False Illusions and What You Need to Know
Homebuyer Alert…
For prospective homebuyers who are on the fence about making a home purchase, the next few months represent a countdown of sorts for two reasons.
The first of these, the coming expiration of huge tax incentives, may be a bit more obvious to most borrowers. April 30, 2010 is the last day to enter into a home purchase contract and still potentially qualify for a federal income tax credit of up to $8,000 for first-time homebuyers and up to $6,500 for repeat homebuyers. The credit can be claimed only on contracts that close by June 30, 2010.
Secondly, beyond the waning benefit of the Federal income tax incentive, another form of stimulus will soon disappear, as the Federal Reserve winds down a program that has been keeping home loan rates artificially low.
Rate Alert…
The lowest rates of 2009 were driven down to their attractive levels because of the Fed’s Mortgage Backed Securities (MBS) purchase program. Home loan rates have an inverse relationship with the value of MBS. When these securities trade higher on the market, rates move lower and vice-versa. So when the Fed originally agreed to be a big buyer, it helped provide a market for MBS, which helped keep prices high and, as a result, helped push home loan rates low.
And while the Fed continues that program through the end of March 2010, the reality is that the Fed‘s “extension” was really more of a rationing intended to prevent home loan rates from spiking as the program is phased out. It’s sort of like weaning the market off of its life-saving treatment instead of forcing it to go cold turkey.
Already, some in the media have mistakenly reported the extension of the program through March as good news, telling consumers that rates will continue to decline, and remain low into the spring. This gives a false sense of security that homebuyers and refinancers simply cannot afford.
The problem is…
Those reports do not accurately report what’s going on or where rates are really headed. That can have a very costly impact on consumers who may miss out on historically low rates if they listen to these media outlets.
Here’s what’s really going on…In May 2009, the Federal Reserve's purchases of MBS peaked at an average of $25 Billion per week. As of November, the average weekly purchases dropped down to $14 Billion. At the end of November, the Fed had already used over 80% of the allocated funds for MBS, meaning less than 20% remained to be used over four months.
Making the problem worse is that the Fed now has less money available to purchase MBS while at the same time, the supply of these securities has increased as a result of refinance and purchase activity that was triggered by lower rates.
Why is that important?
As the Fed now has fewer funds to last through the remaining months of the program, its ability to keep rates low will wane.As the Fed's program winds down and ends, we’ll likely see two things happen.
First, we will probably see higher levels of volatility—with rates sometimes shifting dramatically in the middle of the day. That means it is more important than ever for buyers to work with a knowledgeable mortgage professional who has a finger on the pulse of the market at all times and can provide trusted, proven advice.
Second, since MBS will have less support from the Fed, rates are likely to rise over time.
In short, while rates are still very good, they may not be for long.
What should you do to protect yourself?
First and foremost, work with a knowledgeable mortgage originator who studies and monitors the market.
Second, don’t be fooled by media stories that only report the headlines and don’t understand the underlying implications of the Fed’s actions. If you ever hear something in the news but aren’t sure what it means to your situation, feel free to call or email me for in-depth answers and advice.
Finally, if you haven't yet explored how the current rate environment might benefit you or someone you know, let’s arrange a time to sit down and discuss your unique situation as well as your short- and long-term goals.
Remember, rates are still very good, but they may not be for long.
Friday, December 18, 2009
Monday, November 30, 2009
Buying Homes the need repairs....
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 203k 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, give us a call, and we’ll gladly provide you more information about this valuable program.
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 203k 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, give us a call, and we’ll gladly provide you more information about this valuable program.
Friday, November 6, 2009
First Time Homebuyer Credit
Who Gets What?
First-Time Homebuyers (FTHBs): First-time homebuyers (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000
Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.
Current Owners: The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.
Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.
What are the New Deadlines?
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.
What are the Income Caps?
The amount of income someone can earn and qualify for the full amount of the credit has been increased.
Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible
Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.
What is the Maximum Purchase Price?
