95 DAYS LEFT FOR THE $8,000 FIRST TIME HOMEBUYER'S TAX CREDIT

The clock is ticking for first time home buyers to take advantage of the $8,000 tax credit. The tax credit expires on November 30, 2009, if not extended. 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 January 1, 2009 and before December 1, 2009. If you do not close escrow by this date, you will be ineligible for the $8,000 tax credit. At the current market, you should allow 30- 45 days to close escrow today. This means you want to be in contract by October 15, 2009.

That’s 49 days to find a house. A daunting task? Probably. But if you have a great team, i.e. a highly experienced Realtor and lender, working with you, the process shouldn’t be that difficult. Easier said than done you might say, but it can be done.

More information on the tax credit can be found here:
http://www.federalhousingtaxcredit.com/2009/faq.php

CLOSING DATE EXPECTATIONS WHEN BUYING BANK-OWNED PROPERTIES

Most contracts today call for 30 to 45 day closings. Most contracts also call for late fees, sometimes as high as $150/day or more, if you don't close on time.

There were new laws and guidelines enacted concerning mortgages in the last few months that have changed things.

In combination with the time-consuming challenges some buyers faced when buying bank-owned properties today, it's important to consider the potential pitfalls when deciding to agree to a closing date and the late fees, and anticipating what they could possibly cost.

First is the appraisal. Two of the biggest challenges you can face on the appraisal are value issues and repairs.

Quite often, on bank-owned property transactions, we see that the actual appraised value of the home comes in less than the agreed-to sales price.

When that happens you have four options:

1. seller lowers price
2. buyer pays difference
3. seller and buyer split difference in some manner
4. cancel (ask your agent if you have this option)

Many buyers choose the first option. This means going back to the bank for their response. That response can take sometime, anywhere from a few days to a week or more.

If the home is in need of repairs, those take time too. Allow anywhere from a few days to a few weeks, depending on the scope of the repairs.

Appraisals take a little longer to get today. The new Regulation Z federal laws that were enacted in late July made it so lenders cannot collect fees, like appraisal money, from a borrower, and therefore cannot order the appraisal, for a minimum of three business days from the date of application or the date the lender sends the disclosure package.

So, this means the appraisal is ordered about 3-4 days after application date. Appraisals can take between 5 -10 business days today so you may be looking at 8 -14 business days before you know of the value or repair challenges.

Another time-consuming factor when buying a bank-owned home is getting the payoff demand from the homeowner's association.

Here’s a typical scenario: The seller stopped making his payments and went into foreclosure. His bank took back the home. You bought from the bank. The seller owes his homeowner's association (HOA) money that he didn't pay when he missed his payments. With penalties and fines, this number could be in the $10,000's.

Your escrow company will order this HOA payoff demand. However, with the high number of foreclosures today and the amount of payoff requests on the HOA, these payoff demands can take weeks, or sometimes even months to get.

Finally, when buying a bank-owned home, you need the seller (the bank) to sign off on the closing statement. Because you are dealing with large banks, this can sometimes take a few days or even a week or more.

And none of this addresses any potential challenges with your actual loan.

Hopefully, none of these adversely affect your transaction. However, its important to understand the potential challenges and timeframes you face when buying a bank-owned home today, especially when negotiating closing dates and late fees.

RATE UPDATE:

INTEREST RATES ARE UP LAST WEEK. Rates approached a 50 year low, once again, and then bounced up slightly.

Courtesy of one of our preferred lenders, Aaron Gordon at Bank of America Home Loans, plan on the following rates:

5.000 % (APR 5.344) FOR A 30 YR FIXED CONVENTIONAL LOAN (OWNER OCCUPIED OR SECOND HOME) with 1.250 points, NO ORIGINATION FEE!

5.000 % (APR 5.290) FOR A 30 YR FHA / VA LOAN, WITH .625 POINTS, NO ORIGINATION FEE!

5.625 % (APR 5.960) ON A 30 YR JUMBO LOAN OVER $417,000 with 1.000 POINTS, NO ORIGINATION FEE!

5.125 % (APR 5.450) ON A 5 YR JUMBO ARM OVER $417,000 with 1.000 POINTS, NO ORIGINATION FEE!

