April 23, 2009

Rural Development Increases Income Limits!

New income limits for the USDA Guaranteed Rural Housing Program went into effect on
April 20th. This includes an increase in the income limits nationwide, as well as the implementation of the new “2-Tier” income limit structure, which will simplify program requirements and the qualification process.

Previously, income limits for many counties, including Cumberland & York Counties, depended on the number of persons. There was a different income level for each additional person. The new structure only has two income levels (1-4 persons and 5-8 persons). This increases the maximum income level for most families.

Cumberland & York County:
$73,600 for 1-4 person household
$97,150 for 5-8 person household

Portland Metro:
$83,250 for 1-4 person household
$109,900 for 5-8 person household

This is great news for many buyers!

Here is the link to look up the Rural Development income limits for your area.

Wednesday, April 8, 2009

Tax Credits for Energy Efficiency

President Obama's "Stimulus Bill" (The American Recovery and Reinvestment Act of 2009), which was signed on February 17, 2009, made significant changes to the energy efficiency tax credits. These changes apply to products "placed in service" in 2009.

The highlights are:
  • The tax credits that were previously effective for 2009 have been extended to 2010 as well.
  • The tax credit has been raised from 10% to 30%.
  • The tax credits that were for a specific dollar amount (i.e. $300 for a CAC), have been converted to 30% of the cost.
  • The maximum credit has been raised from $500 to $1,500 total for the two year period (2009-2010). However, some improvements such as geothermal heat pumps, solar water heaters, and solar panels are not subject to the $1,500 maximum.
  • The $200 cap on windows has been removed, but the requirements for windows has been increased significantly. Keep in mind that not all ENERGY STAR qualified windows will qualify.

Click here for more specific information on what is covered by the tax credits.

Friday, April 3, 2009

Are You Ready To Buy?

Determining whether or not you are ready to buy a house can be a daunting task. But, whether you are a renter or you are aiming to upgrade to a larger home, there are signs that will indicate whether you are ready to take the buying plunge.

So are you ready to make the move? You might be if you:

1. Are familiar with the market. If you have been paying attention to how much houses are listed for in the neighborhoods you are interested in and have a realistic idea of how much a house will cost you, you're in good shape. But if you're dreaming about that big corner house with no clue about the asking price, you may want to spend some more time becoming familiar with the market.

2. Have the money for a down payment and closing costs. The down payment is a percentage of the value of the property. Typically, the percentage will be determined by the type of mortgage you select. Down payments usually range from 3 to 20 percent of the property value. You may also be required to have Private Mortgage Insurance (PMI or MI) if your down payment is less than 20 percent. And don’t forget closing costs which include points, taxes, title insurance, financing costs and items that must be prepaid or escrowed and other settlement costs. You can expect to pay between from 2 to 7 percent of the property value. Generally, buyers will receive an estimate of these costs from your lender after you apply for a mortgage.

3. Know how much you can afford. Typically, as a general rule, your monthly mortgage payment should be less than or equal to a percentage of your income, usually about a quarter of your gross monthly income. Also, your income, debt and credit history go into determining how much you can borrow. As a general rule, your debt -credit card bills, car loans, housing expenses, alimony and child support -- should not be more than about 30 to 40 percent of your gross income.

4. Know what additional expenses will come with owning a home. This includes homeowners insurance, utility bills, maintenance costs -- roofing, plumbing, heating and cooling.

5. Have your credit in good shape and make sure your credit report is accurate. Potential lenders will view your credit history. You should get a report from each of the three credit reporting companies (Equifax, Experian, and Trans Union) and be familiar with your scores.

6. You haven't made any recent major purchases, particularly a vehicle. If you do, you may have a harder time getting a loan (or it could potentially lower the amount you'll be approved for).

Thursday, March 26, 2009

Making Home Affordable

The Department of the Treasury and the Department of Housing and Urban Development recently launched a new Web site for consumers seeking information about the Making Home Affordable loan modification and refinancing program.

The site offers interactive self-assessment tools to help borrowers determine if they are eligible to participate and calculate the monthly mortgage payment reductions under the program.