Qualifying buyers may purchase a property with a maximum sale price of $800,000.
What is a Tax Credit?
A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual’s primary residence.
How Much are First-Time Homebuyers (FTHB) Eligible to Receive?
An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.
Who is Eligible fort FTHB Tax Credit?
Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible.
This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.
As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.
How Much are Current Home Owners Eligible to Receive?
The tax credit program includes a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.
Can Homebuyers Claim the Tax Credit in Advance of Purchasing a Property?
No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.
Can a Taxpayer Claim a Credit if the Property is Purchased from a Seller with Seller Financing and the Seller Retains Title to the Property?
Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Some examples of this would include a land contract or a contract for deed.
According to the IRS, factors that would demonstrate the ownership of the property would include:
1. Right of possession,
2. Right to obtain legal title upon full payment of the purchase price,
3. Right to construct improvements,
4. Obligation to pay property taxes,
5. Risk of loss,
6. Responsibility to insure the property, and
7. Duty to maintain the property.
Are There Other Restrictions to Taking the FTHB Credit?
Yes. According to the IRS, if any of the following describe a homebuyer’s situation, a credit would not be due:
They buy the home from a close relative. This includes a spouse, parent, grandparent, child or grandchild. (Please see the question below for details regarding purchases from “step-relatives.”)
They do not use the home as your principal residence.
They sell their home before the end of the year.
They are a nonresident alien.
They are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)
Their home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
They owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2005, through July 1, 2008.
Can Homebuyers Purchase a Home from a Step-Relative and Still be Eligible for the Credit?
Yes. As long as the person they buy the home from is not a direct blood relative, the purchase would be allowed.
If a Parent (Who Will Not Live In The Property) Cosigns for a Mortgage, Will Their Child Still be Eligible for the Credit?
Yes, provided that the child meets the other requirements for the tax credit.
First-Time Homebuyers (FTHBs): First-time homebuyers (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000
Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.
Current Owners: The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.
Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.
What are the New Deadlines?
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.
What are the Income Caps?
The amount of income someone can earn and qualify for the full amount of the credit has been increased.
Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible
Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.
What is the Maximum Purchase Price?
Qualifying buyers may purchase a property with a maximum sale price of $800,000.
What is a Tax Credit?
A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual’s primary residence.
How Much are First-Time Homebuyers (FTHB) Eligible to Receive?
An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.
Who is Eligible fort FTHB Tax Credit?
Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible.
This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.
As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.
How Much are Current Home Owners Eligible to Receive?
The tax credit program includes a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.
Can Homebuyers Claim the Tax Credit in Advance of Purchasing a Property?
No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.
Can a Taxpayer Claim a Credit if the Property is Purchased from a Seller with Seller Financing and the Seller Retains Title to the Property?
Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Some examples of this would include a land contract or a contract for deed.
According to the IRS, factors that would demonstrate the ownership of the property would include:
1. Right of possession,
2. Right to obtain legal title upon full payment of the purchase price,
3. Right to construct improvements,
4. Obligation to pay property taxes,
5. Risk of loss,
6. Responsibility to insure the property, and
7. Duty to maintain the property.
Are There Other Restrictions to Taking the FTHB Credit?
Yes. According to the IRS, if any of the following describe a homebuyer’s situation, a credit would not be due:
They buy the home from a close relative. This includes a spouse, parent, grandparent, child or grandchild. (Please see the question below for details regarding purchases from “step-relatives.”)
They do not use the home as your principal residence.
They sell their home before the end of the year.
They are a nonresident alien.
They are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)
Their home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
They owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2005, through July 1, 2008.
Can Homebuyers Purchase a Home from a Step-Relative and Still be Eligible for the Credit?
Yes. As long as the person they buy the home from is not a direct blood relative, the purchase would be allowed.
If a Parent (Who Will Not Live In The Property) Cosigns for a Mortgage, Will Their Child Still be Eligible for the Credit?
