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  1. 2008 First Time Homebuyer Tax Credits Need to be Repaid This Year

    By on February 18, 2011

    Were you one of the people that took advantage of the first time home buyer tax credit in 2008?  Did you know that your tax credit has to be paid back starting this year?  While later iterations of the tax credit do not have to be paid back, those who claimed the tax credit between April 8, 2008 and January 1, 2009 need to pay their credit back to the government.  From the IRS’ website:

    “The credit operates much like an interest-free loan, because it must be repaid over a 15-year period.  So, for example, and eligible taxpayer who buys a home today an properly claims the maximum available credit of $7,500 on his or her 2008 federal income tax return must begin repaying the credit by including one-fifteenth of this amount, or $500, as an additional tax on his or her 2010 return.”

    There are some exceptions to the rule:

    • If you die, any remaining repayments are cancelled.
    • If filed a joint return and fie, your surviving spouse would have to repay half of the remaining amount owed.
    • If you stop using the home as your primary residence, the remainder of the payments are due the year you sell the home.
    • If you sell the home, the remainder of the payments are due the year of the sale.  If you sell the home at a loss or no gain, the remainder of the payments may be cancelled or reduced.
    • If you transfer your house to a spouse, or former spouse as a part of a divorce, that person owes the remainder of the payments.

    Here is a link to IRS form 5405, which is required for repayment of the 2008 first-time homebuyer tax credit.

    Disclaimer: I am not a tax expert, tax attorney, nor accountant.  This article was written for informational purposes only.  Please consult your tax professional for further information about this matter.
    Category: Mortgage Rates

  2. Housing Prices Resume Falling in Absence of Government Stimulus

    By on September 22, 2010

    In the absence of the cliff, the coyote will fall, as is the case with housing prices and government stimulus.

    For quite a while now we’ve been saying that home prices were going to decline following the expiration of the first time homebuyer tax credit in April.  Due to the lagging nature of home price indices, we are just now seeing the effects of the absence of government stimulus in the housing market.

    The FHFA’s House Price Index was released this morning, and as expected, housing prices declined from June to July, falling 0.5 percent.  The June numbers were revised from a decline of 0.3 percent to a decline of 1.2 percent.  The report states that “the unusually large revision mainly reflects the addition of new data from late June that show considerably weaker prices than earlier in the month”.

    The price decline can be attributed to an oversupply of houses coupled with anemic demand and continued high unemployment.

    For the 12 month period July 2009-2010, housing prices dropped 3.3 percent.  The FHFA index is now 13.8 percent below its peak, which occurred in April 2007.  Prices declined most precipitously in the Mountain region (Montana, Idaho, Wyoming, Nevada, Utah, Colorado, Arizona, and New Mexico), falling 1.5 percent last month and 7.3 percent over the past year.  The only regions posting positive growth last month were the Pacific and Middle Atlantic regions, seeing price increases of 1.1 and 0.2 percent respectively.  No region is showing growth in housing prices over the last 12 months.

    The S & P Case Shiller House Price Index, a somewhat broader measure of housing prices, is due out next Tuesday.  I do not expect to see drastic declines in the Case Shiller Index yet, as it is a three month average that lags the market by two months.  I expect the Case Shiller reports for October and especially November to be particularly ugly, as that is when post-tax credit home sales will be fully integrated into the reports.

    Category: Mortgage Rates

  3. Repossessions Due to Foreclosure Up 25% in 2010

    4 By on September 16, 2010

    Today there is more bad news on the foreclosure front.  Lenders seized more houses in foreclosure in August than any other month since the beginning of the mortgage crisis.  This news comes from a RealtyTrac study via an AP article by Alex Veiga.

    According to RealtyTrac, over 95,000 homes became real estate owned (REO) in August, a 3 percent increase from the prior month and a 25 percent increase from the previous August.  This is the ninth straight month that the number of homes seized by lenders has increased.

