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Financing for First Time Buyers

Tip from the mortgage experts at Mortgage Support Services:

The details are out on the new $8,000 tax credit for first-time homebuyers that is a part of the economic stimulus act that was just passed. Here are the essentials:– If you buy a home after December 31, 2008 and before December 1, 2009, and you are a first-time homebuyer, you can get a tax credit of 10% of the purchase price, up to $8,000. If the purchase price is more than $80,000, you are eligible for the full $8,000.

– This credit is from the IRS, and you do NOT have to pay it back if you keep the house as your “main home” for 3 years.

– The IRS definition of a first-time homebuyer is different than the definition used to qualify for down payment assistance. You can get the credit if you (and your spouse, if you are married) did not own any other “main home” in the past 3 years. A “main home” is defined as the home you live in most of the time. That means you could have owned a house in the past three years and still get the tax credit, as long as the other house you owned was not your “main home”.

– You can claim the credit when filing your 2008 taxes, even if you buy the house after you file your taxes. Just file an amended return and you will get the refund.

– The $7,500 tax credit that has to be paid back over 15 years still applies for houses that were purchased after April 8, 2008 and before January 1, 2009.

Both credits are claimed on the same IRS form. You can get to the IRS form and the instructions by going to our web site and clicking on the link on the bottom of our home page. Here’s the link:

Remember, FHA rules allow a relative of the borrower to give the 3.5% FHA down payment to the borrower. They also allow a relative to LEND the down payment to the borrower. If a borrower does not have the down payment, they can borrow the money from a relative, file for the tax credit, and pay the relative back. Mention this to all your prospects who think they can’t get a house because they don’t have a down payment.
Does the mortgage broker you are currently using know this? If not, then call the Mortgage Experts to set up a meeting, get to know us, and see why agents and buyers love us. In this economy, you need expert mortgage brokers taking care of your buyers. We’ll even bring you a Twinkie.

One of the best ways to succeed in the real estate business is to associate yourself with mortgage brokers who add value to your business and to your buyers. Here’s what we can offer you:

* Mortgage knowledge unsurpassed in the Metro Denver area. We have taught hundreds of other mortgage brokers, and because we also owned a nationwide loan processing company, we are intimately familiar with all the loan programs.

* We can offer every type of loan available, so your buyers will always have access to the best loan for their situation. Many lenders are not approved to sell the loans that might be best – FHA, VA, rehab, down payment assistance, USDA, CHFA, etc.

* Free, quick and easy pre-approvals. In most cases, we can gather all the information necessary to get a pre-approval in a short, 15-minute phone call. Once your buyers are pre-approved, they can shop for a home with confidence, knowing they have the financing.

* Free online automated underwriting approval. We have direct access to the Fannie Mae, Freddie Mac, FHA, and VA underwriting systems. Rather than waiting weeks for a loan decision,
we can get an approval in a matter of minutes. All our pre-approvals are run through an underwriting system, so they’re not guess-work – they are REAL pre-approvals.

* Plain language explanations of the application, all the disclosures, the fees – everything that’s involved. We regularly teach mortgage brokers, real estate agents, and members of the public
about all the different types of loans that are available. The successful professionals rely on us – you should, too.

* Credit report review. We’ve taught hundreds of other mortgage brokers and members of
the public how to read and interpret credit reports, and we’ll do the same for your buyers. If their credit score needs to improve, we’ll tell them exactly what to do.

* Regular updates throughout the entire loan process. You’ll never have to worry about what’s happening with the loan.

* Free rate locks. There’s never a fee to lock in an interest rate.

* We never charge an application fee.

* We attend all of our closings, and we don’t send someone in our place. When we handle the financing, we’ll never leave you hanging.

* We are approved by the Division of Real Estate to offer FREE continuing education classes for credit toward license renewal. We have classes on FHA loans, VA loans, and automated underwriting systems.

If your buyers need information on how to get approved, the loan application, closing costs, all the disclosures, or anything else related to a mortgage, click here.

For access to the leading source of mortgage and credit information, click here to visit our informational blog.

Need help with anything or need more information? Call Chris at 303-345-3683. We’re always happy to answer any questions you might have.

Have a question about an FHA or VA loan? Call Debbie, our government loan expert, at 303-451-0977.


Chris Thomas
Mortgage Support Services
13395 Shoshone St.
Westminster, CO 80234
Phone: 303-345-3683
Fax: 720-208-0665

First-Time Homebuyer Credit Information Center

Congress recently approved a tax credit for first-time homebuyers that can be worth up to $7,500. The credit, however, acts more like a no-interest loan because it must be repaid to the government over 15 years.

