Homebuyer Tax Credit Forms and Rules Now in Place

The Treasury Department has moved at record speed to implement one piece of the new American Recovery and Reinvestment Act of 2009 Act aka the stimulus act.

The Department and the Internal Revenue Service which will manage it announced on Wednesday that forms and regulations are already in place for homebuyers who wish to claim the first-time credit enabled under the act.

The credit is available to homebuyers who purchase a home before December 1 of this year.   In an effort to make the effects of the credit felt quickly in the economy, homebuyers can claim the credit either on their 2009 tax return or immediately on the 2008 return due in April.

The tax credit represents 10 percent of the purchase price of a home up to a maximum of $8,000 or $4,000 for married taxpayers filing separate returns.     The $7,500 credit that was authorized under earlier legislation last year was actually a 15 year loan; the new tax credit does not have to be repaid by the homeowner under ordinary circumstances.

The credit does have to be repaid if the homeowner sells the home in less than 36 months or if the home ceases to be his principal residence during that time.
For the purpose of this credit, a first time homeowner is defined as one who has not owned a home for the 36 months ending on the date of purchase.

The credit is available to taxpayers with adjusted gross incomes up to $75,000 or $150,000 for married taxpayers filing jointly.   Above those income levels the credit is phased out gradually.

Homeowners who purchased a house between April 8 and December 31, 2008 are not eligible for the new credit.   They are covered by the earlier legislation and can claim the $7,500 repayable credit.

Treasury Secretary Tim Geithner said in a press release from his department, “The expansion of the first-time home buyer tax break as part of the President’s recovery agenda gives money to taxpayers when they need it most, while also targeting an important group of buyers.   We view our economic recovery plan, our financial stability plan, and now this homeowner affordability plan as three legs of the same stool – an integrated whole that represents our immediate response to the current crisis.”

Forms and instructions for claiming the credit on 2008 tax returns are available at www.irs.gov.   The form number is 5405

This past week mortgage rates started off on a positive note and actually dipped a bit below 5% for a conventional loan with solid down payment/equity and high credit score. In fact a rally was under way Monday into Tuesday but later on Wednesday into Friday the market gave up some gains and ended the week in the 5 -5.125% range for a 30 year fixed rate with no points. FHA/VA loans continue to hover in the 5-5.5% range as well. We seem to be in a fairly tight trading range with a ceiling and floor that continue to keep rates in a very attractive range.

On Friday the economic stimulus package was passed by Congress and will be signed into law by the President on Tuesday.

The key component that will directly affect the real estate market is the $8000 homebuyer tax credit. It is important to note some of the details and a comparison of the new vs. the previous version passed last year is attached.

The best news is that this credit does not have to be re-paid! The credit however, is for first time homebuyers and does have income restrictions for single or joint household income. A first time homebuyer is defined as one having not owned a home in the previous 3 years leading up to the time of purchase. Phase outs of the credit begin to kick in for single tax filers at $75,000 and joint household income at $150,000.

One other note, the new tax credit provisions for this year are retroactive to settlements beginning January 1, 2009 so any of your clients who meet the criteria and settled this year in advance of this bill getting passed just got a nice windfall and this is great news you can reach out to them with.

The tax credit now has some more teeth to it now. With this enhanced incentive and low mortgage rates coupled with plenty of inventory at reduced prices it™s time for buyers to get off the fence. None of us can accurately predict the future and buyers cannot time the market perfectly but we know when economic conditions improve home prices will increase again, rates will too, and the tax credit/free money to buyers may no longer be available.

We are open for business on Monday although the markets will be closed in observance of the President™s Day holiday.

Have a great week!

Mike Fagan

(410) 218-2030 office

(410) 461-7608 fax

mike.fagan@mortgagefamily.com

PHH Home Loans

10050 Baltimore National Pike

Ellicott City, MD 21042

Please call Hollie with Pakulla Professionals and Re/Max Advantage at 410.952.8964 or visit www.SellsHomesForYou.com

This is a conversation I had with one of my local lenders about the stimulus package. Please start at the bottom to fully understand this blog.

Hollie,

It is for first time homebuyers.   The package put forth by Obama is the same as previous one with the exception that you now get $8000 and do not have to pay it back.   Something to note, that a first time buyer is considered someone who has not owned a home in 3 years.   So if they owned a home and sold it more then   3 years ago, they qualify.   I attached the old tax credit form for you to reference.   Hope this helps.

