Snapshot: Housing and Economic Recovery Act of 2008 - 1st Time Homebuyer Tax Credit Info

Let's start with the basics. The who, when, & what!

Who's Eligible?

1st-time Home-buyers only. This means that neither the purchaser nor the purchaser's spouse may have owned a principal residence in three years prior to the purchase.

When Is It Effective?

Purchases on or after April 9, 2008 until the feature terminates before July 1, 2009. Thus, it doesn't matter if you signed the offer to purchase in February as long as the closing(simply put the transfer of title) occurs on or after 4/9/08 you'd be eligible to take the credit.

What Does the Refund Do?

Refund reduces income tax liability for the year of the home purchase and will be claimed on the tax return for that year.

What Properties are Eligible?

Eligible property includes any single-family residence that will be used as a principal residnence. No condos or co-ops allowed.

How Much of a Credit Can I Get?

Ten percent of the cost of the home, not to exceed $7500.

Are There Income Limits?

You are eligible for the full amount of credit as long as your adjusted gross income is $75000 or less ($150000 if filing joint return). Their are credit phase outs above those caps and individual with incomes at $95000 for individuals and $170000 for those filing jointly will not be eligible for any tax credit.

Now let's get down to business and look at the fine print. The government is not simply giving you a $7500 tax break!

Do I Have To Pay This Credit Back?

Recapture! Yes, that's what I said. A portion of the credit - 6.67% - is to be repaid each year for 15 years. If you sell your home before you've reached 15 years the remainder of the credit will be recaptured upon the sale. This feature is why you may have heard this tax credit referred to as an interest free loan. Home-buyer pays 6.67% of whatever credit they receive($7500 or less) for the next 15 years with no interest. So, if you qualify for the full $7500 credit you will repay $502.50 each year for 15 years.

One caveat here is that if you sell your house before the 15 years and there isn't enough proceeds to pay back the loan the remainder will be forgiven. You will not owe the IRS if the proceeds fail to cover the full repayment amount.

What About The Alternative Minimum Tax?

The credit can be used against the AMT so that it will not push individual into the AMT.

Item of note:

There's no application. Just claim the credit on the appropriate tax form if you wish to take it.

Disclaimer: Nothing in this article shall constitute either legal or tax advice. Consult with your tax advisor regarding the use of this provision.

Shannon Luscher VP Elite Mortgage Solutions, Inc. Visit the Elite Mortgage Daily Blog for Mortgage News & Insights at http://elitemortgagesolutionsdailyblog.com/ Wisconsin borrowers can find more information about rates and products by visiting my comprehensive website - http://www.elitemortgagesolutions.com/

Article Source: http://EzineArticles.com/?expert=Shannon_Luscher

Snapshot Congress

H.R. 6254: Temporary FHA Direct Endorsement Lender Participation Act of 2008

To authorize the temporary participation of mortgage brokers and lenders under the FHA single-family housing mortgage insurance program.

Jun 12, 2008: Referred to the House Committee on Financial Services.

H.R. 3221: The Foreclosure Prevention Act of 2008
By a vote of 272-152 the House passed H.R. 3221: The Foreclosure Prevention Act of 2008.

Excerpt: From Article on fhaloanpros.com by Peter G. Miller
July 23rd, 2008

Next, the bill goes back to the Senate for final approval. However, while passage by the Senate is expected, the final vote is unlikely until Friday at the earliest. The reason? A number of senators, including Sen. Jim DeMint (R-SC), Sen. Tom Coburn (R-OK) and Sen. Jim Bunning (R-KY) oppose the authority given to the Treasury Department to invest in and loan to Fannie Mae and Freddie Mac.

Major Provisions

The major provisions of the bill, according to the Mortgage Bankers Association, include the following elements:

___FHA Modernization: Authorizes a $25 million appropriation to improve technology, processes, program performance, eliminate fraud and provide appropriate staffing. Effective January 1, 2009, it also increases the FHA loan limit to the lesser of 115 percent of the local median home price or $625,500 with a floor for lower priced markets of $271,000, establishes a 12-month stay on FHA’s proposal for risk-based premiums, sets the down payment requirement at 3.5 percent and prohibits seller-funded down payment assistance (both direct or through a third party).

___GSE Oversight Reform: Creates a new regulator (five-year term, appointed by the President, confirmed by the Senate) with oversight authority similar bank regulators, establishes a new affordable housing fund and capital magnet fund to be funded by a 4.2 basis point fee on all new loans, significantly changes the affordable housing goals and raises the conforming loan limit to the higher of $417,000 or 115 percent of the local median home price, not to exceed $625,500 (the stimulus limits remain in effect until January 1, 2009).

___FHA Rescue: Creates a voluntary program for lenders to write down the loan balance in exchange for an FHA guaranteed loan not to exceed 90 percent of the newly appraised value of home. The lender would pay a 3 percent FHA loan origination fee. To qualify, the borrower must have a debt-to-income ratio above 31 percent on the original loan. The program is capped at $300 billion.

___Tax Incentives: Creates a $7,500 refundable tax credit for first-time home buyers, expands the volume cap for the low income housing tax credit, allows for tax-exempt treatment of bonds guaranteed by the Federal Home Loan Banks and exempts the low income housing tax credit from the alternative minimum tax.

___Low Income and Affordable Housing: Encourages the development of low-income and affordable housing by harmonizing multi-family FHA mortgage insurance programs with the low income housing tax credit. Allowing these two programs to work together will result in more effective uses of both programs.

___GSE Backstop: Authorizes the Treasury Secretary to temporarily increase the GSEs’ line of credit and to, if necessary, buy equity in the GSEs in order to provide confidence to credit markets. Also provides a role for Treasury and the Federal Reserve in GSE oversight to ensure safety and soundness.

___Truth in Lending Reform: Requires TILA disclosures to be delivered seven days prior to loan origination, requires that disclosures include examples of how payments would change based on rate adjustments in addition to disclosing the maximum possible payment under the loan terms and mandates that the consumer receive early disclosures before paying anything more than a nominal fee that covers the cost of a credit report.

___Empowering States: Raises the cap by $11 billion on tax-free bonds that state housing finance agencies may use to help at-risk homeowners by refinancing troubled loans and appropriates $4 billion for states to purchase and renovate abandoned and foreclosed properties.

___Licensing: Encourages state officials to create a national licensing system for residential loan originators, allows HUD to create a licensing system for those states that fail to enact their own, establishes minimum qualifications for all loan originators and requires federal regulators to create a registry for banks and thrift employees who originate loans.