Archive for April, 2009

$8000 Tax Credit Explained

$8000 Tax Credit

 

Right now, an $8,000 tax credit is being offered by the government to enable aspiring homeowners to buy their first home.1 

If you are eligible, the tax credit can help ease the financial transition from renting to owning. It can assist with buying furniture and home-décor; making home improvements – like remodeling, landscaping and painting; or paying down debt as you adjust to new monthly expenses. Homes purchased between January 1, 2009 and December 1, 2009 are eligible.



The tax credit is part of the American Recovery and Reinvestment Act of 2009, signed into law on February 17, 2009, and enacted to help stabilize the housing market and strengthen our overall economy.
Are you eligible for the tax credit?

The tax credit is designated for first-time home buyers.2 A first-time home buyer is defined as a buyer who has not owned a home in the last three years.

The tax credit is equal to ten percent of the home purchase price, which is capped at $8,000. Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit. Single taxpayers with incomes between $75,000 and $95,000, and married couples with incomes between $150,000 and $170,000 qualify for partial credit.

All homes purchased between January 1, 2009 and December 1, 2009 including single-family, townhomes, or condominiums will qualify for the tax credit, provided that the home is used as the principal residence. This also includes new construction homes if occupied by December 1, 2009.

To learn more about obtaining the tax credit and repayment, visit the Frequently Asked Questions.

For further information about eligibility requirements and limitations, visit www.irs.gov. 

This information is subject to change without notice.
1. Consult a tax advisor regarding your individual situation. This information is not intended to provide legal advice, tax advice, accounting services, or investment advice, nor should it be relied on for legal advice. Please seek the advice of your own legal counsel.
2. Not available for those who qualify for a similar tax credit in the District of Columbia, or for those who finance their home purchase under a mortgage revenue bond program.

 

Ten Steps To Buying A Home

Buying a home is a big step in your life.  Whether it’s your first time or you’ve owned several homes, it can be intimidating to get started.  The market is constantly changing, as are the numerous contracts and legalities involved in the real estate field.  Working with a REALTOR® you trust will alleviate most of the hassles in the process. 

But how do you get that process started?  Just follow these steps:

1.  Educate yourself.   First-time home buyers should attend an approved HomeStretch class that will qualify them to take advantage of many programs available to them.  HomeStretch classes cover everything from cleaning up your credit to maintaining your new home and will pay you back in dividends for a very small fee.  Or, attend one of Edina’s Free Home Seminars to get valuable home buying tips, information on the current housing market and financial advice.

2.  Figure out how much home you can afford.  Before you go out looking for a home, you can get an idea of what you can afford by using our Finance Center Tools.

Another thing to consider is your down payment amount. Think you can’t buy a house without a 10% or 20% down payment? Thanks to more lenient government guidelines and new mortgage products, many people can now get into a house for as little as 3% down-or less. There are even some special programs for first-time buyers that help with closing costs.

3.  Conduct a preliminary search with the  Property Finder. You may even want to save some of your searches and schedule home showings online.

4.   Get pre-approved.  You will nearly always need a letter of mortgage pre-approval for your offers to be accepted.  Waiting until you want to write an offer could cause you to lose out on a deal.  Apply Online or contact a trusted mortgage consultant of your choice.  I am happy to offer recommendations based on your needs. 

5.  Find your home.  Once you are under a buyer’s contract with me, you no longer have to wait for open houses or make appointments with the listing agents.  We can see the houses privately and on your own schedule.  Remember that under a buyer’s contract, your obligation is to work with one agent.  Buyer agent’s commissions are generally paid by the listing agent.  Private showings and a professional negotiator working on my behalf – with no cost to me? Yes, please!

6.  Make an offer.  Once you find the home that you want to make an offer on, you’ll sign a purchase agreement and give the seller earnest money to seal the deal. If your offer is accepted (sometimes with contingencies), determine a date you wish to close.

7.  Have your new home inspected to ensure there’s nothing seriously wrong with the property and get homeowner’s insurance to protect yourself against any unforeseen calamity.

8.  Notify your mortgage consultant that you’ve found a property so they can begin the appraisal and title process. And, lock in your interest rate. Your mortgage consultant will send you a new good faith estimate which shows your monthly mortgage payment as well as your estimated cash needed for closing. Edina Realty Title will notify you of the time and date you close on your home and the items you’ll need to bring to closing.

9.  Notify your phone company, utilities (don’t forget water and sewer), moving company, post office, newspaper and magazines, friends and family (see our moving checklist) and change your mailing address. 

10.  Move into your new home!

Real Estate Terms to Know

Whether it’s your first time dealing with real estate or it’s just been a while, there may be a lot of terms that you’ll hear and won’t be familiar with. This can leave buyers frustrated and confused. Below are definitions to some commonly used terms to get you educated and ahead of the game.

To search for a particular term, use your “ctrl” key and “F” key together to bring up the word finder.

Terms to Know

Addenda
These are supplemental documents that are part of a purchase agreement.

Adjustable Rate Mortgage, ARM
A loan where the interest rate adjusts to current rates during the duration of the loan.

