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As you may have heard, the $8000 Federal Tax Credit for 1st-Time Home Buyers has been extended.

In addition, several new key elements have been included  into this legislation.

The $8000 First Time Home Buyer Tax Credit was due to expire on November 30th. In my humble opinion, this has been one of the few bills our elected officials have created that has genuinely stimulated our economy and given much needed tax relief to those who can really use it!

Here’s the full scoop on the extension and what else has been added:

1st-Time Home Buyers Credit

Many aspects of this tax credit remain the same as before:

• First Time Home Buyers will still get a tax credit of 10% of the home purchase price, up to the maximum of $8000.

• It applies to both partners of a married couple who haven’t owned a principle residence for at least 3 years prior to the purchase.

• If you claim this tax credit, you must continue to live in the home as your principle residence for 3 consecutive years.

• This credit is a ‘dollar-for-dollar’ reduction of your income tax amount and can be refundable. For example, if you qualify for the full $8000 tax credit, but only owe $6000 in taxes, you could receive a refund for $2000 from the IRS.

• If you buy your home in 2009, claim it on your 2009 tax return. If you buy your home in 2010, you can claim this tax credit on either your 2009 or 2010 tax return.

• You don’t qualify if you purchase the home from a lineal ancestor or descendant, i.e., your parents, grandparents, children, or grandchildren.

What has changed:

• you must be under contract to purchase the home no later than May 1st, 2010, and the transaction must close no later than July 1st, 2010.

• There is now a cap amount being imposed. For purchases made after November 6th, 2009, the tax credit will not be allowed for homes costing more than $800,000.

Repeat Home Buyers Tax Credit

This is a new tax credit that is now available for the rest of us who have owned homes in the past.:

• If you’ve lived in the same house for 5 consecutive years, you qualify.

• The tax credit is 10% of the purchase price, up to a maximum of $6500.

• If you buy your home in 2009, claim it on your 2009 tax return. If you buy your home in 2010, you can claim this tax credit on either your 2009 or 2010 tax return.

• You don’t qualify if you purchase the home from a lineal ancestor or descendant, i.e., your parents, grandparents, children, or grandchildren.

• This new Repeat Buyers Tax Credit only applies to home purchases made after November 6th, 2009.

An added note for Active-Duty Military:

Active-duty military members who are serving overseas on official extended duty for at least 90 days during 2009 and the first four months of 2010 have an extra year to take advantage of these credits.

For additional information on these tax credits:

Consult with the Internal Revenue Services Home page; go to the Smart Money website; and CNN Money.com

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Rich Jacobson is a licensed real estate professional providing knowledgeable empowerment and relentless representation for his clients of residential properties and vacant land throughout all of Kitsap County WA and portions of Pierce, Mason, and Jefferson Counties. You can also find him at KitsapLife.com, ActiveRain, Crabbing in the Hood, Facebook, Twitter, or e-mail:  kitsapagent@gmail.com

Posted in Buyers | 5 Comments »

Tags: $8000 1st time home buyers tax credit, first time homebuyers, IRS, Kitsap County WA real estate, repeat buyers tax credit

John and Mary are frightened and more than a little upset. They need to ask for an extension on the closing of their new home purchase because the financing is not ready. They made an offer on their new home 26 days ago and had no idea their Loan Approval Letter was not worth the paper it was written on! Now their Earnest Money is at risk and the money they already spent on a moving company is in question. In addition, they have already paid for the appraisal.

When is a loan approval not a loan approval?

This is not a frequent occurance. It does happen often enough that savvy Realtors® and experienced sellers are somewhat wary of Mortgage Pre-Approval Letters from loan officers they don’t know through previous transactions. The reason they are wary is simple. Experienced Realtors® know that Pre-Approval Letters are written by loan officers, and loan officers can’t approve loans!

The who’s who of a mortgage transaction.

A Loan Originator is the real name for a person like me who is more commonly called a Loan Officer. A loan originator does exactly what the title implies. He or she creates (or originates) mortgage business. A loan originator’s primary job is to supply a never-ending flow of new loan clients. The title of Loan Officer is rather misleading. A good loan originator does not have to work very hard to maintain a flow of business. Previous happy clients and satisfied Realtors® will keep him or her pretty busy without the need to spend much time marketing.

After they find a client to work with, loan originators are responsible for making certain everything that must be done to close the loan, is indeed accomplished. This includes coordinating a Title Company, an Appraisal Company, a mortgage processor, two Realtors® (one for the buyer and one for the seller) and of course, the borrower. But, a loan officer does not approve loans.