Go to: to check it out!

Wednesday, March 18, 2009

Fed Move to Buy More Securities Should Boost Housing Markets

The Federal Reserve announced today that it would purchase an additional $750 billion in Fannie Mae and Freddie Mac mortgage-backed securities and up to $300 billion in longer term Treasury securities. This is great news for American home buyers and homeowners because mortgage interest rates will continue to remain at historic lows (and potentially drop even more).

This should help improve many home buyer’s ability to purchase a home. Potentially homeowners facing challenges will be able to refinance into better terms. We are already experiencing a great improvement in housing affordability due to historically low interest rates, and the Fed’s move will push affordability conditions to the best levels in 40 years. In addition, continued low rates will lessen foreclosure pressure and help stabilize home prices sooner, as more American buy homes and draw down inventory.

Thursday, March 5, 2009

Understanding the $8000 Tax Credit - Part 2

(Note: See Part 1 in previous post)
Some Practical Questions

15. How do I apply for the credit?
There is no pre-purchase authorization, application or similar approval process. All eligible purchasers simply claim the credit on their IRS Form 1040 tax return. The credit will be reflected on a new Form 5405 that will be attached to the 1040. Form 5405 can be found at

16. So I can’t use the credit amount as part of my downpayment?
No. Congress tried hard to devise a mechanism that would make the funds available for closing costs, but found that pre-funding would require cumbersome processes that would, in effect, bring the IRS into the purchase and settlement phase of the transaction.

17. So there’s no way to get any cash flow benefits before I file my tax return?
Yes, there is. Any first-time homebuyers who believe they are eligible for all or part of the credit can modify their income tax withholding (through their employers) or adjust their quarterly estimated tax payments. Individuals subject to income tax withholding would get an IRS Form W-4 from their employer, follow the instructions on the schedules provided and give the completed Form W-4 back to the employer. In many cases their withholding would decrease and their take‐home pay would increase. Those who make estimated tax payments would make similar adjustments.

Some “Real World” Examples

18. What if I purchase later this year but can’t get to settlement before December 1?
The credit is available for purchases before December 1, 2009. A home is considered as “purchased” when all events have occurred that transfer the title from the seller to the new purchaser. Thus, closings must occur before December 1, 2009 for purchases to be eligible for the credit.

19. I haven’t even filed my 2008 tax return yet. If I buy in 2009, do I have to wait until next year to get the benefit of the credit?
You’ll have a helpful choice that might speed up the process. Eligible homebuyers who make their purchase between January 1, 2009 and December 1, 2009 can treat the purchase as if it had occurred on December 31, 2008. Thus, they can claim the credit on their 2008 tax return that is due on April 15, 2009. They actually have three filing options:

• If they purchase between January 1, 2009 and April 15, 2009, they can claim the $8000 credit on the 2008 return due on April 15.
• They can extend their 2008 income-ax filing until as late as October 15, 2009. (The IRS grants automatic extensions, but the taxpayer must file for the extension. See for instructions on how to obtain an extension.)
• If they have filed their 2008 return before they purchase the home, they may file an amended 2008 tax return on Form 1040X. (Form 1040X is available at
Of course, 2009 purchasers will always have the option of claiming the credit for the 2009 purchase on their 2009 return. Their 2009 tax return is due on April 15, 2010.

20. I purchased my home in early 2009 before the stimulus bill was enacted. I claimed a $7500 tax credit on my 2008 return as prior law had permitted. Am I restricted to just a $7500 credit?
No, you would qualify for the $8000 credit. Eligible purchasers who have already claimed the $7500 credit on a 2008 return for a 2009 purchase may file an amended return (IRS Form 1040X) for the 2008 tax year. This amended return will enable them to obtain the additional $500 credit amount.

21. If I claim my 2009 $8000 credit on my 2008 tax return, will I have to repay the credit just as the 2008 credits are repaid?
No. Congress anticipated this confusion and has made specific provision so that there would be no repayment of 2009 credits that are claimed on 2008 returns.

