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| WARDLAW REAL ESTATE TEAM Partner with the Best |
Local lenders are reporting record low interest rates.
Rates for 30 year fixed FHA loans are as low as 4.75%
Rates for 30 year fixed Conventional loans are as low as 5%
With rates this low, home buyers can purchase more home for less or purchase the same value of home with a lower monthly mortgage payment.
A lot of good buys have just gotten better!
Contact us if you'd like to receive a list of our "GOOD BUYS".
Everyone is aware that late payments affect your credit score, but exactly how much was unclear. Recently, Fair Issac, which developed FICO scores, revealed some estimates of point score declines with respect to mortgage delinquency issues such as late payments, foreclosure, or bankruptcy.
Fair Issac created two hypothetical consumers, one who starts with an average score of 680 and the other with a very good score of 780. FICO scores range from 300 to 850. Here are average credit score point reductions:
30 days late: 40 – 110 points
90 days late: 70 – 135 points
Foreclosure
Short Sale
Deed –in-lieu: 85 – 160 points
Bankruptcy: 130 – 240 points
Five main factors that affect a credit score: Payment history (35%), Amounts Owed (30%), Length of Credit History ( 15%), New Credit (10%), and Types of Credit Used (10%).
Beth Wardlaw
Broker, CRS, GRI, e-Pro
WARDLAW Real Estate Team
Keller Williams Realty Southern Indiana
Cell: 502.807.2384
Fax: 502.554.9585
WardlawRealEstateTeam.com
Got the "BUG" to Move?
The Indiana House recently passed a bill requiring residents to verify that they are still eligible for the homestead tax credit. Residents will be asked to complete a Homestead Verification Form that will be sent by the County Auditor’s office and included in the property tax bill.
Some counties may begin seeing this as early as the 2009 payable 2010 tax bill, but the form is not due until December 31, 2012. Although this gives individuals ample time, the best idea is to return it as soon as it is received.
The County Auditor should update the database from the Sales Disclosure completed at the closing, however it is best to check with the County Auditor to confirm the status is updated.
Failure to complete and return this form prior to December 31, 2012 may result in loss of the homestead exemption beginning with the Spring 2012/payable 2013 tax bill. Loss of this exemption could have a significant impact on property taxes.
Changes in FHA financing were announced on January 20th
Since the number of borrowers using FHA financing has drastically increased in the last year changes are being made to help protect the agency and make sure funds are still available without getting assistance from the federal government.
Upfront Premium increased
The Mortgage Insurance Premium (MIP) will be increased from 1.75% to 2.5%
Decrease in Seller Assistance
Sellers can only pay a maximum of 3% towards buyer closing costs, down from 6%
Increased downpayment for under 580 credit score
Most lenders will not lend for borrowers with under 620 credit score, but FHA will lend to those with under 580 providing the borrowers put a minimum of 10% down
The 90 day "flipping" rule
Homes will not have to be held for 90 days before they can be sold
FHA is an important component in the market. Over 30% of all loans between September 2008 and September 2009 were FHA. FHA works for first time homebuyers, buyers with not a lot of down payment, and buyers with less than perfect credit.
A. Eligibility for the first-time homebuyer credit is determined on the date of purchase. If Taxpayer A, a first-time homebuyer, buys a house and then later that year marries Taxpayer B, not a first-time homebuyer, the credit is allowable to Taxpayer A. Taxpayer A may take the maximum credit.
S2. Taxpayer A is a single first-time home buyer. Taxpayer B (parent) cosigns for A and does not qualify. Both names are on the mortgage. Can Taxpayer A claim the credit and, if so, how much?
A. Yes. Taxpayer B is not a first-time homebuyer and cannot claim any portion of the credit, but A may claim the entire credit ($7,500 for purchase in 2008; $8,000 for purchase in 2009), if the home was purchased as Taxpayer A's primary residence.
S3. A taxpayer owned her principal residence. Several years ago, she decided to relocate to a rented apartment, but did not sell the former residence. Instead, she rented it out to tenants. Now the taxpayer plans to buy another house and make it her new principal residence. Does she qualify for the first-time homebuyer credit?
A. A taxpayer who owned rental property within the past three years is still eligible for the credit. The taxpayer cannot have owned and used a home as his or her principal residence within the last three years.