Yes, provided that the child meets the other requirements for the tax credit.
Saturday, February 21, 2009
Obama Unveils Homeowner Affordability and Stability Plan
President Obama unveiled his plan to help stabilize the housing market and keep millions of borrowers in their homes.
The Homeowner Affordability and Stability Plan includes two initiatives to help struggling homeowners. One is a refinancing program for homeowners with less than 20% equity in their homes, or who owe more than their home is worth. The second program attempts to lower monthly payments for homeowners at risk of losing their home. In addition, the plan includes a third initiative to support low mortgage rates by strengthening confidence in Fannie Mae and Freddie Mac.
Many of the plan’s details are still being worked out and will not be announced until March 4, here is an overview of the plan’s main components.
Refinancing Initiative
Under current rules, those families who own less than 20% equity in their homes have a difficult time refinancing and taking advantage of the historically low interest rates. Therefore, the refinancing initiative in the new plan provides refinancing help for homeowners with less than 20% equity in their homes or who owe more than their home is worth. This initiative is open to homeowners who have conforming loans which are guaranteed by Fannie Mae and Freddie Mac, and who owe up to 5% more than their home is worth.
According to the plan, “credit-worthy” or “responsible” homeowners can refinance their mortgage into a 30- or 15-year, fixed-rate loan based on current market rates. The refinanced loan, however, cannot include prepayment penalties or balloon payments. For many families, this low-cost refinancing may help reduce their mortgage payments by up to thousands of dollars per year.
As with the rest of the plan, details about this initiative will be released at a future date—including what, if any, credit score requirements will be included.
Stability Initiative
This initiative aims at providing help to individual families as well as entire neighborhoods by helping reduce foreclosures and stabilize home prices. It is intended to help homeowners who are struggling to afford their mortgage payments, but cannot sell their homes because prices have fallen significantly.
The goal of this initiative is simple: “reduce the amount homeowners owe per month to sustainable levels.” To accomplish this, lenders are encouraged to lower homeowners' payments to 31 percent of their income by lowering their interest rate to as low as 2% or by extending the terms of the loan. In addition, lenders can also lower the principal owed by the borrower, with Treasury sharing in the costs.
Homeowners who are current on their mortgages but are struggling can still apply for this program. As such, this is one of the few programs designed to help homeowners who may face delinquency soon, but are current at the moment.
Since the focus of this initiative is on helping families and neighborhoods, investment properties do not qualify. This initiative also includes a number of additional elements and incentives that benefit homeowners and lenders alike, including:
* Incentives to Help Borrowers Stay Current: To provide an extra incentive for borrowers to keep paying on time, the initiative will provide a monthly balance reduction payment that goes straight towards reducing the principal balance of the mortgage loan. As long as a borrower stays current on his or her loan, he or she can get up to $1,000 each year for five years.
* Reaching Borrowers Early: To keep lenders focused on reaching borrowers who are trying their best to stay current on their mortgages, an incentive payment of $500 will be paid to servicers, and an incentive payment of $1,500 will be paid to mortgage holders, if they modify at-risk loans before the borrower falls behind.
Supporting Low Mortgage Rates
As part of the Homeowner Affordability and Stability Plan, the Treasury Department is increasing its funding commitment to Fannie Mae and Freddie Mac to ensure the strength and security of the mortgage market and to help maintain mortgage affordability. This portion of the plan will use using funds already authorized in 2008 by Congress for this purpose.
The increased funding will enable Fannie Mae and Freddie Mac to carry out ambitious efforts to ensure mortgage affordability for responsible homeowners, and provide forward-looking confidence in the mortgage market.
Again, the government plans to unveil the final details of the plan on March 4, 2009. For now, you can download a sheet of common Questions and Answers produced by the government at: www.treas.gov/initiatives/eesa/homeowner-affordability-plan/ConsumerQA.pdf
I will continue monitoring the plan as new information becomes available. If you have any questions or would like to discuss how this may specifically impact you, I’d be happy to sit down with you. Just call or email me to set up an appointment.