22. I made an eligible purchase of a principal residence in May 2008 and claimed the $7500 credit on my 2008 tax return. My brother, who has never owned a home, wishes to purchase a partial interest in the home this spring and move in. Will he qualify for the $8000 credit, as well?
No. Any purchase of a principal residence (or interest in a principal residence) from a related party such as a sibling, parent, grandparent, aunt or uncle is ineligible for the tax credit. Since you and your brother are related in this way, he cannot qualify for the credit on any portion of the home that he purchases from you, even if he is a first-time homebuyer.

23. I live in the District of Columbia. If I qualify as a first-time homebuyer, can I use both the $5000 DC credit and the $8000 credit?
No; double dipping is not allowed. You would be eligible for only the $8000 credit. This will be an advantage because of the higher credit amount, plus the eligibility requirements for the $8000 credit are somewhat more easily satisfied than the DC credit.

24. I know there is no repayment requirement for the $8000 credit. Will I ever have to repay any of the credit back to the government?
One situation does require a recapture payment back to the government. If you claim the credit but then sell the property within 3 years of the date of purchase, you are required to pay back the full amount of any credit, including any refund you received from it. A few exceptions apply. (See below, #24). Note that this same 3-year recapture rule applies, as well, to the $7500 credit available for 2008. This provision is designed as an anti-flipping rule.

25. What if I die or get divorced or my property is ruined in a natural disaster within the 3 years?
The repayment rules are eased for many circumstances. If the homeowner who used the credit dies within the first three years of ownership, there is no recapture. Special rules make adjustments for people who sell homes as part of a divorce settlement, as well. Similarly, adjustments are made in the case of a home that is part of an involuntary conversion (property is destroyed in a natural disaster or subject to condemnation by eminent domain by an authorized agency) within the first three years.

26. I have a home under construction. Am I eligible for the credit?
Yes, so long as you actually occupy the home before December 1, 2009.

Sunday, March 1, 2009

Understanding the $8000 Tax Credit - Part 1

In 2008, Congress enacted a $7500 tax credit designed to be an incentive for first-time homebuyers to purchase a home. The credit was designed as a mechanism to decrease the over-supply of homes for sale.

For 2009, Congress has increased the credit to $8000 and made several additional improvements. This revised $8000 tax credit applies to purchases on or after January 1, 2009 and before December 1, 2009.

Tax Credits -- The Basics

1. What’s this new homebuyer tax incentive for 2009?
The 2008 $7500, repayable credit is increased to $8000 and the repayment feature is eliminated for 2009 purchasers. Any home that is purchased for $80,000 or more qualifies for the full $8000 amount.

If the house costs less than $80,000, the credit will be 10% of the cost. Thus, if an individual purchased a home for $75,000, the credit would be $7500. It is available for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009.

2. Who is eligible?
Only first-time homebuyers are eligible. A person is considered a first-time buyer if he/she has not had any ownership interest in a home in the three years previous to the day of the 2009 purchase.

3. How does a tax credit work?
Every dollar of a tax credit reduces income taxes by a dollar. Credits are claimed on an individual’s income tax return. Thus, a qualified purchaser would figure out all the income items and exemptions and make all the calculations required to figure out his/her total tax due. Then, once the total tax owed has been computed, tax credits are applied to reduce the total tax bill. So, if before taking any credits on a tax return a person has total tax liability of $9500, an $8000 credit would wipe out all but $1500 of the tax due. ($9,500 - $8000 = $1500)

4. So what happens if the purchaser is eligible for an $8000 credit but their entire income tax liability for the year is only $6000?
This tax credit is what’s called “refundable” credit. Thus, if the eligible purchaser’s total tax liability was $6000, the IRS would send the purchaser a check for $2000. The refundable amount is the difference between $8000 credit amount and the amount of tax liability. ($8000 - $6000 = $2000) Most taxpayers determine their tax liability by referring to tables that the IRS prepares each year.

5. How does withholding affect my tax credit and my refund?
A few examples are provided at the end of this document. There are several steps in this calculation, but most income tax software programs are equipped to make that determination.

