Debbie Brodie’s Chico Real Estate Blog

If you have not taken advantage of the $8000 first time home buyer credit, there is still time.

The Los Angeles Times released a story outlining the IRS release of guidelines for the home buyer tax credits.

The Internal Revenue Service (IRS) recently issued new guidelines and clarified documentation that taxpayers must submit to successfully obtain the federal tax credit for home buyers.

• The federal tax credit for home buyers was extended and expanded late last year.  Qualified first-time buyers may be eligible to receive a tax credit of up to $8,000 on homes purchased before April 30, 2010.  Repeat buyers may be eligible for a tax credit of up to $6,500. Click here for more information about the federal tax credit for home buyers, including eligibility requirements.
• To receive the tax credit, home buyers must comply with the IRS’s documentation requirements, including a fully executed IRS Form 5405.  On the form, which is available on the IRS’s Web site, taxpayers provide information supporting their claim of eligibility, such as income and home purchase date.
• The IRS also requires home buyers to submit a copy of the closing or settlement statement that proves the transaction took place.  The IRS previously said that the statement should show “all parties’ names and signatures, property address, sales price, and date of purchase.”  However, since closing or settlement statements vary by state, and in some cases the form does not include both the seller’s and buyer’s signatures, the IRS has revised this requirement.  As long as the closing or settlement statement conforms to prevailing local practices, the IRS will accept it.
• One stipulation for repeat buyers is they must provide documentation they lived in their former property for a consecutive five years out of the previous eight years.  Accepted documentation may include property tax records, hazard insurance records, or copies of annual mortgage interest statements filed with their federal taxes.

To read the full story, please click here.

Everyone is looking for the right strategy to buy or sell property in today’s changing real estate market.

Seller’s still want to wait until their property is worth the amount they established in their minds at the top of the market. Those numbers may not return for many years. So, what to do?

If you have considered moving up to a nicer property, or down sizing, there are many incentives in place to make it a very attractive time.

With a good Realtor to guide you, you can actually gain an advantage in today’s market. Remember, the “loss” is really only a paper loss if the next property you buy is also a bargain.

 The same rule applied if you bought a house at the very top of the market,and sold one at the top as well. The extra money you made on the sale of the first home offset the extra you paid for the new home. Bubble for bubble, bust for bust.

So, find the home you really really want. Make an offer. Put your current house on the market, subject to the new house closing successfully.  Apply for the $6500 tax credit. And be happy

We all know about the $6,500 or $8,000 federal tax credit for people who buy a home, and are in contract by April 30th. But there are more reasons not to wait. FHA buyers will not be able to get all the same benefits as new regulations are passed.

One biggie: the seller will only be able to contribute 3%, not 6% towards closing costs.  Another: not everyone will get the low 3.5% down payment.

New Rules for FHA Borrowers
The Federal Housing Administration (FHA) recently outlined future changes to the FHA home loan program.  The changes first were proposed last month by Secretary of Housing and Urban Development (HUD) Shaun Donovan.

Rising defaults on FHA loans have led to the FHA’s cash reserves falling below federally mandated levels.  FHA officials hope that policy changes will ensure borrowers have a stronger equity position and are less likely to default.

Policy changes include:

–Raising the up-front mortgage insurance premium: The premium will rise to 2.25 percent from its current 1.75 percent.  HUD is expected to release a Mortgagee Letter on Jan. 21 making the premium increase effective in the spring.
–Raising the minimum credit score requirements: New borrowers will be required to have a minimum FICO score of 580 to qualify for the FHA?s 3.5 percent down payment program.  New borrowers with less than a 580 FICO score will be required to put down at least 10 percent.  FHA expects this to take effect in early summer after it goes through the normal regulatory process.
–Reduce allowable seller concessions:  The agency is lowering the maximum permissible level to 3 percent from its current 6 percent limit.  FHA expects this to take effect in early summer after it goes through the normal regulatory process.
More info 
http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-016

FHA intends to lower  the amount a seller can contribute to the buyer’s closing cost during the sale of their home. The current 6% seller concession, will be capped off at 3%.

Other changes include  higher mortgage insurance and stricter credit score requirements.

The Federal Housing Administration (FHA) today outlined future changes to the FHA home loan program.  The changes first were proposed last month by Secretary of Housing and Urban Development (HUD) Shaun Donovan.

Rising defaults on FHA loans have led to the FHA’s cash reserves falling below federally mandated levels.  FHA officials hope that policy changes will ensure borrowers have a stronger equity position and are less likely to default.

Policy changes include:

• Raising the up-front mortgage insurance premium: The premium will rise to 2.25 percent from its current 1.75 percent.  HUD is expected to release a Mortgagee Letter on Jan. 21 making the premium increase effective in the spring.
• Raising the minimum credit score requirements: New borrowers will be required to have a minimum FICO score of 580 to qualify for the FHA’s 3.5 percent down payment program.  New borrowers with less than a 580 FICO score will be required to put down at least 10 percent.  FHA expects this to take effect in early summer after it goes through the normal regulatory process.
• Reduce allowable seller concessions:  The agency is lowering the maximum permissible level to 3 percent from its current 6 percent limit.  FHA expects this to take effect in early summer after it goes through the normal regulatory process.

More info 

I have long heard that the super low mortgage interest rates we have today will not last. This week, I found an article that explains why.  And when.

 
April 1 will be the first day that the Federal Reserve will end its debt purchase program and allow the struggling U.S. mortgage market to operate unassisted. As a result, the Fed believes mortgage rates will rise about three-quarters of a percent to about 6 percent, Boston Fed President Eric Rosengren said Saturday.

Fear of a worldwide perception that the U.S. government is simply printing money to use to purchase mortgage-related securities is a big reason the Fed has pulled back, analysts say. If that fear caused a sell-off of U.S. government bonds, it would push borrowing costs substantially higher and derail the economic recovery.
We are still in uncharted waters,” Fed Vice Chairman Donald Kohn said in an unrelated speech Saturday. “We will need to be flexible and adjust as we gain experience.”

Source: Reuters News,  (01/08/2010)