President Obama unveiled his plan to help stabilize the housing market and keep millions of borrowers in their homes.
The Homeowner Affordability and Stability Plan includes two initiatives to help struggling homeowners. One is a refinancing program for homeowners with less than 20% equity in their homes, or who owe more than their home is worth. The second program attempts to lower monthly payments for homeowners at risk of losing their home. In addition, the plan includes a third initiative to support low mortgage rates by strengthening confidence in Fannie Mae and Freddie Mac.
Many of the plan’s details are still being worked out and will not be announced until March 4, here is an overview of the plan’s main components.
Refinancing Initiative
Under current rules, those families who own less than 20% equity in their homes have a difficult time refinancing and taking advantage of the historically low interest rates. Therefore, the refinancing initiative in the new plan provides refinancing help for homeowners with less than 20% equity in their homes or who owe more than their home is worth. This initiative is open to homeowners who have conforming loans which are guaranteed by Fannie Mae and Freddie Mac, and who owe up to 5% more than their home is worth.
According to the plan, “credit-worthy” or “responsible” homeowners can refinance their mortgage into a 30- or 15-year, fixed-rate loan based on current market rates. The refinanced loan, however, cannot include prepayment penalties or balloon payments. For many families, this low-cost refinancing may help reduce their mortgage payments by up to thousands of dollars per year.
As with the rest of the plan, details about this initiative will be released at a future date—including what, if any, credit score requirements will be included.
Stability Initiative
This initiative aims at providing help to individual families as well as entire neighborhoods by helping reduce foreclosures and stabilize home prices. It is intended to help homeowners who are struggling to afford their mortgage payments, but cannot sell their homes because prices have fallen significantly.
The goal of this initiative is simple: “reduce the amount homeowners owe per month to sustainable levels.” To accomplish this, lenders are encouraged to lower homeowners' payments to 31 percent of their income by lowering their interest rate to as low as 2% or by extending the terms of the loan. In addition, lenders can also lower the principal owed by the borrower, with Treasury sharing in the costs.
Homeowners who are current on their mortgages but are struggling can still apply for this program. As such, this is one of the few programs designed to help homeowners who may face delinquency soon, but are current at the moment.
Since the focus of this initiative is on helping families and neighborhoods, investment properties do not qualify. This initiative also includes a number of additional elements and incentives that benefit homeowners and lenders alike, including:
* Incentives to Help Borrowers Stay Current: To provide an extra incentive for borrowers to keep paying on time, the initiative will provide a monthly balance reduction payment that goes straight towards reducing the principal balance of the mortgage loan. As long as a borrower stays current on his or her loan, he or she can get up to $1,000 each year for five years.
* Reaching Borrowers Early: To keep lenders focused on reaching borrowers who are trying their best to stay current on their mortgages, an incentive payment of $500 will be paid to servicers, and an incentive payment of $1,500 will be paid to mortgage holders, if they modify at-risk loans before the borrower falls behind.
Supporting Low Mortgage Rates
As part of the Homeowner Affordability and Stability Plan, the Treasury Department is increasing its funding commitment to Fannie Mae and Freddie Mac to ensure the strength and security of the mortgage market and to help maintain mortgage affordability. This portion of the plan will use using funds already authorized in 2008 by Congress for this purpose.
The increased funding will enable Fannie Mae and Freddie Mac to carry out ambitious efforts to ensure mortgage affordability for responsible homeowners, and provide forward-looking confidence in the mortgage market.
Again, the government plans to unveil the final details of the plan on March 4, 2009. For now, you can download a sheet of common Questions and Answers produced by the government at: www.treas.gov/initiatives/eesa/homeowner-affordability-plan/ConsumerQA.pdf
I will continue monitoring the plan as new information becomes available. If you have any questions or would like to discuss how this may specifically impact you, I’d be happy to sit down with you. Just call or email me to set up an appointment.