6. Is there an income restriction?
Yes. The income restriction is based on the tax filing status the purchaser claims when filing his/her income tax return. Individuals filing Form 1040 as Single (or Head of Household) are eligible for the credit if their income is no more than $75,000. Married couples who file a Joint return may have income of no more than $150,000.

7. How is my “income” determined?
For most individuals, income is defined and calculated in the same manner as their Adjusted Gross Income (AGI) on their 1040 income tax return. AGI includes items like wages, salaries, interest and dividends, pension and retirement earnings, rental income and a host of other elements. AGI is the final number that appears on the bottom line of the front page of an IRS Form 1040.

8. What if I worked abroad for part of the year?
Some individuals have earned income and/or receive housing allowances while working outside the US. Their income will be adjusted to reflect those items to measure Modified Adjusted Gross Income (MAGI). Their eligibility for the credit will be based on their MAGI.

9. Do individuals with incomes higher than the $75,000 or $150,000 limits lose all the benefit of the credit?
Not always. The credit phases-out between $75,000 - $95,000 for singles and $150,000 - $170,000 for married filing joint. The closer a buyer comes to the maximum phase-out amount, the smaller the credit will be. The law provides a formula to gradually withdraw the credit. Thus, the credit will disappear after an individual’s income reaches $95,000 (single return) or $170,000 (joint return).

For example, if a married couple had income of $165,000, their credit would be reduced by 75% as shown:
Couple’s income $165,000
Income limit 150,000
Excess income $15,000

The excess income amount ($15,000 in this example) is used to form a fraction. The numerator of the fraction is the excess income amount ($15,000). The denominator is $20,000 (specified by the statute).

In this example, the disallowed portion of the credit is 75% of $8000, or $6000
($15,000/$20,000 = 75% x $8000 = $6000)

Stated another way, only 25% of the credit amount would be allowed. In this example, the allowable credit would be $2000 (25% x $8000 = $2000)

10. What’s the definition of “principal residence?”
Generally, a principal residence is the home where an individual spends most of his/her time (generally defined as more than 50%). It is also defined as “owner-occupied” housing. The term includes single family detached housing, condos or co-ops, townhouses or any similar type of new or existing dwelling. Even some houseboats or manufactured homes count as principal residences.

11. Are there restrictions on the location of the property?
Yes. The home must be located in the United States. Property located outside the US is not eligible for the credit.

12. Are there restrictions related to the financing for the mortgage on the property?
In 2009, most financing arrangements are acceptable and will not affect eligibility for the credit. Congress eliminated the financing restriction that applied in 2008. (In 2008, purchasers were ineligible for the $7500 credit if the financing was obtained by means of mortgage revenue bonds.) Now, mortgage-revenue bond financing will not disqualify an otherwise-eligible purchaser. (Mortgage revenue bonds are tax-exempt bonds issued by a state housing agency. Proceeds from the bonds must be used for below market loans to qualified buyers.)

13. Do I have to repay the 2009 tax credit?
NO. There is no repayment for 2009 tax credits.

14. Do 2008 purchasers still have to repay their tax credit?
YES. The $7500 credit in 2008 was more like an interest-free loan. All eligible purchasers who claimed the 2008 credit will still be required to repay it over 15 years, starting with their 2010 tax return.

Sunday, February 22, 2009

Questions and Answers for Borrowers about the Homeowner Affordability and Stability Plan

As a real estate broker, I have a lot of people approach me with questions regarding how the Homeowner Affordability and Stability Plan impacts their specific situation.

Below you will find Q&A from President Obama's blog. You may find this helpful when trying to determine what options are available for you.

Borrowers Who Are Current on Their Mortgage Are Asking:

What help is available for borrowers who stay current on their mortgage payments but have seen their homes decrease in value?
Under the Homeowner Affordability and Stability Plan, eligible borrowers who stay current on their mortgages but have been unable to refinance to lower their interest rates because their homes have decreased in value, may now have the opportunity to refinance into a 30 or 15 year, fixed rate loan. Through the program, Fannie Mae and Freddie Mac will allow the refinancing of mortgage loans that they hold in their portfolios or that they placed in mortgage backed securities.