S4. If husband and wife wanted to sell the home that the wife owned when they got married, and the husband had not owned a home within the past three years, could he qualify as a first-time homebuyer for the credit even though the wife would not qualify?
A. No. The purchase date determines whether a taxpayer is a first-time homebuyer. Since the wife had ownership interest in a principal residence within the prior three years, neither taxpayer may take the first-time homebuyer credit. Section 36(c)(1) of the Internal Revenue Code requires that the taxpayer and the taxpayer's spouse not have an ownership interest in a principal residence within the prior three years from the date of purchase. The husband may not take the credit even if he filed on a separate return.
S5. Taxpayer purchased a home on April 24, 2008, while she was separated from her husband. Later in the year, they reconciled and were living together at the end of 2008. She has not owned a home since 2004 but he owned one which he sold in 2006. They remained married the entire time. Is the taxpayer eligible for the first-time homebuyer credit?
A. No. The purchase date determines whether a taxpayer is a first-time homebuyer. Since the husband had ownership interest in a principal residence within the prior three years, and the taxpayers were legally married, neither taxpayer may take the first-time homebuyer credit. Section 36(c)(1) requires that the taxpayer and the taxpayer's spouse not have an ownership interest in a principal residence within the prior three years from the date of purchase. While individuals do not have to be married to get the credit, marriage (and legal separation) imputes ownership of a previous home upon the other spouse. The wife may not take the credit even if she filed on a separate return.
S6. I have been estranged from my spouse for over three years and file married filing separate. I don’t know if my spouse has owned a main home in the last three years, but I have not. If I buy a house in 2009 that otherwise qualifies for the first-time homebuyer credit, can I claim the credit?
A. Section 36(c)(1) requires that the taxpayer and the taxpayer's spouse not have an ownership interest in a principal residence within the three years prior to the date of purchase. While individuals do not have to be married to get the credit, marriage (and legal separation) imputes ownership of a previous home upon the other spouse. If your spouse has not owned a main home in the last three years, then you may claim the credit.
S7. I am separated from my spouse and considered unmarried, and qualify for the unmarried head of household filing status. My spouse has owned a main home in the last three years, but I have not. If I buy a home on May 1, 2009, that otherwise qualifies, can I claim the first-time homebuyer credit?
A. No. Section 36(c)(1) requires that the taxpayer and the taxpayer's spouse not have an ownership interest in a principal residence within the three years prior to the date of purchase. While individuals do not have to be married to get the credit, marriage (and legal separation) imputes ownership of a previous home upon the other spouse. The taxpayer may not take the credit even if filed on a separate return.
S8. A qualifying taxpayer bought a home in August 2008 that needed a lot of work before occupying. They finished the renovations and moved in the home in January 2009. Can they claim the $8,000, since they did not occupy the home until 2009?
A. No. Taxpayers who purchase an existing home and renovate the property before moving in are eligible for the first-time homebuyer credit based on the date of purchase, not the date of occupancy.
Q. I bought my home in 2009 (early) and filed my 2008 tax return claiming the $7,500 first-time homebuyer credit that has to be repaid. Now the expanded law provides for an $8,000 credit that doesn’t have to be repaid. What do I need to do to get the $8,000 credit that doesn’t have to be paid back?
A. You can file an amended return.
Q. If I purchase a home in June 2009, and have already filed my 2008 tax return, can I amend my 2008 return or will I have to claim it on my 2009 return?
A. You can either file an amended return to claim it on your 2008 return or claim it on your 2009 return.
Q. I am in the process of buying a home. Can I claim the first-time homebuyer credit now? That would allow me to use the refund for a down payment.
A. No. You may not claim the credit in anticipation of a purchase that has yet to happen. Until you have finalized the purchase of your home, which for most purchasers occurs at the time of the closing, you do not qualify for the credit. IRS news release 2009-27, First-Time Homebuyers Have Several Options to Maximize New Tax Credit, contains details for filing options if the home is purchased after April 15, 2009.
Q: When must I pay back the credit for the home I purchased in 2009?
