Erie Real Estate

PHFA tax-credit loan program out of funds

The Pennsylvania Housing Finance Agency’s (PHFA) popular Tax Credit Advance Loan Program has run out of money.

According to Kate Newton, director of Homeownership Programs for PHFA, homebuyers took advantage of the program which provided an interest-free loan of up to $6,000 to use toward down payment and/or closing costs.

PHFA funded the tax credit monetization with $5 million of its own funding and cautioned homebuyers loan availability was limited.

Top 7 Reasons Why Buying is Better than Renting

Many renters are realizing that the increase in affordability- combined with low interest rates and tax incentives- are tipping the scales away from renting and towards homeownership.   some renters are finding that they can get a bigger bang for their buck if they buy.

Following are the top 7 reasons why it’s better to buy than rent in 2009

1. Buying doesn’t always cost much more than renting. According to a recent study by the Associated Press, the gap between monthly mortgage payments on a median-priced home and the median rent has decreased from $777 to just $221 in the last three years.

2. Affordability is at an all-time high. In some markets across the Country, prices have declined by nearly 40%.  Not quite that drastic locally, however.

3. Buyers can take advantage of tax benefits of home ownership. Perhaps the biggest tax break is reflected in the house payment homeowners make each month. For most, the bulk of that payment goes towards interest. All interest is deductible, unless the amount is more than $1 million. Property taxes are also deductible.

4. Buyers can purchase homes with little or no down payment. Qualified first-time buyers may be eligible for loans insured by the Veterans Administration (VA), which does not require a down payment. Another loan product gaining popularity are those insured by the Federal Housing Administration (FHA), which require only a down payment of 3.5%.

5. The Tax Credit. First time homebuyers-defined as anyone who hasn’t owned a home in the last three years- are entitled to an $8,000 tax credit. (Ownership of a vacation property or a rental property doesn’t disqualify homebuyers from this program.) No repayment is required for homes sold after 36 months of occupancy and ownership.

6. Mortgage rates are at all-time lows. Take advantage of low 30 year fixed rates. We haven’t seen rates this low in the last 3 decades.

7. It’s yours. It feels good to own your own home. After all, you can paint it any color you want, make improvements, and plant a little garden.

No minimum credit score - PHFA

With the mortgage market increasing it's credit scores, PHFA is going the other way.  No minimum credit score is required under the FHA and Conventional 95% LTV loans.  I personally don't know that this is a good thing.  However, it doesn't much matter what I think.

The PHFA also offers a  Tax Credit Advance Loan (TCA).  The TCA is an interest free loan that can be used towards down payment and/or closing costs.  $5,000 for existing homes OR 10% of purchase price, whichever is less.

• If TCA is repaid by 6/30/10, the borrower pays no interest for this loan.
• If TCA is not repaid by 6/30/10, it becomes a 10 yr. loan.
• Must be 1st time homebuyer.
• Fall within Federal first homebuyer tax credit income guidelines and PHFA limits.
• Loan must close prior to  12/1/09.

 The PHFA does have income limits and purchase limits for 1st time buyers.  If you would like to know these limits, just drop me a line and I'll get the information to you.

Monetization of $8,000 Tax Credit

Shaun Donovan, secretary of the U.S. Department of HUD, said that the Federal Housing Administration (FHA) is going to permit its lenders to allow homeowners to use the $8,000 tax credit as a downpayment.

Donovan’s remarks came in an address to several thousand Realtors^® gathered Wednesday morning at The Real Estate Summit: Advancing the U.S. Economy, a special daylong session at the Realtors^® Midyear Legislative Meetings & Trade Expo here.

Secretary Donovan said that important changes, which the National Association of Realtors^® has been calling for, will help consumers purchase a home. “We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a downpayment,” Donovan said. According to Donovan, the FHA’s approved lenders will be permitted to “monetize” the tax credit through short-term bridge loans. This will allow eligible home buyers to access the funds immediately at the closing table.

The complete article is here.

Minimum Credit Score

A local mortgage lender told me this morning the effective 4-6-09, loans with less than 20% down will require a minimum 660 credit score.  This is a recent PMI policy change.  It is a PMI requirement, not lender specific.  Therefore, it will likely effect all lending institutions on all conventional loans. 

 

FHA loan will now require a minimum credit score of 600.

What if your mortgage application is rejected?

