Wednesday, March 18, 2009

Feds announced a significant increase in the amount of Mortgage Backed Securities that they intend to buy!

3/18/09 Feds announced a significant increase in the amount of Mortgage Backed Securities that they intend to buy. In addition to the earlier pledge to buy $500 billion between now and June, they indicated that they are intending to purchase an additional $750 billion in MBS. Moreover, the Feds also indicated their plan to buy $300 Billion in Long Term Government Treasuries (something that they have been hinting at for 2 months)

On the news, MBS prices improved 125 basis points. Given this improved pricing, watch for improved rates this afternoon and tomorrow. In my opinion, once this action has been fully priced in during the next couple of days, you or your clients will want to seek your rate and have me lock it in. I believe this is the final push that we have been hoping for.

Of EQUAL importance is this caution...

This will totally overwhelm all areas of the mortgage industry. Please take this into consideration when establishing closing dates and financing commitment dates.

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Monday, March 16, 2009

From The IRS: The First Time Home Buyer Tax Credit Form!

As part of the American Recovery and Reinvestment Act of 2009, the IRS has officially released Form 5405 -- better known as the First-Time Homebuyer Credit Form.

True to tax code standards, the 10-field form is accompanied by 3 pages of instructions.

Form 5405 is a helpful, go-to resource for home buyers with questions about the tax credit.

For example, the form distinguishes tax consequences for homes bought in 2008 versus 2009, and clearly defines the term "first-time home buyer".

In addition, Form 5405 highlights the math behind the tax credit. In general, the First-Time Homebuyer Credit is equal to the lesser of:

  • $8,000 for homes bought in 2009
  • 10 percent of the home's purchase price

Married couples filing separately are entitled to half of the expected credit, and homes sold within 3 years are subject to a credit repayment in the year the home ceases to be the "main home".

Form 5405 is a comprehensive reference. However, be sure to check with your accountant for specific questions about your personal returns and how the First-Time Homebuyer Credit may impact your finances. There is no substitute for professional, paid advice.

Saturday, March 7, 2009

The Truth on the New Home Buyer Tax Credit (Part 2)

With Congress reaching agreement on a $789 billion stimulus package for Americans, the clock is ticking for this year's home buyers and homeowners.

The package contains important benefits related to housing.

One provision gives first-time home buyers an $8,000 tax credit provided they purchase a home between January 1, 2009 and December 1, 2009.


1. 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. Qualified prospective home buyers who believe they are going to purchase 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 when they eventually buy within the time period allowed.

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.

2. 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.

3. 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.

Be sure to discuss your plans with a qualified accountant before committing to a plan.

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Tuesday, March 3, 2009

Improve your credit score quickly !

If you are looking to improve your credit score quickly, now is the time to get started. Here are some great strategies you can utilize right away to give your score a little boost.

Create Some Balance: While paying down installment debt (car, school, mortgage, etc.) will definitely boost your credit score, paying down or paying off revolving debt, such as credit cards, can cause a quick jump in your credit score. The trick is to get and keep your balances below 30% of your credit limit on each card. For faster results, attack those cards with balances closer to their respective credit limits first, as opposed to those cards with simply the highest debt. Remember, if you pay off any credit cards completely, do not close your accounts without discussing it with your mortgage professional first. Cancelling those cards may inadvertently undo all of your hard work.

Know Your Limits: Make sure that your credit card issuers are reporting the correct limits on your accounts to the three major credit bureaus. Without an available limit, your account will appear to be maxed out at its highest reported balance each month. This could cost you up to 80 points in certain instances. Some creditors, such as American Express® and certain cards issued by Capital One®, actually have a policy of not reporting available credit. However, most companies will report your credit limits if you ask them in writing.

Take Some Credit: If you have a credit card account in very good standing, make sure that all three credit bureaus know about it. Just like your credit limits, some creditors don’t report your information to all three credit companies - this is why credit scores often vary between bureaus. If this is the case, give them a call to find out why. Correcting this oversight could provide a significant boost to your score. Also, if you’re in very good standing, ask your creditor for a lower rate or higher credit limit. This will increase the gap in the debt you owe versus the credit you have available. Sometimes hinting about closing an account can suddenly bring out the generous spirit of certain card issuers. Give it a try. The worst they can say is no.

Protect Your Interests: Your credit is calculated based solely on the information available to your creditors. If you have a HELOC, make sure it’s listed as a mortgage or an installment account on your credit reports and not a revolving debt. If you had a bankruptcy, be sure that all items associated with the bankruptcy are being reported correctly, that is with a zero balance. This action could increase your score by 50-100 points. Because simple mistakes like these can wreak havoc on your credit score, it’s important to monitor your credit every four to six months.

Even the Score: If you find information on your credit report that you believe is inaccurate or incomplete, then you have the right to dispute it free of charge. For the fastest results, visit the appropriate credit bureau’s website and file a complaint online. If supporting documents are necessary, you have to file your dispute by mail.