St. Louis Mortgage News - Housing Assistance Tax Act of 2008 pt 2

Filed under: First Time Home Buyer, For Buyers, Mortgage News, Relocation Buyer, Uncategorized

Credit for First-Time Home-buyers by Chris Scheer, Cornerstone Mortgage, O’Fallon, MO

The single largest provision in the Housing Act is a measure allowing taxpayers buying their first home to take a tax credit of up to $7,500 of the purchase price. Qualified home-buyers can subtract the credit amount from their federal income tax when they buy a home and even get a refund if the credit exceeds their tax. However, they are then required to pay the credit back over fifteen years. The result is that the credit resembles an interest-free loan that must be repaid to the government.

Here are the details of the new credit:

• The home must be located in the United States and must be the taxpayer’s principal residence. The taxpayer (and the taxpayer’s spouse if married) must not have owned another principal residence in the United States in the three-year period before purchasing the new home. Accordingly, the home does not literally have to be the taxpayer’s first home ever purchased in the United States.
• The home must be purchased between April 9, 2008 and June 30, 2009. Purchases from certain related persons and acquisitions by gift or inheritance do not qualify. A home constructed by the taxpayer does qualify if the taxpayer moves in between April 9, 2008 and June 30, 2009.
• There is also a special rule that allows taxpayers who purchase a qualifying principal residence in the first six months of 2009 to treat the purchase as if made on December 31, 2008. This allows the credit to be claimed on the taxpayer’s 2008 taxes rather than waiting to claim it on the taxpayer’s 2009 taxes.
• The credit is equal to ten percent of the price paid for the home, up to a maximum of $7,500. The $7,500 maximum credit applies both to individuals and married couples filing a joint return. A married individual filing separately can only claim a maximum credit of $3,750.
• The credit is phased out for individual taxpayers with modified adjusted gross income (AGI) between $75,000 and $95,000 ($150,000 and $170,000 for joint filers) for the year of purchase. Taxpayers with modified AGI over $95,000 ($170,000 for joint filers) can’t claim the credit at all.
• The credit is refundable, which means that households with incomes too low to owe any income tax can still benefit as the excess credit available after applying to any income taxes will be refunded to the taxpayer.
• In the second year after purchase (note that the payback doesn’t immediately start in the subsequent tax year), taxpayers who took the credit must start paying back the credit in equal interest-free installments over fifteen years. For example, suppose a first-time home-buyer purchases a home for $100,000 in December 2008 and claims the maximum credit of $7,500 on his 2008 tax return. He would then be required to pay back $500 (one-fifteenth of the credit) on his tax return for 2010 and for each subsequent return for the following fourteen years, finishing in 2024.
• If the taxpayer sells the home (or the home ceases to be the principal residence of the taxpayer or the taxpayer’s spouse) before the complete repayment of the credit, any remaining credit is due on the tax return for the year in which the home is sold (or ceases to be the principal residence). If the home was sold at a loss to an unrelated person, repayment of the remaining credit is forgiven to the extent of the loss.
• No credit is allowed if certain conditions exist: the taxpayer was ever entitled to a District of Columbia homebuyer credit, the home purchase was financed through tax-exempt mortgage revenue bonds, the taxpayer is a nonresident alien, or the taxpayer disposes of the residence (or it ceases to be a principal residence) in the same year as it was purchased.

For a chart of the tax credit information, click here 

 For Questions or Comments, please contact Chris Scheer chrisscheer@stlouisrealestatevoice.com  

Posted by doug   |   Read More   |   Your Comments Are Welcome!   |   08.05.2008

St. Louis Mortgage News - The View From 30,000 Feet

Filed under: For Buyers, For Sellers, Mortgage News

St. Louis Real Estate Voice guest editor Chris Scheer takes a look back at the past 12 months of the mortgage industry and a hopeful look forward.

As a buyer, seller, or investor, how do you feel about the mortgage mess and how has it affected your home purchase plans? . . . what’s the view from street level?

What a difference a day makes! by Chris Scheer, Cornerstone Mortgage, O’Fallon MO

Over the past 11 months the mortgage industry has gone through one of the most tumultuous times in recent history.  As mortgage companies went out of business, others were rescued by the Federal Reserve and program guidelines changed like your mother told you to change your underwear; DAILY.  Many people, loan officers included were caught not being up to date on the ever changing landscape of guideline changes.  I can admit I had challenges with 2 condo loans in particular. 

In addition to the ever changing landscape of product and guideline changes we have also seen a rate climate that reminds me of a playground toy, the sliding teeter totter!  Rates go up one day, down the next, up again then up and up and then a drastic drop followed by more upward movement.  I continue to preach to my clients, that locking in is the best defense in the current market.  We can always look to renegotiate if rates go down drastically but, once they go up you are screwed.  As my old mentor told me, “pigs get fat, hogs get slaughtered.

Let’s hope that the reforms FHA has instituted effective July 14, 2008 and the merger of Countrywide and Bank of America signal a change to the whirlwind of changes and the rest of the year is filled with calm waters for borrowers to sail in.