The Loan Underwriter is an employee of the bank. The underwriter’s job is to make sure the borrower (represented by the Loan Originator) fits the Lenders Guidelines for Approval. The underwriter is the person who actually approves the mortgage loan. Very few borrowers ever speak with a Loan Underwriter. Many underwriters prefer it that way. They are busy people who want to be able to move quickly from one loan to the next. There jobs are dependent on speed and accuracy. Getting bogged down with client phone calls does not help with either speed or accuracy.

Whether you, as a borrower, are working with a Bank or a Mortgage Broker, your primary contact is probably a Loan Originator, not an underwriter.

How do you make sure your Pre-Approval Letter is worth something?

A Loan Commitment Letter is the document an underwriter sends to the loan officer once a loan is approved. This is the real thing! A commitment letter will detail every aspect of the mortgage. It will include the terms and interest rate. It will itemize the “Conditions” (the items that must be provided or explained for final approval). The commitment letter will be dated and it will have an expiration date. It may be signed by the underwriter. The Loan Commitment Letter is a formal, legally binding document.

So, if you want to be sure your pre-approval is really an approval, request to see the Commitment Letter! If you are unfamiliar with anything in the letter, have your loan officer explain the unfamiliar portions. It is after all, your loan commitment letter and there is no reason you shouldn’t see it!

In Washington State and many others, the seller has the right to request this proof from the Buyer’s Agent. If the seller has a savvy Agent, the Agent will verify the validity of the Pre-Approval Letter by requesting a Loan Commitment Letter.

In John and Mary’s case, had they simply known to ask for a copy of their Loan Commitment Letter, they would have found out that the loan was not yet approved when the Pre-Approval Letter was written. It shouldn’t have happened the way it did, but this happens often enough that as an educated borrower, you must verify that your pre-approval is a genuine approval.

Posted in Miscellaneous, Mortgage Bites | 5 Comments »

Tags: bremerton real estate, first time homebuyers, port orchard real estate, poulsbo real estate, silverdale real estate

This is the ninth installment in an on-going series of posts dedicated to helping 1st Time Home Buyers successfully achieve their home purchasing goals.

We have been identifying and discussing, in chronological order, key events in the home buying process. In our last time together, we talked about the importance and value of conducting a home inspection in a post entitled, “Home Inspection or Home Alone?”

Today’s topic is: “Potential Pitfalls in the 11th Hour”

Okay, so we’ve conducted our home inspection and have successfully negotiated with the Sellers for those items which need to be corrected/repaired prior to closing. We now enter into the “Pending” phase of the home buying process. Typically, there isn’t too much more drama left, but it is helpful to understand that there are still some additional steps in the transaction that may lead to unforeseen challenges or delays.

 

The Lender’s Appraisal

Immediately following the inspection, your mortgage specialist will order up the appraisal. The underwriter for your loan will need to know if the house you are purchasing is worth the value/price you have agreed to pay.

There are several possibilities that may occur as the result of an appraisal:

1. The property appraises at the full value of your agreed purchase price and with no conditions for funding. This is the most preferred result, and typically ensures a timely closing.

2. The property appraises at the full value, but there are some conditions for funding that need to be remedied prior to closing. Even though you may have conducted a thorough home inspection and negotiated the corrections with the Sellers, the Lender may still require for other issues to be resolved before they can provide funding. This is especially prevalent in VA or FHA transactions. Both VA and FHA loans typically employ more stringent standards, focusing primarily on safety and structural concerns, when conducting their appraisals. Shortly after the appraisal has been done, your Mortgage specialist will receive notification of value and the called-out conditions for funding. These additional conditions or issues will need to be negotiated with the Sellers for correction and hopefully can be resolved in a timely manner.

3. The property appraisal comes in under value. In this instance, the appraiser has determined through their analysis that the current market value of the property is below the agreed purchase price. In most cases, the financing contingency of your contract provides language which protects you as the Buyers, and offers you some options to address this discrepancy:

A. Depending on the variance amount, you may be able to ask the Seller to lower the sales price to match the appraised value.

B. As the Buyer, if you have the resources, you can bring in cash to make up the difference.

C. In some instances, depending on the type of loan, you can request that the Sellers pay for a reappraisal by another company that is acceptable to the Buyer’s lender.

D. If any of these options are not feasible, most financing contingencies allow the Buyers to back out of the contract and retain their earnest money deposit.

Homeowner’s Insurance

Since I haven’t covered this point yet, now is as good a time as any. Typically, once you’re under contract, as a Buyer, you will want to make contact with your insurance agent to determine if the property can be reasonably insured. There may be instances where the current owners have submitted significant claims against the property, thereby making homeowner’s insurance very costly or difficult to obtain. Once again, your contract should contain language that protects you in this event, and allows you to terminate the contract, if necessary.