    The only marginally good news on this topic is that foreclosure filings (the number of homes entering the foreclosure process) actually declined for the third straight month.  It appears that banks are increasing the pace at which they can handle these foreclosures, slowly working through the backlog.  According to James Saccacio, CEO of RealtyTrac:

    “On the front end, seriously delinquent loans are rolling into foreclosure at an unusually slow rate, while on the back end the dammed-up inventory of properties already in foreclosure is moving to REO in steady stream rather than a flood — presumably to prevent further erosion of home prices,”

    So this current wave of foreclosures appears to have crested and may be rolling back, but there is a concern that further home price declines could send many more borrowers underwater, and many others into foreclosure.  Nearly 25 percent of U.S. homeowners with mortgages have negative home equity, and many more are in danger of becoming underwater if prices decrease.  As stated in the above quote, putting additional REO property on the market could put additional downward pressure on home values.

    More downward movement in home values is almost inevitable at this point.  There is a huge overhang of supply (12.5 months of supply vs 6 months in a normal market) and a severe lack of demand for homes following the expiration of the first time homebuyer tax credit.  Factor in continued high unemployment and we can see that home prices must fall.

    Category: Mortgage Rates

  4. First Time Homebuyer Tax Credit Cost $16.2B

    By on September 3, 2010

    It seemed like a good idea at the time...

    According to reports from the IRS, via Housingwire.com, the total bill for the first time homebuyer tax credit is $16.2 billion through July.  An additional $7.3 billion was spent on interest-free loans and other related stimulus.

    The Government Accountability Office estimates that when it is all said and done, we will spend $22 billion on the homebuyer tax credits.

    I suppose this naturally leads to the question of whether or not the expenditure was worth it.  I am of the opinion that it was not.  According to the Brooking Institute, only 15 percent of people who took advantage of the tax credit said it was their primary motivator for purchasing a home.  A Zillow survey from 2009 found 18 percent of respondents saying the credit was their primary motivator.  We could infer that upward of 80 percent of those who claimed the credit would have made a purchase anyway, the credit simply accelerated their purchases.  Even if you do not buy into these numbers, we can conservatively estimate that a substantial portion of those claiming the credit would’ve eventually made a purchase in its absence.

    If you do buy into the 80 percent figure, we spent more than $40,000 on every home that would not have sold without the tax credit.  To me this is a vastly inefficient use of taxpayer money.  Additionally, housing prices have resumed falling after being briefly buoyed by the tax credit.  Many analysts expect to see housing prices fall between 5 and 20 percent over the next few years.  If one of the goals of the stimulus was to stabilize the housing market, that goal was not achieved.

    In short, we spent at least $16 billion to temporarily lift the market.  We did not reduce the overall housing supply (which is steadily increasing), and we stole demand from the fall and summer in order for a short-term gain in the spring.  The whole thing was bad policy that was clearly politically-motivated.  With any luck it will not return.

    Category: Mortgage Rates

  5. “No Discussions” to Bring Back First Time Homebuyer Tax Credits

    By on August 31, 2010

    Yesterday there was some buzz around the internets that the first time homebuyer tax credit could return.

    The rumors/speculation arose when HUD Secretary Shaun Donovan did not dismiss the possibility of a return of the tax credit during a CNN interview.  Donovan was quoted as saying: “It’s too early to say whether the tax credit will be revived”, adding the administration would “do everything [they] can” to help stabilize the housing market.

    On the same program, several politicians, including Gov. Charlie Crist of Florida, voiced support for the possibility of bringing back the credit.

    Now there is a report from CNBC’s Diana Glick who asserts that a HUD spokesperson said there are “no discussions underway to revive the credit”.  You will note that the wording of the response does not rule out the eventual return of housing tax credits.  I would not be at all surprised to see the credits come back, especially if the housing market continues to decelerate as the mid-term elections approach.

    Additionally, in a press briefing yesterday, Obama Administration Press Secretary Robert Gibbs was quoted as saying that bringing back the tax credit “is not as high on the list as many other things are“.