For questions or comments on this post, please contact Chris Scheer at chrisscheer@stlouisrealestatevoice.com

Tags: St.+Louis+Mortgage, St.+Louis+Real+Estate, Buyers, Sellers, Investors, FHA, Countrywide+Mortgage, Bank+of+America

Posted by doug   |   Read More   |   Your Comments Are Welcome!   |   07.05.2008

St. Louis Real Estate - Mortgage News - FHA takes the gloves off

Filed under: First Time Home Buyer, For Buyers, For Sellers, Mortgage News

FHA Lifts 90 Waiting Period by Chris Scheer, Cornerstone Mortgage, O’Fallon, MO

In a move to help get foreclosures off the books of lenders quicker and help avoid deterioration of properties that have been foreclosed upon the Department of Housing and Urban Development has lifted their ban on writing a contract if the title has changed in the past 90 days. 

See the following article: FHA Lifts Waiting Period, Extends Insurance Coverage

For further clarification you can visit HUD’s website.

For questions or comments please contact Chris Scheer at chrisscheer@stlouisrealestatevoice.com

Posted by doug   |   Read More   |   Your Comments Are Welcome!   |   06.18.2008

St. Louis Real Estate - Mortgage News - Declining Markets

Filed under: Mortgage News

Declining Markets by Chris Scheer, Branch Manager, Cornerstone Mortgage, O’Fallon, MO 

As the foreclosures and short sales begin to take effect on the housing market one of the single biggest changes that is occurring is the dreaded “Declining Market” label attached to a property in the appraisal.  I have seen investors make the predetermination that certain zip codes, cities and counties are in declining markets and thus they are lowering their exposure by reducing the maximum loan on the properties in that area.  Other investors have said that they will only apply declining market guides if the appraisal states that the property is in a declining market.  Either way, when the declining market rules come into play, the only person that loses is the borrower.

Here are a few examples:

• The borrower is planning on putting only 5% down to purchase the property and the investor has deemed that entire zip code to be a declining market.  They will only lend on the property if the buyer puts 10% down.
• An investor is planning to purchase a home with 10% down and the appraiser notes that the property is in a declining market.  Now the investor has to put 15% down to get the loan.

In both cases if the borrower has the additional 5% it is an inconvenience, but the transaction will still go forward.  But if the borrower does not have the additional 5%, then the deal is dead.  In most cases the seller has lost valuable days marketing their property while the waiting for the buyer to get loan commitment.

Now that we know the challenges this brings I will discuss the inadequacy of how this is applied in my next post.

Chris can be reached at chrisscheer@stlouisrealestatevoice.com

Tags: St.+Louis+Real+Estate, Mortgage+News, Declining+Markets, short+sale, foreclosures

Posted by doug   |   Read More   |   1 Comment »   |   05.10.2008

St. Louis Real Estate - Mortgage News - 100%

Filed under: First Time Home Buyer, For Buyers, Mortgage News, Mortgage News

The End of 100%!

In the ever changing landscape of lending, we had the latest and most significant change take place this past Monday. All of the Private Mortgage Insurance Companies announced that they would no longer issue mortgage insurance on any loan with a loan to value greater than 97%. On a side note I can remember when we could only do a 97% loan and then just one of the mortgage insurance companies said they would insure up to 100% and it was months before the others joined in when the LTV was going up, but now that the maximum LTV is going down, they are all are the same page and quick to make the move.

Kind of like rats jumping off a sinking ship!

But I digress! Now there are few instances that one of the companies will honor the 100% commitment but it is in such a limited scope that you have a better chance of winning tonight’s Powerball drawing than getting a 100% loan.

So why are they doing this?

First of all they are all taking a bath financially in mortgage insurance claims on loans that are in default and foreclosure due to the current mortgage crisis. Some would argue that they have been making money hand over fist for years as their losses have been limited as the housing prices grew and mortgage rates were declining or low, but keep in mind that during that time that they had to fight to keep market share and revenues as the banks created the second mortgages that would go to 100% and in the industry it was common practice to do a first mortgage for 80% and the second for the remaining amount to avoid mortgage insurance. So let’s not rush to judgment on the profits of the mortgage insurance companies over the last 7 years.

Secondly and more importantly, we are seeing house values in some areas decline. So if they did insure a loan that was a 100% loan in one of those areas and the house price has declined, they are now insuring for over 100% of the value of the house. How smart is that?
Where does this leave us? Thanks to the stimulus package that was passed we now have higher FHA loan limits and in most cases the cost of the monthly mortgage insurance will be less on an FHA loan.

Also, in the old days, before 100% financing, we did most loans using gifts, tax returns, SAVINGS, as a way to come up with the initial 3% for a down payment. Imagine that, you have to save some money to buy a house?

I will write more on the increase in the FHA loan limits and the opportunities that are presented by this later this week.

For questions or comments on this please contact Chris Scheer at chrisscheer@stlouisrealestatevoice.com

Tags: St.+Louis+Real+Estate, St.+Louis+Mortgage+News, Buyers, Sellers, FHA, LTV

Posted by doug   |   Read More   |   Your Comments Are Welcome!   |   03.18.2008