Military Personnel Can Still Claim The $8,000 Homebuyer Tax Credit

For certain members of the military, and for certain federal employees, there's just 2 months remaining to get use the federal home buyer tax credit.

Eligible persons include members of the uniformed services, members of the Foreign Service, and intelligence community employees who served at least 90 days of qualified, extended duty service outside of the United States between January 1, 2009 and April 30, 2010.

Spouses of persons meeting the above criteria are eligible as well.

The federal home buyer tax credit ranges up to $8,000 for first-time home buyers, and up to $6,500 for existing homeowners. Existing homeowners must have lived in their "main home" through 5 of the last 8 years to be eligible.

Claiming the federal tax credit is a two-step process. First, eligible persons must be under contract for a new home on or before April 30, 2011.  The home's closing must then occur on or before June 30, 2011. 

The IRS does not make date exceptions.

Furthermore, both the buyer(s) and the subject property must meet certain minimum eligibility requirements:

• The home may not be purchased from a parent, spouse, or child
• The home may not be purchased from an entity in which the seller is a majority owner
• The home may not be acquired by gift or inheritance
• Each buyer must meet tax credit eligibility standards
• The home sale price may not exceed $800,000
• Buyers may not earn more than $125,000 as single-filers; $225,000 as joint-filers

The complete program description is published on the IRS website.

Another important note is that the IRS is giving eligible buyers a tax credit as opposed to a deduction.  This means that a taxpayer qualifying for the full $8,000, and for whom the "normal" 2011 federal tax liability is $8,000, will have zero federal tax liability in 2011.

For additional information regarding your tax credit eligibility, call an accountant. Speaking with a tax professional is often worth the cost.

The Home Buyer Tax Credit Extension Has Not Been Passed Into Law (Yet)

As its June 30, 2010 closing deadline approaches, the federal home buyer tax credit is back in the news.

Unfortunately, the headlines are misleading.

Contrary to what you may have read (or heard), the federal home buyer tax credit has not been extended past June 30, 2010. At least not yet. And here's why there's confusion.

Look at these headlines from earlier this week:

• Senate Extends Date On Home-Buying Tax Credit (Philadelphia Inquirer)
• U.S. Senate Approves Extension Of Home Buyer Tax Credit (NASDAQ)
• Senate Approves Home Tax Credit Extension (Reuters)

Now, nothing above is factually incorrect, but each neglects a key piece of the country's law-making process -- it takes more than the Senate to pass a law. For a bill to become a law, it must pass the Senate and the House of Representatives and then it must be ratified by the President.

To date, we've only cleared just one of those 3 steps.

This means that the federal home buyer tax credit has not been formally extended. As of now, it's still in discussion.  Ultimately, though, if the extension does pass, it's expected to extend the closing date deadline for Duluth home buyers beyond the original June 30, 2010 date into September 2010.

Homeowners must still have been in contract as of April 30, 2010 to claim up to $8,000 in federal tax credits.

March Pending Home Sales Point To Stronger Spring Market

The Pending Home Sales Index moved higher in March as home sales were spurred by low mortgage rates and an expiring tax credit.

A "pending home" is a property that is under contract to sell, but not yet closed.

March marks the second straight month in which the Pending Home Sales Index improved after a series of weak showings this past winter.

March showed a 5 percent increase over the month, but the Pending Home Sales Index is still off its October 2009's peak.  October 2009 is a comparable period to March 2010 in that it marked the 1-month deadline before the home buyer tax credit's initial expiration date. The credit was later extended to April 2010, of course.

That said, March's surge in sales is being felt on the street.

Home buyers in Atlanta no doubt noticed the change in activity. Around the country, anecdotally, multiple offer situations were more common last month and "right-priced" homes tended to go under contract quickly.

The increase in March's Pending Home Sales is diminishing the nation's home supply which, in turn, should cause prices to rise in most markets -- including Brookstone.

Today's buyers should consider making an offer sooner rather than later.  Looking at the data, it appears the best time to have found a "deal" on a home may have been in February.

New Homes Sales Were Strong in March, But Not As Strong As The News Would Have You Believe

The sales of newly-built homes soared in March. Even more than what was expected. But the news may not be as glowing as what the media is telling us.

Take a look at the headlines from last Friday:

• Sales of new homes rocketed up 27 percent in March (WaPo)
• New-home sales rise fastest in 47 years (CNNMoney)
• Sales of New Homes Climb by Most Since 1963 (Business Week)

None of these statements is false, per se, but each is somewhat misleading.  The biggest reason why March's New Home Sales was even able to rise 27 percent is because data from the month before it -- February -- was the worst in New Home Sales history.

In February, new homes sold posted its lowest level in recorded history. 