A: Generally, there is no requirement to pay back the credit for a principal residence purchased in 2009 or early 2010. The obligation to repay the credit arises only if the home ceases to be your principal residence within 36 months from the date of purchase. The full amount of the credit received becomes due on the return for the year the home ceased being your principal residence.
Q. If I claim the first-time homebuyer credit for a purchase in 2009 or early 2010 and stop using the property as my principal residence before the 36 month period expires after I purchase, how is the credit repaid and how long would I have to repay it?
A. If, within 36 months of the date of purchase, the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full amount of the credit is due at the time the income tax return for the year the home ceased to be your principal residence is due. The full amount of the credit is reflected as additional tax on that year's tax return. Form 5405 and its instructions will be revised for tax year 2009 to include information about repayment of the credit.
Q: I’m already a homeowner. If I buy another home after Nov. 6, 2009, to use as my principal residence, do I have to sell my home to qualify for the homebuyer tax credit?
A: No. If you meet all of the requirements for the credit, the law does not require you to sell or otherwise dispose of your current principal residence to qualify for a credit of up to $6,500 when you buy a replacement home to use as your principal residence. The requirements are that you must buy, or enter into a binding contract to buy, the replacement principal residence after Nov. 6, 2009, and on or before April 30, 2010, and close on the home by June 30, 2010. Additionally, you must have lived in the same principal residence for any five-consecutive-year period during the eight-year period that ended on the date the replacement home is purchased. For example, if you bought a home on Nov. 30, 2009, the eight-year period would run from Dec. 1, 2001, through Nov. 30, 2009. (11/17/09)
Q. I am a long-time resident (have owned and used my current home as a principal residence for five consecutive years out of the eight-year period ending on the date of purchase of the new residence) but my spouse has lived there for only three years. Can we qualify for the long-time resident homebuyer credit if we purchase a new principal residence?
A. No. Both spouses must have owned and used the same previous principal residence for five consecutive years out of the 8-year period ending on the date of purchase of the new principal residence to qualify for the credit. (12/14/09)
Q. I am a long-time resident and current homeowner and my spouse is a first-time homebuyer (has had no ownership interest in a principal residence during the three-year period ending on the date of purchase of a new principal residence) and we purchased a new principal residence. Can we qualify for either the first-time homebuyer credit or the long-time resident homebuyer credit if we purchase a new principal residence?
A. No. Both you and your spouse must be first-time homebuyers in order to qualify for the first-time homebuyer tax credit. Since you had an ownership interest in a principal residence during the three-year period ending on the date of purchase, neither you nor your spouse qualifies for the credit. Similarly, both you and your spouse must be long-time homeowners of the same previous principal residence in order to qualify for the long-time resident homebuyer credit. Since your spouse is not a long-time homeowner of your current principal residence, neither of you qualify for the credit. (12/14/09)
Q. I am a long-time homeowner of a principal residence and my spouse is a long-time homeowner of a different principal residence. Can we qualify for the long-time resident homebuyer credit if we purchase a new principal residence?
A. No. Both spouses must have owned and used the same previous principal residence for five consecutive years out of the eight-year period ending on the date of purchase of the new principal residence to be eligible for the credit. Since you and your spouse owned and used different principal residences, neither of you qualify. (12/14/09)
Q. How does the allocation provision work when unmarried taxpayers purchase a home together and both qualify for the first-time homebuyer credit under different tests?
A. Co-purchasers who are not married may allocate the credit using a reasonable method. A reasonable method is any method that does not allocate any portion of the credit to a taxpayer who is not eligible for that portion of the credit. The maximum credit for a taxpayer who qualifies under the long-time resident test is $6,500, and the maximum credit for a taxpayer who qualifies under the first-time homebuyer test is $8,000. One example of a reasonable method is to allocate $6,500 to the long-time resident homebuyer and $1,500 to the first-time homebuyer. (12/14/09)
Q. I plan to build a home and occupy it in 2009 or early 2010. Can I claim the first-time homebuyer credit now and use the funds toward the down payment or other ongoing construction costs?
A. No. To qualify for the first time home buyer credit, the residence must be purchased. By statute, a residence which is constructed by the taxpayer is treated as purchased on the date the taxpayer first occupies the residence. (05/06/09)
Q. I entered into a written home construction contract with a homebuilder before May 1, 2010, and the ...
