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  • Congress Renews Mortgage Debt Relief Act through December 31, 2013

    Underwater Homeowners Breathe a Sigh of Relief as Congress Renews Mortgage Debt Relief Act!

    On January 1, 2013, Congress passed an extension of the Mortgage Forgiveness Debt Relief Act. This extension of this act, which has saved homeowners more than $1 billion dollars in taxes[1], is great news for struggling homeowners nationwide.

    The Mortgage Forgiveness Debt Relief Act was originally passed in 2007 to aid the millions of homeowners who suddenly found themselves in danger of losing their homes to foreclosure following the housing market crash.

    Under the Mortgage Forgiveness Debt Relief Act, any debt forgiven in a short sale, foreclosure, or loan modification, is exempt from federal taxes on primary residences. For homeowners facing foreclosure, this exemption saves them from paying thousands, or even tens of thousands, in taxes on top of losing their homes.

    Now for another year thru December 31, 2013, homeowners can take advantage of this exemption and avoid foreclosure without the fear of an impossible tax liability.

    As a Certified Distressed Property Expert (CDPE) agent, I am specially trained to help homeowners escape the threat of foreclosure. If you or someone you know is facing foreclosure, contact me for a private consultation. I can help find a solution.

    Karen Daniel

    Associate Broker, CDPE, SFR

    (208) 412-0509



  • Congress Extends Mortgage Debt Relief Act!

    On January 1, 2013, as part of the so-called fiscal cliff negotiations, Congress passed an extension of the Mortgage Forgiveness Debt Relief Act. This extension of this act, which has saved homeowners more than $1 billion dollars in taxes, is great news for struggling homeowners nationwide, and for the agents that represent them.

    The extension is now only awaiting President Obama’s signature.

    The Mortgage Forgiveness Debt Relief Act was originally passed in 2007 to aid the millions of homeowners who suddenly found themselves in danger of losing their homes to foreclosure following the housing market crash.

    Under the Mortgage Forgiveness Debt Relief Act, debt forgiven in a short sale, foreclosure, or loan modification, is exempt from federal taxes on primary residences. For homeowners facing foreclosure, this exemption saves them from paying thousands, or even tens of thousands, in taxes on top of losing their homes.

    Now for another year, homeowners can take advantage of this exemption and avoid foreclosure without the fear of an impossible tax liability.

    And with banks recognizing the significance of short sales as an effective loss mitigation tool, they’re ramping up for business. Short sales will be the key loss mitigation tool used by mortgage servicers in 2013.

  • Canyon County home prices at 10-year low

    Canyon County’s median home price in October dropped to a 10-year low of about $82,000, slightly more than half of Ada County’s median home price, according to Intermountain Multiple Listing Service numbers released Monday.  The question is whether it will it end before discounts get even bigger.

    Canyon County’s median home price in September dropped to $81,900, the lowest since the Y2K computer-bug era, and about half of its $170,000 peak in 2007, the Intermountain Multiple Listing Service reported Monday.

    The reason: homeowners in distress.

    ”In Canyon County, close to 70 percent of the homes that are selling are either short sale or foreclosures,“ which is having a real negative effect on values. The latest figure is even lower than January 2000, the first month of more than a decade of price data reviewed.

    That month, the median had fallen to $82,400.  But there’s an upside: Bargain hunters are buying. The number of homes sold in Canyon County was up over the same month for the past three years.

    In Ada County, the median price fell to $158,000, about the midpoint of the $149,000-to-$168,000 range that prices been bouncing in for more than a year.  It is said jobs are needed to rebuild the local housing market. Nampa Association of Realtors President Gloria Urwin said she’s concerned that the recent disclosure of mistakes in foreclosure proceedings by national lenders will put Canyon County in a worse position.

    Banks need to loosen their belts and start working with people. Why not rewrite the loans and add a clause if they’re concerned about a market correction in two years? ... Give (people) an incentive to stay in their homes.

  • First-Time Homebuyers Drive Housing Market in March

    First-time homebuyers accounted for a record-high share of purchases last month, according to new data released this week by Campbell Surveys. The results aren’t entirely
    unexpected, considering the April 30 contract deadline to receive the federal homebuyer tax credit is fast approaching.

    The momentum from the tax break is likely to continue into this month, as many lenders are still reporting a flurry of contract activity just ahead of the cut-off date.