Mike

Mike Homberg

Branch Manager

1st Mariner Mortgage

3301 Boston St

Baltimore, MD 21224

Office: 443-573-3074

Cell: 410-952-1068

Fax: 410-735-2050

To apply online, visit:

www.1stmarinermortgage.com/mhomberg

WE LEND IN ALL 50 STATES

Mike,

Does this only apply to first time buyers or any buyer that purchases a home in 2009?

Thank you very much,

Hollie

Hollie Pakulla
Pakulla Professionals
Re/Max Advantage Realty
www.SellsHomesForYou.com
Cell: 410.952.8964

Here is what has passed and you can see affect our industry:

For qualified home purchases in 2009, the legislation:

• Stipulates that the $8,000 tax credit does not have to be repaid, unlike the tax credit passed last summer;
• Keeps the tax credit refundable, or claimable regardless of tax liability;
• Extends the sunset date from July 1, 2009 until Dec. 1, 2009 so that consumers can utilize it during the critical summer and fall buying months;
• Allows tax credit home buyers to participate in the mortgage revenue bond program; and
• Permits state housing finance agencies to help buyers at closing by advancing the credit amount as a loan using tax-exempt bond proceeds.   (If CDA adopts this, it could be a great opportunity for you to work with 1st time buyers because they will have the money upfront to spend.)

Mike Homberg

Branch Manager

1st Mariner Mortgage

3301 Boston St

Baltimore, MD 21224

Office: 443-573-3074

Cell: 410-952-1068

Fax: 410-735-2050

To apply online, visit:

www.1stmarinermortgage.com/mhomberg

WE LEND IN ALL 50 STATES

For more information about Maryland real estate, please call Hollie at 410.952.8964 or visit www.SellsHomesForYou.com

What a month for rates it has been in January. Just as soon as we all got back to work and our regularly daily lives in January after the long holiday weekend, the Federal Reserve unveiled it™s plan to begin aggressively purchasing mortgage backed securities in an effort to push mortgage rates down. The announcement on Tuesday January 6^th sparked a huge rally, one of the biggest days we™d seen in years and 30 mortgage rates quickly dipped below 5% for a rate with no points. As the rally unfolded and rates remained around 4.75% – 4.875% with no points, further speculation and hype in the media suggested rates could even go lower perhaps to 4.5% maybe even 4%. The efforts by the government are designed to keep rates low and lure buyers to the market who might otherwise be sitting on the fence contemplating whether or not to buy. More buyers in the marketplace could help stabilize the real estate market and soak up the inventory of homes for sale including short sale and foreclosure properties. The government™s target for lower rates you might recall was initially made public when rumors had started to circulate in late 2008.

With low rates readily available in the high 4™s the mortgage industry was quickly inundated with loan applications, a high percentage of which were by existing homeowner™s looking to refinance. The industry however had been in contraction for the past two years with many lenders going out of business and those surviving the market downturn going through the process of cost cutting, workforce reduction, etc. The sudden surge in demand for mortgages was more than the industry™s capacity could readily handle and lenders were quickly flooded with calls and applications over a two week period once the rates had dipped. By the 3^rd week of January rates crept back up over 5% even while economic data continued to pour in suggesting the economy remains in bad shape. Many suggest that rates did not climb because of economic data or true market forces but more so in defense to choke off the demand for a bit so lenders could catch up on the business they had already taken in. Furthermore, many suggest rates will cool again once lenders are able to clear out their pipeline a bit and get loans out the door that were taken in over the past few weeks and free up their capacity.

As we end the month, rates are sitting just over 5% in the 5.125- 5.25% range for a clean conventional loan with no points. Time will tell if another rally unfolds or not but expect to see continued volatility as the markets and overall economy search for a bottom, some stability and signals of a potential recovery as the many forms of government intervention are implemented and take effect. One thing is certain, when there is a sign of recovery rates will climb and could climb sharply. Stay tuned, more to come in the weeks ahead. Part 2 of this update will be a discussion about points and current pricing spreads for different rate and point combinations in today™s market.

