$8000 First time buyer credit

$8,000 First Time Buyer Tax Credit

***Smart Financial Weekly Mortgage Update March 13, 2009***

 

Interest Rates

Rates continue to remain in a narrow range hovering just above the historical low (see Historical Note below). Earlier in the week the Mortgage Bankers Association VP of Economic Forecasting said that 30 year fixed rates should stay in the 5% range for the “foreseeable future”. She also observed that it was likely the Fed would step in and “buy more loans” to keep rates low. There does not seem to be much expectation for lowers rates so waiting may not be prudent whether purchasing or refinancing.

 

Historical Note: On January 15, 2009 the average rate was 4.96 the lowest since 1971 when they started tracking rates.

 

Note that actual market rates vary geographically, lender, credit score and loan to value.

Date	Rate
3/13/09	5.03
3/6/09	5.15
2/27/09	5.07
2/20/09	5.04
3/13/08	6.13
3/15/07	6.14

Source: Federal Reserve Statistical H.15.

 

Mortgage Industry Update

I was asked recently by an Agent about the $8,000 tax credit for first time home buyers. After doing some research on it I thought it a good topic for my weekly newsletter. The credit is part of The American Recovery and Investment Act of 2009 more commonly known as “The Stimulus Act”. The Act authorizes a tax credit of 10% of the purchase price up to a maximum of $8,000 for first time home buyers who purchase homes between January 1, 2009 and December 1, 2009. The credit does NOT have to be repaid. Single tax payers can earn up to $75,000 and married couples up to $150,000. There are some other points worth noting;

·         First time buyer defined as someone who has not owned a principal residence during the 3 years prior to the new purchase.

·         If a buyer owns a vacation home or rental property not used as principal residence they may still qualify for the credit.

·         Reduced credit is available for single buyers with income to $95,000 and married couples to $170,000.

·         The credit can be claimed by completing IRS Form 5405 (as with any tax issue we urge anyone interested in the credit to consult with an appropriate, qualified tax advisor).

·         Any home that qualifies as a principal residence for tax purposes qualifies for the credit (single- family detached, attached homes like townhouses and condos, manufactured homes and even houseboats).

·         The tax credit is refundable which means a buyer can claim the credit even if there is no Federal tax liability. In fact, the buyer would likely get a check from the IRS in this instance!

·         I am not aware of any mechanism where a buyer could access the credit in the form of cash for the down payment today. Buyers can decrease their withholding to accumulate cash over a period of time. Again, consult with a tax professional for advice on this. Note that in some states the state housing finance agency has a program for advancing the funds for a down payment. The person I spoke with at the Arizona State Housing Finance Agency said they did not have such a plan.

 If you have any questions please let me know or go to www.federalhousingtaxcredit.com for additional information.

 

Good News

·         The Omnibus Spending Bill recently passed includes a provision that prohibits banks from getting into the real estate business (except for mortgages).

·         The Term Asset-Backed Securities Loan Facility (TALF) providing for $200 Billion to support auto, credit card and student loan financing was launched this week. The TALF’s goal is to help make more money available for auto loans, credit card financing and student loans. Down the road it is also expected to do the same for commercial real estate.

·         February retail sales were down only .1% versus forecast of down .5% plus the January numbers were revised from up 1.0% to up 1.8%. It is unclear if this is a trend but we will take what we can get.

·         Remember Smart Financial’s FREE appraisal offer for any HomeSmart Agent’s first loan with us!

 

For more information contact Burt Carlson at (602) 803-9660 or by e-mail at burt@gosfm.com.