    The government’s initiative to stimulate home sales has worked, incentivizing sidelined homebuyers to seize the moment … and the extra cash. But some economists have warned that sales are being pulled forward to make the tax credit window, and as a result will slip fairly substantially in the months ahead. There are no plans to extend the credit again.

    While round two of the program added payouts to existing homeowners making new purchases, the credit still seems to have the most draw for first-timers. The Campbell survey found that 48.2 percent of March’s home purchase transactions were attributable to first-time homebuyers. This eclipsed the previous peak of 46.9 percent reached last October when the November expiration of the original homebuyer tax credit sent purchases by first-time buyers soaring.

    “The strong participation of first-time homebuyers this spring is a welcome surprise,” said Thomas Popik, research director for Campbell Surveys. “Many observers had felt that the pool of first-time homebuyers had been depleted last fall, but this is turning out not to be the case. Instead, the normal spring-summer buying season is combining with the tax credit to produce blow-out results for first-time homebuyers.”

    The surge in first-time buyer activity in March came at the same time the volume of distressed properties in the housing market climbed to over 50 percent, according to the survey. This was far above the distressed share low of 37.3 percent recorded in November, when a combination of government-mandated loan modification efforts and foreclosure moratoriums significantly reduced the inventory of distressed properties on the market.

    According to the Campbell survey, first-time homebuyers are particularly attracted to what has turned out to be one of the most popular forms of distressed home sale transactions – the short sale. The latest survey found that short sales accounted for 18.6 percent of the housing market in March.

    “None of the survey results take into account the new Home Affordable Foreclosures Alternative (HAFA) program for short sales,” commented Popik. “This government program took effect in early April, so we expect short sales to account for an even greater proportion of the real estate market in coming months.”

  • HOUSING: Feds suspend anti-flipping rule....GREAT news for investors and buyers!!

    FHA recently announced a temporary (1 yr) relaxation of its "90-day" anti-flipping rule, which prohibits the use of FHA insured financing if the contract for sale was executed within 90 days of the seller's acquisition of the property.  What this rule said is that if an investor purchased a rehab home, remodeled it and wanted to resell it, they could not use FHA funds until a 90 day period had expired from the time the investor took title.

    This waiver, which takes effect on February 1, 2010 and is for one year is limited to those sales meeting the following criteria:

    1. All transactions must be arms-length, with no identity of interest between the buyer and the seller or other parties participating in the sales transaction. Some ways that the lender can insure that there is no inappropriate collusion or agreements between the parties is to assess and determine the following:

    • The seller holds title to the property;
    • LLC's, corporations, or trusts that are serving as sellers were established and are operated in accordance with applicable state and federal laws;
    • No pattern of previous flipping activity exists for the subject property, as evidenced by multiple title transfers within a 12-month time frame (chain of title information for the subject property can be found in the appraisal report.
    • The property was marketed openly and fairly, via MLS, auction, For Sale by Owner offering, or developer marketing (any sales contracts that refer to an "assignment of contact of sale," which represents a special arrangement between seller and buyer may be a red flag).

    2. In cases in which the sales price of the property is 20 percent or more over and above the seller's acquisition cost, the waiver will only apply if the lender:

    • Justifies the increase in value by retaining in the loan file supporting documentation and/or a second appraisal which verifies that the seller has completed sufficient legitimate renovation, repair, and rehabilitation work on the subject property to substantiate the increase in value or, in cases where no such work is performed, the appraiser provides appropriate explanation of the increase in property value since the prior title transfer; and
    • Orders a property inspection and provides the inspection report to the purchaser before closing. FHA-approved inspectors or 203(k) consultants is not required. The inspector must have no interest in the property or relationship with the seller, and must not receive compensation for the inspection from any party other than the lender. Also, the inspector may not compensate anyone for the referral of the inspection. Additionally, the inspector may not receive any compensation for referring or recommending contractors to perform any repairs recommended by the inspection, and may not be involved with performing any repairs recommended by the inspection.

    FHA finds that by eliminating the 90 day resale restriction for buyers it will give FHA a greater opportunity to dispose of it's single family REO properties in a way that maximizes return to the FHA's mortgage insurance fund; also, permitting buyers to use FHA-insured financing to purchase other bank-owned properties, or properties sold through private sales for resale, will help create market conditions that will allow homes to resell as quickly as possible, thus helping to stabilize real estate prices as well as helping to stabilize neighborhoods and communities where foreclosure activity has been high.(read more)

  • FHA Guidelines giving "Idaho Short Sale" sellers ability to buy immediately after a short sale

    With all the talk about Idaho Short Sales and Idaho Bank Owned Real Estate there has also been talk about how anyone selling a home using the short sale process would have their credit damaged and would be unable to buy a home for 3 years using any kind of government financing after executing an Idaho Short Sale. This has been drilled into us by Realtors and mortgage lenders right?