    In previous posts I have voiced my dislike for the tax credit.  I believe that it accelerated home sales from the Fall and Summer into the Spring, but I doubt it prompted many people to make purchases who would not have otherwise done so.  After the expiration of the credit, demand for homes utterly dissipated, and home values have or are about to resume falling.  The first time home buyer tax credit was costly for taxpayers, and it appears to have only delayed rather than prevented the bottoming out of the housing market. Only when some of the excess housing supply gets absorbed will the housing market begin to strengthen.  To that end, I think that any tax credit or incentive should be aimed specifically at dealing with some of the overhang.

    If there were to be some form of government stimulus for the housing market, what form do you think it should take?  Is government support of the housing market even appropriate?  Let me know your opinions in the comments section below.

    Category: Mortgage Rates

  6. Mortgage Rates Projected to Continuously Rise

    1 By on April 15, 2010

    Mortgage Rates Projected to Continuously Rise

    As the overall outlook for economic recovery continues to improve, mortgage rates are expected to experience a sustained increase. Despite the unrelenting effort by the federal government to artificially keep mortgage rates at or near historic lows for more than a year, the Federal Reserve has taken its proverbial foot off the gas in an attempt to allow the housing market to heal without government intervention. Coupled with improved unemployment figures and the ever-increasing government debt, interest rates will undoubtedly go up.

    As the housing market continues to recover from unrelenting property value declines and unprecedented foreclosure activity, it appears mortgage rates are highly unlikely to go any lower than where they are currently at, leaving them with nowhere to go but up. According to last week’s figures, the average on a 30-year fixed-rate mortgage was 5.26 percent, which is still significantly lower than the 5.48 percent from April 2009.

    The rate and term refinance boom that had been generated by the Obama administration’s Home Affordable Refinance Program (HARP) has effectively dried up. There is an extremely limited number of homeowners remaining that have not already refinanced, who could still qualify. As analysts predict a rise in mortgage rates – likely reaching 5.5 percent by August and 6 percent or higher by December – homeowners who may have missed their chance at refinancing can now expect higher monthly mortgage payments than they may have originally anticipated.

    Prospective homeowners are in the same boat, but any procrastination will only compound their potential financial windfall as the $8,000 first-time home buyer tax credit and the $6,500 move-up home buyer tax credit will expire in just over two weeks if a purchase agreement is not signed with a seller by April 30.

    Regrettably, too many Americans have become accustomed to the incredibly low mortgage rates from the past year or so, and believed that they would remain extremely low for a more prolonged period of time. The question is no longer whether mortgage rates will rise, but rather how much will they go up? All good things come to an end, so it’s just a matter of time before mortgage rates increase rather sharply.

    Robert Hyder

    Follow Total Mortgage on Twitter

    Category: Mortgage Rates

  7. FHA Home Buyers Tax Credit: Clock’s Ticking for First-Time Home Buyers

    By on March 10, 2010

    Remember the Good Old Days? These are the Good Old Days!! tick tock… tick tock…

    clock_moneyTime is running out. Hurry before April 30th to take advantage of Federal Governments first-time home buyer tax credit. If you are considering parlaying the home buyer tax credit with an FHA approved mortgage, then you will want to also turn it up a notch and make sure you apply for your mortgage prior to April 5, 2010, when The Department of Housing and Urban Development (HUD), through it’s FHA program, will be raising the amount of the required upfront mortgage insurance by a half-percent, from the current amount of 1.75 percent to the new amount of 2.25 percent. View Today’s FHA Rates.

    • FHA will still allow a borrower to qualify for a FHA mortgage with as little as 3.50 percent down payment.
    • FHA may allow up to a 55 percent debt to income ratio (DTI) to qualify for this 3.50 percent down payment mortgage.
    • FHA will allow a borrower to purchase an owner occupied property and qualify up to a 55 percent DTI while including a non occupant co borrower.
    • FHA will allow maximum financing of 96.5 percent LTV (3.50 down payment) for borrowers related by blood, marriage or law (spouses, parent-child, siblings, stepchildren, aunts-uncles/nieces-nephews, etc.), or for unrelated individuals that can document evidence of a family-type, longstanding, and substantial relationship not arising out of the loan transaction.
    • Conforming loans (Fannie Mae and Freddie Mac) will not allow a loan with a Loan to Value Ratio of greater than 80 percent to qualify fro a mortgage if the debt to income ratio is greater than 45 percent at best. FHA will still allow a seller to contribute up to 6 percent of the Purchase price toward the buyers closing costs.
    • FHA will allow this 6 percent Seller contribution to be used toward the upfront mortgage insurance and/or to buy down the interest rate.
    • FHA will not allow the 6 percent seller concession to be used toward the 3.50 percent down payment FHA will allow the 3.50 down payment to be in the form of a gift from a related to the borrower or with an established “family type relationship”
    • FHA will also allow the buyer to borrower the money from a relative, then when they get this infamous Homebuyer Tax Credit back from the US Federal Government they can pay them back if it was not initially gifted to them.