I owe more than my property is worth, do I still qualify to refinance under the Homeowner Affordability and Stability Plan?
Eligible loans will now include those where the new first mortgage (including any refinancing costs) will not exceed 105% of the current market value of the property. For example, if your property is worth $200,000 but you owe $210,000 or less you may qualify. The current value of your property will be determined after you apply to refinance.

How do I know if I am eligible?
Complete eligibility details will be announced on March 4th when the program starts. The criteria for eligibility will include having sufficient income to make the new payment and an acceptable mortgage payment history. The program is limited to loans held or securitized by Fannie Mae or Freddie Mac. I have both a first and a second mortgage.

Do I still qualify to refinance under the Homeowner Affordability and Stability Plan?
As long as the amount due on the first mortgage is less than 105% of the value of the property, borrowers with more than one mortgage may be eligible to refinance under the Homeowner Affordability and Stability Plan. Your eligibility will depend, in part, on agreement by the lender that has your second mortgage to remain in a second position, and on your ability to meet the new payment terms on the first mortgage.

Will refinancing lower my payments?
The objective of the Homeowner Affordability and Stability Plan is to provide creditworthy borrowers who have shown a commitment to paying their mortgage with affordable payments that are sustainable for the life of the loan. Borrowers whose mortgage interest rates are much higher than the current market rate should see an immediate reduction in their payments. Borrowers who are paying interest only, or who have a low introductory rate that will increase in the future, may not see their current payment go down if they refinance to a fixed rate. These borrowers, however, could save a great deal over the life of the loan. When you submit a loan application, your lender will give you a 'Good Faith Estimate' that includes your new interest rate, mortgage payment and the amount that you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, a refinancing may not be right for you.

What are the interest rate and other terms of this refinance offer?
The objective of the Homeowner Affordability and Stability Plan is to provide borrowers with a safe loan program with a fixed, affordable payment. All loans refinanced under the plan will have a 30 or 15 year term with a fixed interest rate. The rate will be based on market rates in effect at the time of the refinance and any associated points and fees quoted by the lender. Interest rates may vary across lenders and over time as market rates adjust. The refinanced loans will have no prepayment penalties or balloon notes.

Will refinancing reduce the amount that I owe on my loan?
No. The objective of the Homeowner Affordability and Stability Plan is to help borrowers refinance into safer, more affordable fixed rate loans. Refinancing will not reduce the amount you owe to the first mortgage holder or any other debt you owe. However, by reducing the interest rate, refinancing should save you money by reducing the amount of interest that you repay over the life of the loan.

How do I know if my loan is owned or has been securitized by Fannie Mae or Freddie Mac?
To determine if your loan is owned or has been securitized by Fannie Mae or Freddie Mac and is eligible to be refinanced, you should contact your mortgage lender after March 4, 2009.

When can I apply?
Mortgage lenders will begin accepting applications after the details of the program are announced on March 4, 2009.

What should I do in the meantime?
You should gather the information that you will need to provide to your lender after March 4, when the refinance program becomes available. This includes: information about the gross monthly income of all borrowers, including your most recent pay stubs if you receive them or documentation of income you receive from other sources your most recent income tax return information about any second mortgage on the house payments on each of your credit cards if you are carrying balances from month to month, and payments on other loans such as student loans and car loans.

Borrowers Who Are at Risk of Foreclosure Are Asking:

What help is available for borrowers who are at risk of foreclosure either because they are behind on their mortgage or are struggling to make the payments?
The Homeowner Affordability and Stability Plan offers help to borrowers who are already behind on their mortgage payments or who are struggling to keep their loans current. By providing mortgage lenders with financial incentives to modify existing first mortgages, the Treasury hopes to help as many as 3 to 4 million homeowners avoid foreclosure regardless of who owns or services the mortgage.

Do I need to be behind on my mortgage payments to be eligible for a modification?
No. Borrowers who are struggling to stay current on their mortgage payments may be eligible if their income is not sufficient to continue to make their mortgage payments and they are at risk of imminent default. This may be due to several factors, such as a loss of income, a significant increase in expenses, or an interest rate that will reset to an unaffordable level.