    Well along comes FHA with a new announcement. Click FHA Short Sale Guidelines for new purchases to read the sweeping changes.

    Actual language from the guidelines reads:
    FHA Guidance on Short Sales Borrowers are not eligible for a new FHA mortgage if they pursued a short sale agreement on his or her principal residence to take advantage of declining market conditions, and purchase, at the reduced price, a similar or superior property within a reasonable commuting distance. Reference: see 4155.1 4.E.4.g

    And here is the FHA allowed exception:
    Guidance on Borrowers current at the time of Short Sale Borrowers are considered eligible for a new FHA-insured mortgage if they were current on their mortgage and other installment debts at the time of the short sale of their previously owned property, and the proceeds from the short sale serve as payment in full. Reference "Short Sales" at 4155.1 4.C.2.1

    To put this in simple terms FHA is basically rewarding borrowers by allowing them to purchase a home using FHA financing immediately after doing an Idaho Short Sale if they made their payments on time and did not miss any scheduled payments. Many short sale sellers have been advised to stop making the payments on their homes. If a seller desires to pursue FHA financing they may want to reconsider this advice of not making payments based on this new sweeping FHA Guideline.

    Borrowers CAN use a new FHA insured mortgage if they were current on their previous loan, all other debts at the time and the short sale was approved by their mortgage lender.

    The bottom line is this: missed payments equals no FHA financing for 3 years. FHA will make an exception to the rule if the default was due to circumstances beyond the borrower's control such as the death of the primary wage earner.

    Anyone eligible for the Home Affordable Foreclosure Alternative Program (HAFA) would not be eligible for a new FHA-insured mortgage for three years because to qualify for HAFA offers incentives only for seriously delinquent borrowers.

    Have questions? Always consult a qualified Attorney and or Certified Public Accountant for advice.

  • The Housing Environment in 2009...

    Although evidence is accumulating that the economy is emerging from the Great Recession, there are a number of headwinds that may make the nascent recovery slower and more tentative than previous business cycle expansions. Significant job loss is one of the most tangible effects of the recession. Most sectors, with the possible exception of healthcare, have recorded significant decreases in employment. Even under the most optimistic expectations, it will take several years to reabsorb the unemployed and reduce the unemployment rate toward a level consistent with full employment.

    The second long-lasting characteristic of the recession is the loss of trillions of dollars of household wealth since 2005. Households experienced falling home equity and sharply reduced financial asset values as stock markets worldwide posted some of the steepest declines in memory. For many households, the equity held in their home is the largest component of their wealth. Recently released data from the Federal Reserve shows that homeowners’ equity holding relative to the value of their homes is near all-time lows. Downward pressure on home prices as well as extraction of equity through second mortgages and lines of credit has reduced the equity stake that households in the aggregate have in their homes. Unlike job loss, which directly affects a fraction of all households, the loss of wealth is broadly felt.  Evidence is emerging that households are working to strengthen their balance sheets by paying down debt and saving a greater portion of their paycheck. The national savings rate has increased from virtually zero to the high single-digits. Some experts speculate that the long-term impact will be slower growth as cautious consumers spend more carefully and rely less on credit.

    It is within this environment that tentative signs of stabilization are emerging in the housing market. In most areas of the country, home prices remain well below peak levels recorded in late 2005 and early 2006. However, unit sales have risen in some of the areas that have experienced the steepest decline in prices. Inventories of homes for sale have been pared to manageable levels. Housing affordability is at record levels, which has drawn cautious home buyers and investors into the market. Also contributing to the increase in home sales has been a tax credit available to first-time buyers. In fact, as detailed in this profile, the share of first-time home buyers, typically around 40 percent of sales rose to 47 percent during the period from mid-2008 through mid-2009. Challenges remain, however. Consumers remain understandably cautious about the economy and their personal financial situation. While mortgage rates remain at very favorable levels, some home buyers find that securing a mortgage is both more time consuming and more difficult. In fact, one in ten recent home buyers reported that obtaining a mortgage was more difficult than expected. Perhaps as important for the long-term resilience of the housing market, home ownership is still a goal that many aspire to achieve. For example, 62 percent of first-time buyers reported that the primary reason that they purchased a home was the desire to be a homeowner. Other benefits of ownership, while important, ranked lower for most first-time buyers. The dream of homeownership remains alive and well.