A better comparison would be against March a year earlier; or October 2009, the month before the home buyer tax credit's initial expiration date. 

Against both of those time periods, March 2010 fared well.

Home buyers - first-timers and repeats alike -- went under contract last month, taking advantage of the soon-to-expire federal home buyer tax credit program.  The credit gives up to $8,000 for first-time buyers and up to $6,500 for repeat ones.

Buyers must be in mutual contract on or before April 30, 2010 to be eligible for the credit, and must closed on or before June 30, 2010.

The New Home Sales data included other strong housing data, too. The current supply of new homes nationwide is at a multi-year low.  Along with stronger home demand, this should push Marietta home prices higher throughout the coming months.

It's no wonder builders are bullish on the economy.

Housing Starts Data Hints That Housing Will Expand Even After The Tax Credit Expires

After a strong March showing and a surprise upward-revision for February, Housing Starts are, once again, trending better.

It's yet another signal that the housing market in Duluth and nationwide is stabilized.

A Housing Start is a new home on which construction has started and, over the last 6 months, home builders are averaging one half-million starts per month.

This marks the highest 6-month average since 2008 and a reading one-fifth percent better from 12 months ago.  Revisions to prior data have all been higher, too.

Even more interesting, though, is that the number of newly-issued building permits is exploding. Permits were up more than 5 percent last month and have climbed back to the levels of late-2008.

Housing permits are an important data point in housing because permits are precursors to actual housing starts.  According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance.

Therefore, because March's housing permits increased, we should expect Housing Starts to continue to rise into the early months of summer.

This, too, reflects well on housing because the federal home buyer tax credit won't be in existence this summer. The simple fact the homes are being built now shows that housing is likely to expand even after the tax credit expires.

Non-military members must be under contract by April 30, 2010 and closed by June 30, 2010 in order to claim up to $8,000 in federal tax credits.

Why You Shouldn't Schedule Your Closing For May 28, 2010

The federal home buyer tax credit expires April 30 and the deadline is sparking a home sale surge. It figures to burden real estate, mortgage and title offices nationwide over the next 60 days so plan your closing date accordingly.

Especially because the last Friday in May is the Friday before Memorial Day.

Now, if the connection between the tax credit and Memorial Day is not immediately clear, think of your own office on a 3-day weekend's Friday. Some of your colleagues take a half-day at work, others take the entire day off.

Office-wide, productivity drops.

The same is true in the real estate space. Offices are short-handed ahead of a holiday so, if you're under contract for a home and plan to close in May, consider a closing date other than Friday May 28, 2010. 

And meanwhile, with 6 weeks until Memorial Day, here's some steps you can take today prepare for other people's time off later. 

 

 

1. Notify your lender of your planned vacation time between now and your scheduled closing
2. Purchase a homeowners insurance policy and prepay the first year. Send proof of payment to your lender.
3. Have Power of Attorney forms lender-approved and signed by all parties in advance, if applicable
4. Deposit gift monies and/or retirement fund withdrawals into an acceptable bank account, if applicable
5. Schedule your final walk-through as far in advance as is realistic so there's time to make "fixes", if needed
6. Have your closing funds ready at least 1 day in advance

The tax credit's expiration is around the corner and as it gets closer, real estate-related businesses are taking on more work. Basic title and mortgage tasks are taking longer to complete and that should persist for a while.

Get ahead of the curve and beat your contract dates handily. Use the checklist above and be responsive to your lender's requests.

 

And, if at all possible, avoid closing on the Friday before Memorial Day and even the Tuesday after -- it's when office staffs are at their smallest.

It's Time To Re-Approve Your Pre-Approval

As the federal home buyer tax credit nears its April 30 end-date, there's a lot of would-be home buyers in Marietta still working to get under contract.

A piece of advice for all of them : If your pre-qualification and/or pre-approval letter is more than 8 weeks old, it would be prudent to have your lender "re-pre-approve" you.  Mortgage guidelines have been in flux and your original lender letter may now be invalid.

For example, over the past half-dozen months, the majority of mortgage lenders have reduced their risk tolerance with respect to:

• Maximum debt-to-income ratios
• Minimum allowable credit scores
• Calculation of "assets in reserve"

For buyers of condominiums and co-ops, even the subject property itself is coming under tougher scrutiny.

Today's mortgage applicants need to be a complete package. It takes more than just good income and credit to get approved anymore and today's buyers should revisit their qualifications. What passed underwriting in January may not pass in May.

Being pro-active brings other advantages, too. If a mortgage re-pre-approval does unearth an issue, it'll be easier for every party to the transaction to address and correct it up-front versus trying to clean up a mess once a home's already under contract.

Talk to your agent and your loan officer about your pre-qualification/pre-approval letter before you bid on a home.