Annual Percentage Rate, APR
The cost of the loan, including the interest rate, points, origination fee and other charges.

Appraisal
An estimate of the value of a property, made by a state licensed professional appraiser.

Assessments
When a city makes improvements to city property, homeowners must pay for these improvements through their city taxes.

Association Dues
Payments condominium and townhouse owners make for upkeep and management of shared property.

Assumable
A loan where a buyer arranges to take over the seller’s original loan.

Buyer’s Broker
An agent who works on behalf of the buyer.

Closing
The meeting between the buyer, seller, and lender (or their agents) where the property and funds legally change hands. Also called settlement.

Closing Costs (Settlement Costs)
The costs and fees associated with the official change in ownership of the property and with obtaining your mortgage that are assessed at the closing or settlement. Closing costs include required certifications, insurance, taxes, and other fees, and typically total between 3 and 6 percent of the mortgage amount.

Commitment Letter
A letter from your lender showing qualification of a loan and listing the terms.

Contingency
An addition to a purchase agreement stating that certain terms be met within a time frame for the agreement to remain valid.

Contract for Deed
An owner offering the buyer financing, and the buyer makes monthly installments to the owner.

Conventional Loan
Loans without government involvement.

Credit Report
A report that documents a borrower’s credit history and current status. Borrowers can examine their own credit reports, although most credit reporting companies charge a fee to provide a report.

Credit Score
A rating based on your credit history.

Default
Failure of loan payment.

Down Payment
An up-front payment made on a home.

Earnest Money
Money paid to the agent when an offer is made on a property. If the offer is approved, the money is counted toward payment of the property. If the offer is denied, the money is returned to the buyer.

Equity
The portion of the property that you own that is clear of any mortgage.

Escrow
Money paid in addition to the monthly mortgage payment that goes into a special account set up by the lender and is held to pay for taxes and insurance. “Escrow” can also refer to a third party who carries out the instructions of both the buyer and seller to handle the paperwork at the settlement.

FHA Loans
Loans that are backed by the Federal Housing Administration.

Fixed Rate Loan
A loan that has a constant rate for the duration of the terms.

Good Faith Estimate
Document provided by lender which estimates the various fees and closing costs associated with the home purchase.

Gross Income
Your income before taxes.

HUD-1 Form
A settlement statement of all of the closing costs – law requires that parties are furnished with this prior to closing.

Homeowner’s Insurance
Insurance which homeowners purchase to protect their investment.

Homestead Taxes
Property taxes paid by owners who actually live in the home.

Interest
Lender’s charge for a loan, which pays the lender’s costs of doing business. This is paid in addition to your monthly principal payment.

Loan Origination Fees
Fees you pay your lender for handling and processing your loan application.

Loan Processing
An analysis by a lender to determine your qualification for a loan.

Lock-In Agreement
An agreement you make with your lender to lock in at the rate you qualified at.

Long-Term Debt
Debt you will owe on for more than six months.

Mortgage Discount Points
Prepaid interest on a loan.

Mortgage Insurance Premium, MIP
Insurance that a lender is required to charge for on an FHA loan.

PITI–The Monthly Loan Payment
Principal, Interest, Taxes, and Insurance – All factors involved in a monthly loan payment.

Points (Loans Discount Points)
Points are prepaid interest on your mortgage, charged by the lender at the time of the closing. Each point is one percent of the loan amount that is, 2 points on a $100,000 mortgage would be $2,000.

Pre-Approval Letter
A letter from an FDIC institutional lender that states the borrower’s credit, bank references and employment has been verified. It informs a buyer of the loan amount they can obtain.

Pre-Paids
The expenses that are put into escrow at closing, usually including real estate taxes, insurance, and interest.

Prepayment Penalty
A penalty fee assigned for early payoff on a loan.

Prime Mortgage
Highest grade of mortgage that you qualify for.

Principal
The amount of debt, not including interest, left on a loan; also the face amount of the mortgage.

Private Mortgage Insurance, PMI
If you make less than a 20% down payment on a conventional loan, you will be required to pay for this insurance.

Property Tax Adjustment
Reimbursement to the seller for taxes already paid for the year.

Purchase Agreement
A legally binding agreement between the buyer and seller that lists the terms and conditions of the sale of the property.

Re-Issue Credit
Savings on the cost of homeowner’s insurance for using the same company the previous owner used.

Sub-Prime Mortgage
Has a higher interest rate than prime mortgage.

Subagent
A seller’s agent that owes their duties to the seller. A subagent may bring a potential buyer to a property.

Title Insurance
Insurance that you pay to protect the lender from claims on the property title.

Truth-In-Housing Inspection Report
An inspection that the seller pays for that states the condition of the house.

Truth-In-Lending Disclosure Statement
A statement from your lender stating all fees and costs of a loan using the annual percentage rate.

Underwriting
Risk analysis conducted by a lender to decide whether to approve you for the loan.

VA Loan
Low-interest, no down payment loans offered to people who served in the U.S. Military and issued from the Veterans Administration.

Think I’m missing one?  Tell me in the comments.