    In 2009 the First-Time Homebuyer tax credit and affordability conditions brought first-time buyers into the market, and they comprised an unprecedented share of the market - 47%.  Some variables were unaffected by the increase in the share of first-time buyers.  The typical age of buyers was unchanged by the surge in first-time buyers.  Racial characteristics, language, and national origin of buyers were changed slightly in 2009.  Also, the vast majority of buyers still owned only one home.

    Other demographic variables saw shifts that can be explained at lease in part as a result of the increased share of first-time home buyers.  Household incomes decreased slightly amoung all home buyers.  This was due to a small decrease in household incomes of repeat buyers coupled with the surge in first-time buyers who typically have lower household incomes.  Home buyers in 2009 were much more likely to have been renters imnmediatly prior to their home purchase. 

    Affordabiltiy conditions were the primary reason for purchasing a home for a greater share of all types of home buyers.  The first-time home buyer tax credit was cited as the primary reason for the home purchase amount 6% of first-time home buyers.  A buyer's readiness is still the primary drive of the timing of the home pruchase, but the affordability of homes for sale and availability of mortgage financed played an increasing roll in 2009.

  • First-time homebuyer tax credit up to $8,000, along with tax credit for ALL homebuyers up to $6,500.

    Congress giving "ALL" homebuyers a $6,500 tax break, and First Time Homebuyer up to $8,000 tax break.

    WASHINGTON – Buying a home is about to get cheaper for a whole new crop of homebuyers — $6,500 cheaper.

    First-time homebuyers have been getting tax credits of up to $8,000 since January as part of the economic stimulus package enacted earlier this year. But with the program scheduled to expire at the end of November, the Senate voted Wednesday to extend and expand the tax credit to include many buyers who already own homes. The House could vote on the bill as early as Thursday.

    Buyers who have owned their current homes at least five years would be eligible for tax credits of up to $6,500. First-time homebuyers — or anyone who hasn't owned a home in the last three years — would still get up to $8,000. To qualify, buyers in both groups have to sign a purchase agreement by April 30, 2010, and close by June 30.

    "This is probably the last extension," said Sen. Johnny Isakson, R-Ga., a former real estate executive who championed the credits.

    The homebuyers tax credit is one of two tax breaks totaling more than $21 billion that the Senate included in a bill extending unemployment benefits for those without a job for more than a year. The other would let companies now losing money recoup taxes they paid on profits earned in the previous five years.

    "We are still in a world of economic hurt, and Congress must continue to act boldly and creatively," said Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee. "With the right mix of tax breaks and investments we will get through this recession and get folks working again."

    The real estate industry has been pushing to extend and expand the housing tax credit. About 1.4 million first-time homebuyers have qualified for the credit through August. The National Association of Realtors estimates that 350,000 of them would not have purchased their homes without the credit.

    Extending and expanding the tax credit for homebuyers is projected to cost the government about $10.8 billion in lost taxes. While the measure passed the Senate by a 98-0 vote, Sen. Kit Bond, R-Mo., questioned its efficiency in stimulating home sales.

    "For the vast majority of cases, the homebuyer tax credit amounted to a free gift since it did not affect their decision to purchase a home," Bond said. "And for the small minority of buyers whose decision was directly caused by the credit, this raises the question of whether we are subsidizing buyers who may not have been able to afford buying a home in the first place."

    The credit is available for the purchase of principal homes costing $800,000 or less, meaning vacation homes are ineligible. The credit would be phased out for individuals with annual incomes above $125,000 and for joint filers with incomes above $225,000.

    The credit would be extended an additional year, until June 30, 2011, for members of the military serving outside the United States for at least 90 days.

    Expanding the tax credit for money-losing companies is projected to cost $10.4 billion.

    The business tax break would allow money-losing companies to use current losses to offset taxable profits earned in the previous five years, giving them refunds of taxes paid in those years. Under current law, businesses with annual gross receipts of more than $15 million can claim losses back only two years.