Mike Fagan

(410) 218-2030 office

(410) 461-7608 fax

mike.fagan@mortgagefamily.com

PHH Home Loans

10050 Baltimore National Pike

Ellicott City, MD 21042

For all your real estate needs, please contact Hollie with Pakulla Professionals and Re/Max Advantage Realty at 410.952.8964 or visit www.PakullaPros.com

WOW!   I cannot believe it has been a month and a half since my last bog.   I am sorry to my loyal followers for not staying on top of this for you!

The holidays in December keep me busy.   Right after Christmas and before the New Year the phone lines were ringing out of control.   Buyers wanting to buy and sellers wanting to sell.   The New Year came and went.   The phone kept on ringing with people interested in purchasing real estate.   We elected a new president and if you could make it to the œThe Mall you were lucky, but most of us were glued to the TV watching history in the making.  

I wish you a wonderful 2009.

It’s Fed Day! And that means the Fed will release its interest rate decision and policy statement later this afternoon. Currently, the Fed Funds Rate stands at 1%. But, indications are that the Fed will cut by .50% or .75%.

In other news today, Consumer Prices dropped more in November than any other month on record, due in large part to falling gas and energy prices. Based on these numbers, inflation is almost non-existent and could shift thinking towards fears of deflation. Also today, housing starts for November came in at their lowest level since records began in 1959, and building permits were reported at record lows.

So far this morning, Bonds have improved, but have struggled to gain too much ground. The tame inflation numbers and the dismal housing numbers should have sparked a better reaction in Bonds, but traders are cautious ahead of a Fed Rate cut, which historically hurts Bond prices. Therefore, I recommend floating for now, but be prepared to lock this afternoon.

Mike Fagan

(410) 218-2030 office

(410) 461-7608 fax

mike.fagan@mortgagefamily.com

PHH Home Loans

10050 Baltimore National Pike

Ellicott City, MD 21042

Please feel free to contact Hollie with Pakulla Professionals and Re/Max Advantage Realty at 410.952.8964 or visit me at www.PakullaPros.com

Good Morning,

This is to clarify the policy regarding the change in down payment requirements for FHA loans as we approach 2009. The new down payment will move to 3.5% for all loans that receive an FHA case # in 2009. What this means is that the loan does not necessarily have to settle by December 31^st to avoid the higher down payment requirement. If a contract is written, the loan application taken, and the case # assigned before the end of the year, even though settlement may occur in 2009, then the borrower will still be eligible for current/lower down payment requirements. As we begin to move towards the end of the month, spread the word to your buyers who may be sitting on the fence. Rates are down, prices are down, and the down payment can be less for an FHA buyer if they write their contract now to settle in 2009.

Have a great day.

Mike Fagan

(410) 218-2030 office

(410) 461-7608 fax

mike.fagan@mortgagefamily.com

PHH Home Loans

10050 Baltimore National Pike

Ellicott City, MD 21042

Contact Hollie  with Pakulla Professionals and Re/Max Advantage Realty at 410.952.8964 or visit www.SellsHomesForYou.com

Good morning,

As I™m sure you know by now, the news of potential 4.5% interest rates hit the market this week and over the past few days caused quite a stir and buzz nationwide. It now appears that the prospect of this plan was intentionally leaked this week as a trial balloon to see what the reaction would be in the public and the industry. Obviously there was quite a bit of excitement especially for prospective homebuyers, Realtors, sellers, and home owners who surely take advantage of an opportunity to refinance at such a low rate. After the initial news hit the street, further leaks came out and An MSNBC version of the story had a total of $50 Billion going to this program.   That would be perhaps 200,000 loans for the entire country.   This sounds impressive, until you realize that Fannie Mae is projecting a total of $1,595 Billion in new loans for 2009.   This proposal would be just about 3% of new originations.

What we know for sure is that a plan of some sort is being considered that would push mortgage rates down. What we still don™t know is whether or not such a plan will actually materialize and if it does get passed, what the details will be. Now that the government has let the proverbial cat out of the bag, they better so something in the near future. There are concerns that buyers and refinance customers will put their plans on hold and freeze the market until the final verdict is in about this plan so the government will likely have to make some sort of announcement sooner than later.

What we also know now is that rates have already fallen in recent weeks and as of this weekend are averaging in the 5.5% range and in some cases for conventional loans with a high balance, high credit score, and large down payment are as low as 5.25% with no points. Overall rates remain very attractive regardless of whether or not a program is passed by the government to push them down further. Furthermore, there is evidence that rates could still improve based on weak economic data that continues to pour in coupled with the ever diminishing threat of inflation in our economy.