How do I know if I qualify for a payment reduction under the Homeowner Affordability and Stability Plan?
In general, you may qualify for a mortgage modification if (a) you occupy your house as your primary residence; (b) your monthly mortgage payment is greater than 31% of your monthly gross income; and (c) your loan is not large enough to exceed current Fannie Mae and Freddie Mac loan limits. Final eligibility will be determined by your mortgage lender based on your financial situation and detailed guidelines that will be available on March 4, 2009.

I do not live in the house that secures the mortgage I would like to modify. Is this mortgage eligible for the Homeowner Affordability and Stability Plan?
No. For example, if you own a house that you use as a vacation home or that you rent out to tenants, the mortgage on that house is not eligible. If you used to live in the home but you moved out, the mortgage is not eligible. Only the mortgage on your primary residence is eligible. The mortgage lender will check to see if the dwelling is your primary residence.

I have a mortgage on a duplex. I live in one unit and rent the other. Will I still be eligible?
Yes. Mortgages on 2, 3 and 4 unit properties are eligible as long as you live in one unit as your primary residence. I have two mortgages. Will the Homeowner Affordability and Stability Plan reduce the payments on both? Only the first mortgage is eligible for a modification.

I owe more than my house is worth. Will the Homeowner Affordability and Stability Plan reduce what I owe?
The primary objective of the Homeowner Affordability and Stability Plan is to help borrowers avoid foreclosure by modifying troubled loans to achieve a payment the borrower can afford. Lenders are likely to lower payments mainly by reducing loan interest rates. However, the program offers incentives for principal reductions and at your lender?s discretion modifications may include upfront reductions of loan principal.

I heard the government was providing a financial incentive to borrowers. Is that true?
Yes. To encourage borrowers who work hard to retain homeownership, the Homeowner Affordability and Stability Plan provides incentive payments as a borrower makes timely payments on the modified loan. The incentive will accrue on a monthly basis and will be applied directly to reduce your mortgage debt. Borrowers who pay on time for five years can have up to $5,000 applied to reduce their debt by the end of that period.

How much will a modification cost me?
There is no cost to borrowers for a modification under the Homeowner Affordability and Stability Plan. If you wish to get assistance from a HUD-approved housing counseling agency or are referred to a counselor as a condition of the modification, you will not be charged a fee. Borrowers should beware of any organization that attempts to charge a fee for housing counseling or modification of a delinquent loan, especially if they require a fee in advance.

Is my lender required to modify my loan?
No. Mortgage lenders participate in the program on a voluntary basis and loans are evaluated for modification on a case-by-case basis. But the government is offering substantial incentives and it is expected that most major lenders will participate.

I'm already working with my lender / housing counselor on a loan workout. Can I still be considered for the Homeowner Affordability and Stability Plan?
Ask your lender or counselor to be considered under the Homeowner Affordability and Stability Plan.

How do I apply for a modification under the Homeowner Affordability and Stability Plan?
You may not need to do anything at this time. Most mortgage lenders will evaluate loans in their portfolio to identify borrowers who may meet the eligibility criteria. After March 4 they will send letters to potentially eligible homeowners, a process that may take several weeks. If you think you qualify for a modification and do not receive a letter within several weeks, contact your mortgage servicer or a HUD-approved housing counselor. Please be aware that servicers and counseling agencies are expected to receive an extraordinary number of calls about this program.

What should I do in the meantime?
You should gather the information that you will need to provide to your lender on or after March 4, when the modification program becomes available. This includes information about the monthly gross income of your household including recent pay stubs if you receive them or documentation of income you receive from other sources your most recent income tax return information about any second mortgage on the house payments on each of your credit cards if you are carrying balances from month to month, and payments on other loans such as student loans and car loans.

My loan is scheduled for foreclosure soon. What should I do?
Contact your mortgage servicer or credit counselor. Many mortgage lenders have expressed their intention to postpone foreclosure sales on all mortgages that may qualify for the modification in order to allow sufficient time to evaluate the borrower's eligibility.