    The tax break would help industries suffering losses in 2008 or 2009, including retailers, homebuilders and newspapers. Congress included a scaled-back version of the tax break — for companies with revenues of $15 million or less — in the economic recovery package enacted in February. The new tax break would be available to companies of any size, providing a quick source of cash.

    The U.S Chamber of Commerce has been a big backer of the tax break for money-losing companies.

    "It frees up capital that they can use to maintain jobs and potentially even hire new people as the economy returns," said Caroline Harris, senior tax counsel for the U.S. Chamber of Commerce.

    The tax breaks would be paid for largely by delaying a tax break for multinational companies that pay foreign taxes. It was passed in 2004 and originally was to have taken effect this year, but would now be delayed until 2018.


    The bill is H.R. 3548.

  • Am I eligible to be claimed as a "First Time Home Buyer"?

    Who is eligible to claim the tax credit?
    First-time home buyers purchasing any kind of home, new or resale are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and before December 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner. A limited exception exists for certain contract for deed purchases and installment sale purchases. See the IRS website for more detail.

    1.                   What is the definition of a first-time home buyer?
    The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.

    For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.

    2.                   How is the amount of the tax credit determined?
    The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.

    3.                   Are there any income limits for claiming the tax credit?
    Yes. The income limit for single taxpayers is $75,000; the limit is $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.

    4.                   What is "modified adjusted gross income"?
    Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine "adjusted gross income" or AGI. AGI is total income for a year minus certain deductions (known as "adjustments" or "above-the-line deductions"), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.

    To determine modified adjusted gross income (MAGI), add to AGI certain amounts of foreign-earned income. See IRS Form 5405 for more details.

    5.                   If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
    Possibly. It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose MAGI exceeds the phaseout limits.

    6.                   Can you give me an example of how the partial tax credit is determined?
    Just as an example, assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by the phaseout range of $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.

    Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by the phaseout range of $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.

    Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.

    7.                   How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008?
    The most significant difference is that this tax credit does not have to be repaid. Because it had to be repaid, the previous "credit" was essentially an interest-free loan. This tax incentive is a true tax credit. However, home buyers must use the residence as a principal residence for at least three years or face recapture of the tax credit amount. Certain exceptions apply.

    8.                   How do I claim the tax credit? Do I need to complete a form or application?
    Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on line 67 of the 1040 income tax form for 2009 returns (line 69 of the 1040 income tax form for 2008 returns). No other applications or forms are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests. Note that you cannot claim the credit on Form 5405 for an intended purchase for some future date; it must be a completed purchase.

    9.                   What types of homes will qualify for the tax credit?
    Any home that will be used as a principal residence will qualify for the credit. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.

    It is important to note that you cannot purchase a home from your ancestors (parents, grandparents, etc.), your lineal descendants (children, grandchildren, etc.) or your spouse. Please consult with your tax advisor for more information. Also see IRS Form 5405.

    10.                I read that the tax credit is "refundable." What does that mean?
    The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.

    For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).

    11.                I purchased a home in early 2009 and have already filed to receive the $7,500 tax credit on my 2008 tax returns. How can I claim the new $8,000 tax credit instead?
    Home buyers in this situation may file an amended 2008 tax return with a 1040X form. You should consult with a tax advisor to ensure you file this return properly.

    12.                Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
    Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been "purchased" on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after January 1, 2009 and before December 1, 2009.

    In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.

    13.                Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
    Yes. The tax credit can be combined with the MRB home buyer program. Note that first-time home buyers who purchased a home in 2008 may not claim the tax credit if they are participating in an MRB program.

    14.                I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?
    No. You can claim only one.

    15.                I am not a U.S. citizen. Can I claim the tax credit?
    Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of "nonresident alien" in IRS Publication 519.

    16.                Is a tax credit the same as a tax deduction?
    No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS.

    A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $8,000 in income taxes. If the taxpayer receives an $8,000 deduction, the taxpayer’s tax liability would be reduced by $1,200 (15 percent of $8,000), or lowered from $8,000 to $6,800.

    17.                I bought a home in 2008. Do I qualify for this credit?
    No, but if you purchased your first home between April 9, 2008 and January 1, 2009, you may qualify for a different tax credit. Please consult with your tax advisor for more information.

    18.                Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 tax return?
    Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment.

    Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.