The First-Time Homebuyer Credit can be claimed on Form 5405, which is filed with your 2008 or 2009 federal tax return. For the who, what and how, see the following questions and answers:

Q: What is the credit?
A: The First Time Homebuyer Credit is a new tax credit included in the recently enacted Housing and Economic Recovery Act of 2008. The credit operates like an interest free loan because it must be repaid over a 15-year period.

Q: How much is the credit?
A: The credit is 10 percent of the purchase of the home, with a maximum available credit of $7,500 for either a single taxpayer or a married couple filing a joint return; $3,750 for married persons filing separate returns. The full credit is available for homes costing $75,000 or more.

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. 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: When must I pay back the credit?
A: You must begin repaying the loan the second year after claiming the credit. For example, if you properly claim the maximum available credit of $7,500 on your 2008 federal tax return, you must begin repaying the credit by including one-fifteenth of this amount, or $500, as an additional tax on your 2010 federal tax return. Normally, $500 will be due each year from 2010 to 2024.

Q. How is the credit repaid?
A. The first-time homebuyer credit is similar to a 15-year interest-free loan. It is repaid in 15 equal annual installments beginning with the second tax year after the year the credit is claimed. You may need to adjust your withholding or make quarterly estimated tax payments to ensure you are not under-withheld. Some exceptions apply to the repayment rule:

If you die, any remaining annual installments are not due. If you filed a joint return and then you die, your surviving spouse would be required to repay his or her half of the remaining repayment amount.

If you stop using the home as your main home, all remaining annual installments become due on the return for the year that happens. This includes situations where the main home becomes a vacation home or is converted to business or rental property. There are special rules for involuntary conversions. Taxpayers are urged to consult a professional to determine the tax consequences of an involuntary conversion.

If you sell your home, all remaining annual installments become due on the return for the year of sale. The repayment is limited to the amount of gain on the sale, if the home is sold to an unrelated taxpayer. If there is no gain or if there is a loss on the sale, the remaining annual installments may be reduced or even eliminated. Taxpayers are urged to consult a professional to determine the tax consequences of a sale.

If you transfer your home to your spouse, or, as part of a divorce settlement, to your former spouse, that person is responsible for making all subsequent installment payments.

Q: Can I apply for the credit if I bought a vacation home or rental property?
A: No. Vacation homes and rental property do not qualify for this credit.

Q: Who is considered to be a first-time homebuyer?
A: Taxpayers who have not owned another home at any time during the three years prior to the date of purchase.

Q: When would I have had to buy a new home?
A: Only purchases of a main home located in the United States qualify, and the home must have been purchased after April 8, 2008, and before July 1, 2009. For a home you construct, the purchase date is the date you first occupy the home.

Q: How do I apply for the credit?
A: The credit is claimed on new IRS Form 5405 and filed with your 2008 federal tax return.

Q: How are repayments of the homebuyer credit tracked?
A: A memo field will be present on taxpayer record and repayment will be tracked over the 15 year repayment period.

Q: How will the IRS know if someone sells their residence before the 15 years are up?
A: Through both self reporting and third-party information.

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). 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: I purchased a home that qualifies for the First Time Homebuyer Credit. I will be renting two of the bedrooms and reporting the rental income on Schedule E. Will I still qualify for the credit if I use the home as my principal residence?
A: Yes, if you are a first-time homebuyer of a principal residence in the United States, you generally may claim the first-time homebuyer credit, but certain limitations, including a limitation based on modified adjusted gross income, apply. See Form 5405, First-Time Homebuyer Credit, for more details.

Q: If two unmarried people buy a house together, how do they determine how much each may take of the credit?
A: Two unmarried individuals buying a principal residence may allocate the credit among the individual owners in any reasonable manner. The total amount allocated between the owners may not exceed the smaller of $7500 or 10% of the purchase price of the house. Q: Can a person with an ITIN, who qualifies as a resident, take this credit? A: Resident aliens with an ITIN are
eligible to take the credit.

Q: I don’t owe taxes and did not have taxes taken from my paycheck, do I qualify for the credit?
A: Yes, the credit is fully refundable, and you can claim the credit even if no taxes were withheld from your paycheck.

Q. Who cannot take the credit?
A. If any of the following describe you, you cannot take the credit, even if you buy a main home:

Your income exceeds the phase-out range. This means joint filers with MAGI of $170,000 and above and other taxpayers with MAGI of $95,000 and above.

You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild.

You stop using your home as your main home.

You sell your home before the end of the year.

You are a nonresident alien.

You are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year.

Your home financing comes from tax-exempt mortgage revenue bonds.

You owned another main home at any time during the three years prior to the date of purchase. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another main home at any time from July 2, 2005, through July 1, 2008.

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