Friday, February 20, 2009
New Stimulus Bill and Homeowners
Tax Credit for Home buyers
First-time home buyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit. Remember a tax credit is very different than a tax deduction – a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income.
The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit if they sell their homes within three years.
Additional Housing-Related Provisions
Tax Incentives to Spur Energy Savings and Green Jobs
This provision is designed to help promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation.
Landmark Energy Savings
This provision provides $5 Billion for energy efficient improvements for more than one million modest-income homes through weatherization. According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills.
Repairing Public Housing and Making Key Energy Efficiency Retrofits To HUD-Assisted Housing
This provision provides a total of $6.3 Billion for increasing energy efficiency in federally
supported housing programs. Specifically, it establishes a new program to upgrade HUD-sponsored low-income housing (for elderly, disabled, and Section 8) to increase energy efficiency, including new insulation, windows, and frames.
Expanding Housing Assistance
This provision increases support for several critical housing programs. It includes $2 Billion for the Neighborhood Stabilization Program to help communities purchase and rehabilitate foreclosed, vacant properties.
More Help for Homeowners in the Future
Another thing to keep an eye on in the coming weeks is President Obama’s plan to help struggling borrowers before they are faced with a default on their mortgage.
According to reports, the Obama administration is discussing plans to help borrowers who are struggling to stay afloat, but who have not yet fallen behind on their payments. At this point, details are scarce; however, reports indicate that President Obama is looking to spend approximately $50 Billion to directly help homeowners before they face foreclosure and financial disaster.
While this is good news for individual homeowners, it will likely be good for the housing industry as a whole. That’s because, assisting struggling borrowers before they default should help stop the wave of foreclosures, which are estimated to top two million this year. That, in turn, will help stabilize home prices.
The Economic Stimulus Plan is huge, and impacts a number of industries. I’ve highlighted some of the major provisions that may impact you now and in the future.
As always, if you have any questions or would like to discuss how this may specifically impact you, I’d be happy to sit down with you. Just call or email me to set up an appointment.
First-time home buyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit. Remember a tax credit is very different than a tax deduction – a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income.
The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit if they sell their homes within three years.
Additional Housing-Related Provisions
Tax Incentives to Spur Energy Savings and Green Jobs
This provision is designed to help promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation.
Landmark Energy Savings
This provision provides $5 Billion for energy efficient improvements for more than one million modest-income homes through weatherization. According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills.
Repairing Public Housing and Making Key Energy Efficiency Retrofits To HUD-Assisted Housing
This provision provides a total of $6.3 Billion for increasing energy efficiency in federally
supported housing programs. Specifically, it establishes a new program to upgrade HUD-sponsored low-income housing (for elderly, disabled, and Section 8) to increase energy efficiency, including new insulation, windows, and frames.
Expanding Housing Assistance
This provision increases support for several critical housing programs. It includes $2 Billion for the Neighborhood Stabilization Program to help communities purchase and rehabilitate foreclosed, vacant properties.
More Help for Homeowners in the Future
Another thing to keep an eye on in the coming weeks is President Obama’s plan to help struggling borrowers before they are faced with a default on their mortgage.
According to reports, the Obama administration is discussing plans to help borrowers who are struggling to stay afloat, but who have not yet fallen behind on their payments. At this point, details are scarce; however, reports indicate that President Obama is looking to spend approximately $50 Billion to directly help homeowners before they face foreclosure and financial disaster.
While this is good news for individual homeowners, it will likely be good for the housing industry as a whole. That’s because, assisting struggling borrowers before they default should help stop the wave of foreclosures, which are estimated to top two million this year. That, in turn, will help stabilize home prices.
The Economic Stimulus Plan is huge, and impacts a number of industries. I’ve highlighted some of the major provisions that may impact you now and in the future.
As always, if you have any questions or would like to discuss how this may specifically impact you, I’d be happy to sit down with you. Just call or email me to set up an appointment.
Sunday, February 8, 2009
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