    In addition, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. As a result, some state housing finance agencies have introduced programs that provide short-term second mortgage loans that may be used to fund a downpayment. Prospective home buyers should check with their state housing finance agency to see if such a program is available in their community. To date, 14 state agencies have announced tax credit assistance programs, and more are expected to follow suit. The National Council of State Housing Agencies (NCSHA) has compiled a list of such programs, which can be found here.

    19.                The Secretary of Housing and Urban Development has announced that HUD will allow "monetization" of the tax credit. What does that mean?
    It means that HUD will allow buyers using FHA-insured mortgages to apply their anticipated tax credit toward their home purchase immediately rather than waiting until they file their 2009 income taxes to receive a refund. These funds may be used for certain downpayment and closing cost expenses.

    Under the guidelines announced by HUD, non-profits and FHA-approved lenders will be allowed to give home buyers short-term loans of up to $8,000.

    The guidelines also allow government agencies, such as state housing finance agencies, to facilitate home sales by providing longer term loans secured by second mortgages.

    Housing finance agencies and other government entities may also issue tax credit loans, which home buyers may use to satisfy the FHA 3.5 percent downpayment requirement.

    In addition, approved FHA lenders will also be able to purchase a home buyer’s anticipated tax credit to pay closing costs and downpayment costs above the 3.5 percent downpayment that is required for FHA-insured homes.

    More information about the guidelines is available on the NAHB web site. Read the HUD mortgagee letter (pdf) and an explanation of the FHA Mortgagee Letter on Tax Credit Monetization (pdf). An FAQ about monetization (pdf) is available at the NAHB web site.

    20.                If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
    Yes. The law allows taxpayers to choose ("elect") to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.

    Taxpayers buying a home who wish to claim it on their 2008 tax return, but who have already submitted their 2008 return to the IRS, may file an amended 2008 return claiming the tax credit. You should consult with a tax professional to determine how to arrange this.

    21.                For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?
    Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.

  • First-Time Homebuyers 2009 New Tax Credit

    As part of the Treasury Department’s consumer outreach effort and with the April 15 individual tax filing deadline approaching, the Internal Revenue Service today began a concerted effort to educate taxpayers about additional options at their disposal to claim the new $8,000 first-time homebuyer credit for 2009 home purchases. For people who recently purchased a home or are considering buying in the next few months, there are several different ways that they can get this tax credit even if they’ve already filed their tax return.

    The Treasury Department encourages taxpayers to explore these options to maximize their credit and get their money back as fast as possible.

    “The new credit can get money in the pockets of first-time homebuyers quickly,” said IRS Commissioner Doug Shulman. “For people who recently purchased a home or are considering buying in the next few months, there are several different ways that they can get this tax credit even if they’ve already filed their tax return.”

    First-time homebuyers represent a significant portion of existing single-family home sales. The expansion in the first-time homebuyer credit will make it easier for first-time homebuyers to enter the housing market this year.

    Under the American Recovery and Reinvestment Act of 2009, qualifying taxpayers who purchase a home before Dec. 1 receive up to $8,000, or $4,000 for married individuals filing separately. People can claim the credit either on their 2008 tax returns due April 15 or on their 2009 tax returns next year.

    The filing options to consider are:

    • File an extension. Taxpayers who haven’t yet filed their 2008 returns but are buying a home soon can request a six-month extension to October 15.  This step would be faster than waiting until next year to claim it on the 2009 tax return.  Even with an extension, taxpayers could still file electronically, receiving their refund in as few as 10 days with direct deposit.

    • File now, amend later. Taxpayers due a sizable refund for their 2008 tax return but who also are considering buying a house in the next few months can file their return now and claim the credit later.  Taxpayers would file their 2008 tax forms as usual, then follow up with an amended return later this year to claim the homebuyer credit.

    • Amend the 2008 tax return. Taxpayers buying a home in the near future who have already filed their 2008 tax return can consider filing an amended tax return. The amended tax return will allow them to claim the homebuyer credit on the 2008 return without waiting until next year to claim it on the 2009 return.

    • Claim the credit in 2009 rather than 2008. For some taxpayers, it may make more financial sense to wait and claim the homebuyer credit next year when they file the 2009 tax return rather than claiming it now on the 2008 tax return. This could benefit taxpayers who might qualify for a higher credit on the 2009 tax return. This could include people who have less income in 2009 than 2008 because of factors such as a job loss or drop in investment income.