Seller’s Remorse

This rarely occurs, but it needs to be mentioned. Every once in a great while, a Seller may have second thoughts about letting go of their precious home and treasured memories. If you’ve ever seen the Steve Martin movie “Father of the Bride” you’ll understand exactly what I’m talking about.

As a professional agent, I always counsel my Buyers not to worry or be overly anxious about these kinds of issues and the potential for challenges to occur. If and when they happen, we’ll deal with them head-on, and work with the Sellers to achieve a mutual resolution agreeable to both parties.

Hopefully, with a capable, professional agent working hard to represent Your Best Interests, the 1st Time Home Buying process will be a smooth and enjoyable adventure!

Posted in Adventures in 1st Time Home Buying | 1 Comment »

Tags: bremerton real estate, first time homebuyers, ftb, kitsap real estate blog, port orchard real estate, poulsbo real estate, real estate blog, seattle real estate blog, silverdale real estate

This is the eighth installment in an on-going series of posts dedicated to helping 1st Time Home Buyers successfully achieve their home purchasing goals.

We have been identifying and discussing, in chronological order, key events in the home buying process. In our last time together, we talked about the key ingredients to making a well-drafted offer in a post entitled, “Make Them an Offer They Can’t Refuse!”

Today’s topic is: “Home Inspection” or “Home Alone?”

  So, by this point, your offer has been accepted and you’re under contract with the Sellers. The next major step in the home buying process is the Home Inspection. We had touched briefly on this subject previously in the series (“Do I need $$$ to Buy a House?”), but now, we will deal with it at length.

Here are some commonly asked questions & answers regarding Home Inspections:

• Why do we need a home inspection? Regardless of how new or well maintained a house might be, you owe it to yourself to have a qualified professional inspect the home thoroughly. The old adage definitely applies here: “An ounce of prevention is worth a pound of cure.” Meaning that it is better to pay for a complete inspection up front, than to discover some more costly problem after the house is yours!
• My Uncle is a handyman/contractor. He says he can do our inspection for free! You may have a relative or friend that is handy, or has construction experience, but you really need to use the services of an experienced, certified professional. Ask your Agent to recommend several inspectors. Interview each one. Shawn Martin, of Martin Home Inspection Services in Vancouver, WA suggests you ask the following questions: What is their experience and qualifications. Are they licensed or certified? Do they belong to an association? Do they have insurance? What specifically does their inspection cover? What kind of documentation or final report will they provide upon completion of the inspection? What happens if something major is discovered AFTER closing that that inspection missed?
• How much does a Home Inspection cost and how long will it take? Most inspections typically run about $300 to $500, depending on the size of the home and the extent of the inspection. In some states, this cost includes a full pest inspection as well. You can figure approximately 2 to 3 hours for the inspection, again varying on the size of the house.
• What is normally involved in a Home Inspection? Most Home Inspections involve a complete evaluation and assessment of all structural, mechanical, electrical, and plumbing systems and their primary components. Your inspector will want to make sure that the home is safe, structurally sound, and that all primary systems are operating properly.
• Should we be present during the Inspection? I always advise my Buyers to attend the Home Inspection. You can learn a lot about a house during this time. A good inspector will take additional time with the Buyers to point out the features and functions of various systems in the home. Moreover, if any problem items are identified, you can see them first hand.
• What happens if the Inspector finds something major wrong with the house? Once again, Shawn Martin also advises, “Don’t get too excited and worked up. 1^st Time Buyers have a tendency to over react when a negative inspection issue is identified. Almost every house is going to have something come up on the inspection report.” However, if there is a huge defect that is uncovered, you will usually have the opportunity to request the Sellers to remedy or repair the problem. It is a negotiation process. The Sellers may agree to your request, or simply offer a credit at closing. In most instances, if the Seller’s response is not to your liking, you can elect to back out of the contract and retain your earnest money. Consult your Real Estate Agent for specific rules and regulations that are applicable to your particular region.
• Are there other inspections we might need to have done? As I have mentioned before, in some States, a full pest inspection is included in with the cost of the Home Inspection. If not, one should be conducted by a licensed pest inspector. Additional inspections may be required, depending on the property, such as septic or well. Sometimes these additional inspections are required by contract to be paid for by the Sellers or can be negotiated, as such, into the contract. In addition, your Home Inspector may determine that further inspections be performed by more advanced and trained specialists – i.e. roofing contractors, heating & cooling technicians, etc..

Once the inspection is completed and all relevant issues are resolved to the satisfaction of both parties, the transaction moves forward into a “Pending” status, and you’re the next step closer to successfully achieving your 1^st Time Home Buying Adventure!

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Tags: bremerton real estate, first time homebuyers, ftb, home inspection, kitsap real estate blog, port orchard real estate, poulsbo real estate, real estate blog, seattle real estate blog, silverdale real estate