The Mortgage Bankers Association, or MBA, in Washington, D.C., estimates that about half of all mortgage applicants are now being turned down. Though refinancing approvals remained static, the acceptance rate on mortgage applications suffered a 10 percentage-point drop, from 63 percent in the first half of 2007 to 53 percent in the first half of last year, according to mortgage data tracked semi-annually by the association. Since then, further tightening of credit standards means at least half of mortgage-seeking consumers can't squeeze through to acceptance.

Even though this may be true on a broad note across the country, I do not believe the numbers to be that severe locally.  However, if you are rejected here's what you should do:

1. Get a read on the reason
If you've submitted a formal application, federal law dictates that you're entitled to a formal rejection.

 2. Find a fix
Qualifying for a mortgage isn't a black-and-white issue. Rather, different loans at varying rates may be available, depending on how risky a lender thinks a particular mortgage will be. If you don't qualify at 5.5 percent, for instance, you may be able to get the nod for a loan at 6 percent or 6.5 percent.

3. Seek out other opinions
Not every lending firm adheres strictly to the same playbook, and one lender may approve what another rejects.

4. Give it another try
The Mortgage Bankers Association is predicting that 30-year fixed rates will hover near the 5 percent range through 2009. So if predictions hold and interest rates stay relatively low, you should have time to try again if the factors behind your rejection improve.

$8,000 Tax Credit

Here is one question that is posed to me quite often.  This year and this past year is no different.  What’s the question?  “Is now a good time to buy a home?”

My answer has always been (and still is) “yes” now is a great time to buy.  Yes, even in today’s economy.

Why do I believe this?  I have 8,000 reasons plus 1.  The plus 1 first:  interest rates are the lowest they’ve been since Freddie Mac started keeping records of the rates in 1972.  That means they’re the lowest in 37 years!  A 30 year fixed rate is below 5%.

Now on to the 8,000 reasons:  FIRST - TIME HOME BUYER TAX CREDIT . The American Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence on or after 1/1/2009 and before 12/1/2009.

 

I'm sure that many of you that are considering buying a home this year are already aware of the $8,000 tax credit.  However, it has come to my attention by many of my fellow REALTORS that people are unaware of this tax credit.  Either way, are you familiar with the basics?

 

The Basics:

 

1.  Only first-time home buyers are eligible.  A person is considered a first-time buyer if they have not had any ownership interest in a home in the 3 years previous to the day of the 2009 purchase.

 

This is a credit not a deduction.  Which means every dollar of a tax credit reduces income taxes by a dollar.  Credits are claimed on an individual's income tax return.  Once the total tax owed has been computed, tax credits are applied to reduce the total tax bill.  So, if before taking any credits on a tax return a person has a total liability of $,9500, an $8,000 credit would erase all but $1,500 of the tax due.

 

3.  Any home that is purchased for $80,000 or more qualifies for the full $8,000 amount.  If the house costs less than $80,000, the credit will be 10% of the cost.  So, if an individual purchased a home for $70,000, the credit would be $7,000.

4.  This tax credit is called a "refundable" credit.  If the purchaser's tax liability was $6,000, the IRS would send the purchaser a check for $2,000.

 

5.  All eligible purchasers simply claim the credit on there is Form 1040 tax return.  The credit will be reflected on a new Form 5405 that will be attached to the 1040.

6.  The credit cannot be used as part of the downpayment.

 

7.  New construction is eligible as long as you occupy the home before 12/1/2009.

8.  There are income restrictions for individuals earning over $75,000 and married couples who file a joint return with incomes over $150,000.  A credit is still available, just not the full $8,000.

 

These are just a few of the basics.  There are more:  How is the partial tax credit determined?  I purchased in early 2009 and have already filed to receive the $7,500 credit on my 2008 returns.  how can I claim the new $8,000 credit instead?  Can I claim the tax credit if I'm not a U.S. citizen?  can I apply the tax credit against my 2008 return?  How is this credit different from what was passed in July of 2008?  Do 2008 purchasers still have to repay their tax credit?  For all tax questions, please contact a CPA.

So, what are you waiting for?  Now is the time to buy.  Low rates and a great tax incentive.  When is the last time you saw interest rates below 5%?  As mentioned above, it’s been more than 37 years.  When was the last time the Government was willing to give you up to $8,000 to buy a house?  Never.  Do you think the Government is going to throw $8,000 at you again?  I don’t.

Where and how do you begin?  Get in contact with me or if you already have a favorite 

REALTOR® talk to them and get the home buying process started.