    The IRS reminds taxpayers the amount of the credit begins to phase out for taxpayers whose modified adjusted gross income is more than $75,000, or $150,000 for joint filers. Taxpayers can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately.

    IRS.gov provides more information, including guidance for people who bought their first homes in 2008. To learn more about the overall implementation of the Recovery Act, visit www.Recovery.gov.

  • What is the, "First Time Home Buyer Tax Credit"?

    The Housing and Economic Recovery act of 2008


    A new refundable tax credit for individuals who are qualified first-time homebuyers of a principal residence in the United States. The provision applies to a principal residence purchased by the taxpayer on or after April 9, 2008, and before July 1, 2009. Homebuyers who qualify are allowed a one-time credit against their income tax for the year of purchase. Unlike some past credits, this one must be repaid over a 15-year period. As a result, the new tax credit works like an interest free loan. You take the full credit in either 2008 or 2009, and then repay the credit amount in equal payments over 15 years, with no interest charges. 

    Q. Which home purchases qualify for the first-time homebuyer credit?


    A. Only the purchase of a main home located in the United States qualifies and only for a limited time. Vacation homes and rental property are not eligible. You must buy the home after April 8, 2008, and before July 1, 2009. For a home that you construct, the purchase date is the first date you occupy the home.

    Taxpayers who owned a main home at any time during the three years prior to the date of purchase are not eligible for the credit. This means that first-time homebuyers and those who have not owned a home in the three years prior to a purchase can qualify for the credit.

    If you make an eligible purchase in 2008, you claim the first-time homebuyer credit on your 2008 tax return. For an eligible purchase in 2009, you can choose to claim the credit on either your 2008 (or amended 2008 return) or 2009 return.


    Q. How much is the credit?


    A. The credit is 10 percent of the purchase price of the home, with a maximum available credit of $7,500 for either a single taxpayer or a married couple filing jointly. The limit is $3,750 for a married person filing a separate return. In most cases, the full credit will be available for homes costing $75,000 or more. Whatever the size of the credit a taxpayer receives, the credit must be repaid over a 15-year period.


    Q. Are there income limits?


    A. Yes. The credit is reduced or eliminated for higher-income taxpayers.

    The credit is phased out based on your modified adjusted gross income (MAGI). MAGI is your adjusted gross income plus various amounts excluded from income—for example, certain foreign income. For a married couple filing a joint return, the phase-out range is $150,000 to $170,000. For other taxpayers, the phase-out range is $75,000 to $95,000.

    This means the full credit is available for married couples filing a joint return whose MAGI is $150,000 or less and for other taxpayers whose MAGI is $75,000 or less.


    Q. How and when is the credit repaid?


    A. The first-time homebuyer credit is similar to a 15-year interest-free loan.  Normally, it is repaid in 15 equal annual installments beginning with the second tax year after the year the credit is claimed. The repayment amount is included as an additional tax on the taxpayer’s income tax return for that year.  For example, if you properly claim a $7,500 first-time homebuyer credit on your 2008 return, you will begin paying it back on your 2010 tax return. Normally, $500 will be due each year from 2010 to 2024.


  • Buying a HOUSE in Todays Economy?

    You hear it daily, from your friends, your collegues, people just passing you on the street.  You read it in every newspaper headline, people constantly saying that the housing market is down, with Short Sales & foreclosures rising at an alarming rate.  Mortgage markets so frozen, that buyers have no hope of getting a home loan at any price.  WRONG...!  Despite the turmoil in mortgage lending, if you have good credit, a job and steady income, you will find there is still plenty of mortgage credit to be had at good rates with the housing to be less than affordable for ALL well-qualified buyers.  With the decrease in pricing across the Treasure Valley and throughout all Idaho Real Estate, as well as with lower interest rates, the affordability is at it's best level in almost 4 years! Did you know, that interest rates are running at near historical lows?


    What buyers need to know is that the housing market, like all markets, has its' ups and downs. And homeownership has a track record that is virtually unmatched by any other purchase in terms of its real benefits. Looking for a long-term investment?  Homeownership is still one of the best investments for individual households.


    There is still a lot of inventory of homes on the market in the Treasure Valley area, true!  However, for the 5th month in a row inventory levels are below what they were one year ago!  July 2008 was the first time that this had happened since the begining of 2006! Right now, inventory is DOWN 4% from October 2008 and 3% lower than this time last year. 