    President Obama signed into law H.R 3548 The extension and expansion of the home buyer tax credit on Friday November 6, 2009.

    In case you haven’t heard the home buyers tax credit has been extended and expanded to include:

    1. Extension of the current $8,000.00 tax credit for first-time home buyers with a signed purchase contract by April 30, 2010, and closed by June 30, 2010
    2. Raising the income limits for singles to $125,000, and for married couples filing jointly to $225,000
    3. Offering a $6,500 credit for current home owners who have owned their current home as a principle residence far any consecutive five-year period out of the last eight years.
    4. Limiting the purchase price of the home at $800,000
    5. Members of the military, military intelligence, and foreign service who are on qualified extended official duty are not subject to the recapture fee, and individuals who have been deployed overseas for 90 days or more in 2008 or 2009 can claim the credit through April 30, 2011.

    The expansion of this credit for current home owners and/or people making more than $75,000 for single taxpayer, and $150,000 for married couples filing jointly, is effective and shall apply to residences purchased after the date of the enactment of this act.

    I am sure you have either heard someone else remark or possibly say it yourself, “Remember the Good Old Days.”  Well in spite of some of the serious economic challenges we are facing at this time as a nation, in some aspects with regards to home buying and/or refinancing your current mortgage, these ARE the Good Old Days we are currently living in, and we will be referring too these days as the Good Old Days in the future.

    For all home buyer’s tax credits these are the critical times. The clock is ticking for both first-time buyers & FHA home buyers.

    Category: FHA, First Time Home Buyer

  8. Homebuyer Tax Credits Set to Expire

    1 By on March 9, 2010

    tax-credit

    Barring an extension by congress, the $8000 First Time Homebuyer Tax Credit and the $6500 Move-up/Repeat Homebuyer Tax Credits are set to expire on April 30, 2010. The first time homebuyer tax credit was originally due to expire in November 30, 2009 before it was extended by congress. The first iteration of the tax credit did not include the repeat buyer credit.

    Anybody who has not owned a principal residence during the three years prior to the purchase of a home is eligible for the $8000 credit, although certain income limits and price limits on the property do apply. Click here for additional details on how to qualify for the credits.

    In order to take advantage of the credit buyers must enter into a purchase contract prior to April 30, and close on their home prior to July 1. According to the National Association of Realtors, as many as two million transactions of existing home sales in 2009 took advantage of the first time buyer credit. Some analysts disagree about the impact of the extension, saying that many of the people who took advantage of the credit would have purchased homes without it.

    Many do not expect the tax credit to be extended, as it has been less effective as time goes on and the pool of eligible buyers who have yet to take advantage of the credit shrinks. Senate Finance Committee Chairman Max Baucus said “It is important that this tax credit does not become a permanent fixture of the tax code” and Senator Johnny Isakson remarked “This is the last extension”. Congress does tend to to change its mind depending upon the direction the political winds are blowing, but as of now an extension of the credit seems unlikely.

    In many parts of the country, demand for houses, especially on the lower end of the pricing spectrum, has increased substantially as we come closer to the expiration. If you are a renter considering purchasing a home or a current home owner looking to move into a new home, now is a great time to take advantage of these tax credits before they expire. Total Mortgage Services has some of the best mortgage rates in the country and we are experts at with government tax credits. Call 877-868-2503 today to speak to one of our mortgage professionals. Don’t miss out on this opportunity.

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    Category: Mortgage Rates

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