6.125 % (APR 6.470) ON A 30 YR INVESTOR (NON-OWNER OCCUPIED) LOAN UNDER $417,000 WITH 20% DOWN with 1.000 POINT, NO ORIGINATION FEE (720 mid score)!

5.500 % (APR 5.844) ON A 30 YR INVESTOR LOAN (NON-OWNER OCCUPIED) UNDER $417,000 WITH 25% DOWN with 1.125 POINT, NO ORIGINATION FEE (720 mid score)!

NO ORIGINATION FEE ON ANY OF THE LOANS ABOVE. NO PROCESSING FEE. NO UNDERWRITING FEE. NO ADMIN FEE. Rates subject to change until locked.

QUESTION OF THE WEEK:

"My lender asked me for a copy of my tax returns and W2's. I have no idea where to find them. What can I do?"

You can call the IRS at 1-800-829-1040. Option 1, then option 9, then option 1, then option 2. You will be speaking with a live person.

Tell the agent you want a complete transcript including W2's for whichever year you need. They will usually fax it to you within one day for free.

We hope you find the above information valuable in your home search. We at The Dulcie Crawford Group make every effort to be on top of our game, so we can serve you the best way possible. If you have any questions or need sound advice, please call us at 702.285.1990.

HOW TO TAKE ADVANTAGE OF THE $8,000 TAX CREDIT BEFORE IT EXPIRES FOR 1ST TIME HOME BUYERS!

Not many first-time homebuyers are aware that there is a considerable tax credit that is available for them. And if they know about it, they probably don’t know the details and how it can benefit them in their home search.

We have compiled the following information from trusted sources (i.e. mortgage lenders and escrow officers) to explain how the tax credit can be used to one’s advantage.

Highlights:

Timeframe: Must purchase a home (close and receive title) on or after January 1, 2009 and before December 1, 2009.

Down payment or closing costs: Qualifying buyers can use these funds upfront as a down payment or for closing costs.

FHA-approved lenders only: At this time, only FHA-approved loans are required if tax credit is used as a down payment.

Need 3.5% upfront: While the $8,000 tax credit can be used for the down payment or closing costs, home buyers must still come up with FHA's required 3.5% down payment on their own.

If you are buying a home this year, it's important to know whether you qualify for the $8,000 tax credit for first-time home buyers. Read on for details.

Qualifications for $8,000 tax credit:

• Must purchase a home (close and receive title) on or after January 1, 2009 and before December 1, 2009.
• Must be a first-time home buyer, which means you cannot have owned a home for the past three years prior to purchase.
• Must use as a primary residence. The home cannot be used as a vacation home or rental property.
• Cannot purchase a home from a close relative such as your spouse, parent, grandparent, child or grandchild.
• Must make less than $75,000 for a single taxpayer or less than $150,000, if filing jointly.

About the $8,000 tax credit:

• Use as downpayment or closing costs -- Initially, the tax credit was designed as a refundable credit on buyers' tax return next year -- either up to $8,000 or 10% -- whichever came first. Now, a new HUD initiative allows qualifying first-time home buyers to receive these funds upfront to be used as a down payment or money towards closing, as announced by U.S. Housing and Urban Development Secretary Shaun Donovan. This has been referred to as a bridge loan.
• FHA-approved lenders, only -- At this time, only the Federal Housing Administration (FHA) has issued guidance regarding the monetization of the first-time home buyer tax credit. Home buyers using FHA-approved lenders can apply the tax credit to their down payment.
• Home buyers must pay the 3.5 percent -- While the $8,000 tax credit can be used for the down payment or closing costs, home buyers must still come up with FHA's required 3.5% down payment on their own.

For more information on the $8000 tax credit, review these Q&A's from the IRS: http://www.irs.gov/newsroom/article/0,,id=206293,00.html

More relevant information can be found on the following links:

http://www.federalhousingtaxcredit.com/2009/home.html

http://portal.hud.gov/pls/portal/docs/PAGE/FHA_HOME/LENDERS/MORTGAGEE_LETTERS/2009_MORTGAGEE_LETTERS/09-ML-15%20USING%20FIRST-TIME%20HOMEBUYER%20TAX%20CREDITS.PDF

As in any financial transaction, we of course recommend consulting with your financial or tax advisor for implications specific to your situation. Call us today if you need referrals to any of our lenders, or for any real estate question, at 702.285.1990.