    Think about the benefit: If you can find home at a great price, whether it be a short sale, bank owned, or just a regular residential sale, and you have the ability to purchase, don't wait!  Don't wait for homes to get to their all-time lowest, or interest rates to fall farther than they have already, because you will never catch that point nor will you ever know it happened.  You will never see it coming, until it starts to rise again, and by that time you will have missed it.


    There are lots of choices, but at better prices and with lower interest rates! Why wouldn't TODAY be the best time to buy?



    Many people do not realize that they can sell their home while they are still in a Chapter 13 bankruptcy.

    You will want to start by finding someone to put the house on the market. Once you have an interested buyer, then the realtor will draw up a contract between the buyer and the seller. Once this is done, you will need to contact your attorney’s office, so they can forward this information on to the trustee. The trustee will give you approval to sell your home and in the same letter it will also state anything that may need to be done, for example; the proceeds you receive may be used to payoff the bankruptcy.

    If you are trying to sell real property that is not your homestead, then it must be dealt with a little differently. We will still have to have the contract between the buyer and the seller, but now we have to file a motion to sell non-exempt property. There are attorney fees associated with this, so make sure that you consult your attorney for those fees. The hearing will take about 30-45 days to be heard before the Judge. If there are no objections then the attorney is able to upload the order and put any explanations that the trustee may want in there. Again the example of putting “x” amount of dollars towards your bankruptcy.

    If you are in a Chapter 7 bankruptcy you do not have to get permission, however, you need to wait 30 days after your meeting of creditors meeting. The reason for this is that that is the deadline the creditors have to object to your exemptions. If there are no objections filed by then, you don’t have to do anything but proceed to selling.

    But remember regardless if your file bankruptcy or not if your house is not sold before the foreclosure date, you will still have on your credit the "Foreclosure".  Regardless of the circumstances, a "Foreclosure" will stay with you for a minimum of 10 years with no forgiveness.  With my research I have found that in pattern it goes, Short Sale, Bankruptcy then ForeclosureShort Sale having the ability to repair your credit within a 1-2 year term depending on the extent that you put into it.  A "Bankruptcy" is a minimum of 3 years, if you are looking to repurchase a home within the next 3 years, DON'T, but that doesn't mean that you shouldn't repair in the meantime.  Though lenders have lock down on allowing any loans to be released to anyone with a bankruptcy less than 3 year it does not mean that after those 3 years, you won't be able to purchase again, so make sure to continue to clean up your credit and bring up your scores, as you still have hope for a bright future.  And then of course there is the "Foreclosure" as I've talked about at the begining of this paragraph, once there it cannot and will not be removed under any circumstance regardless of the effort that you put in to make it go away.  Remember though regardless of the reason, this DOES NOT mean to throw everything away and not pay your bills because regardless in life there is always a situation that comes about that someone squeezes through the cracks and gets a break, and if you keep everything else in good standing, with the exception of the "Foreclosure", you never know you may be that one who slips through and is still allowed a new mortgage loan regardless of the past, but if you don't make sure you try your hardest you'll never have the chance to find out if you could of been.

    NOTE: All divisions of bankruptcy may be different, so make sure that you consult your attorney before making any decision to move forward, and make sure to ask your attorney specific questions so you get the right answers!


    The lender’s “loan mitigation” department reviews the seller’s request and paperwork and agrees to review (this is not a guarantee of approval) a written purchase contract from a qualified buyer.  As the lender, imagine $250,000 mortgage due with a probable sale price of $220,000.  After  property taxes, $5,000 and sales expenses estimated at $15,400 (total expenses = $20, 400+loss on sale of $30,000) the lender has to be willing to settle for $50,400 less than what is owed on the mortgage- or “short” $50,400.  Not all lenders are willing to go this route.

    As the purchaser, you execute a normal purchase contract which will have an addendum stating something to the effect “contingent upon seller’s lending approving short sale payoff.”  You and the seller agree to all the terms and the contract is signed by all.  Unfortunately the lender’s approval does not come in a matter of hours or days- it may be weeks or months.  

    Be patient!  The average time for the lender to review and respond to contract may run as long as 12 weeks.  Once the lender has approved the short sale contract, you need to get your inspections completed and be ready to close- usually within a two week time frame.

    This scenario is based on the homeowner only having one lender negotiation to handle; the time frames could change when multiple lenders are involved.  There is definitely some well priced properties available in today’s market as long as you are not short sighted about the complexities of the short sale process.

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