More to follow in the week ahead.

Have a great weekend!

Mike Fagan

(410) 218-2030 office

(410) 461-7608 fax

mike.fagan@mortgagefamily.com

PHH Home Loans

10050 Baltimore National Pike

Ellicott City, MD 21042

There is quite a buzz in the air since yesterday afternoon about the possibility that mortgage rates may be falling to 4.5%. The speculation stems from a plan that is under consideration by the Federal Government to push rates down to a possible target of 4.5% to help stabilize the housing industry by bringing more buyers to market to absorb the mounting inventory of homes including the continued rising percentage of foreclosures and short sales. Lower rates should spark greater demand and help bring the market back into equilibrium.

Additionally, if the new rates are available for current owners to refinance their existing mortgages, they will be able to reduce their payments and have more discretionary income to spend which could also help the economy get back on track.

Speculation about lower rates was also fueled by bond guru Bill Gross founder and CIO of PIMCO who suggested on CNBC yesterday that there is room for mortgage rates to fall another 0.5 to 1% from the existing levels which are currently hovering in the 5.5% range. He further went on to suggest that consumers should not buy real estate or refinance at this time until rates fall further.

What we know at the moment is there is quite a bit of speculation but none of it is reality just yet. It is rumored there could be an announcement by the government as early as next week. Furthermore, any plan will have some form of restrictions and we don™t know the details at this point either. I would not suggest that buyers or owners who are candidates for refinance at this time put their plans completely on hold. As a hedge against this uncertainty, our rate cap program continues to give buyers a great rate today with the added benefit of a float down later should rates tumble as many now suggest they might. And if it doesn™t happen, or for some reason rates go up, they are still protected.

For months we have been in quite a volatile environment and the storm is not over but many of the plans already in place, and the ones being proposed should help us, the real estate industry, and the overall economy get back on the right track.

Have a great day.

Mike Fagan

(410) 218-2030 office

(410) 461-7608 fax

mike.fagan@mortgagefamily.com

Real estate questions contact Hollie with Pakulla Professionals  with Re/Max Advantage Realty at 410.952.8964 or visit www.SellsHomesForYou.com

Some really big news for mortgage rates today. The government has announced a plan to shore up and guaranty billions of mortgage debt and this has a triggered a rally and boost of confidence in the mortgage backed securities market. This has had an immediate effect on 30 year fixed rates dropping them down to levels we had hoped would have been reached by now and currently in the 5.5% range. This could be the beginning of a rally that could take us down to levels we saw in 2003 however the market could also be volatile moving forward.

As a result, some suggestions:

Reach out to your buyers who are sitting on the sideline, this dip in rates has just made buying a home even more affordable. Prices are down and rates are too.

For your past clients, if you are reaching out to them with market updates and information, a suggestion to refinance may be in order. However, their present value will be crucial in determining whether a refinance is right for them. A client who may have a rate over 6% and put 20% down just a year or more ago unfortunately may no longer have the same 20% equity. Therefore PMI might become a requirement and thereby negate the benefits of the lower rate. Additionally, many homeowners have a first and second mortgage. Attempting to wrap both loans into one or subordinating the 2^nd mortgage behind a new first lien can also have some snags.

I will be reaching out to many of the clients we share and taking every precaution before embarking on the refinance process with them to ensure it will be a safe and sound financial move for them. Many of the less seasoned originators out there will soon be saturating the market with refinance offers and not necessarily be keeping this component in mind when taking applications. Once an application is taken and processed, there is almost always a cancellation fee if the loan does not close. Proper care and precaution should be taken by anyone attempting to do a refinance as there are numerous changes to the guidelines now if effect that were not just few months ago.

We are ready to assist you with new buyers and past clients in making the right mortgage decision.

Happy Thanksgiving!

Mike Fagan

(410) 218-2030 office

(410) 461-7608 fax

mike.fagan@mortgagefamily.com

PHH Home Loans

10050 Baltimore National Pike

Ellicott City, MD 21042

Contact Hollie with Pakulla Professionals and Re/Max Advantage at 410.952.8964 or visit www.SellsHomesForYou.com