WeGotLand Blog

It’s up to Republicans

admin — Tue, 11 Jan 2011 12:09:00 +0000

Republicans took control of the House of Representatives last week and have vowed to end the government’s involvement in the $11 trillion U.S. residential mortgage market.

While they are likely to fall somewhat short of that lofty campaign promise, some tightening of home-loan terms is all but certain in the next few years as the government pulls back its support for the largest housing market in the world.

The plan Treasury Secretary Timothy Geithner is expected to unveil will be the next step in a debate over the future of Fannie Mae and Freddie Mac, the two ailing firms that continue to prop up the housing sector by providing the bulk of funds for U.S. home mortgages.

Policy makers on the left and right agree on the need to revamp the mortgage finance system, but they disagree on how.

Many Republicans want to move to a completely private market that does not use taxpayer funds to help homebuyers. Democrats generally support some government support to lower the cost of homeownership.

In the end, Fannie Mae and Freddie Mac could be broken up to make way for smaller firms.

The ultimate outcome of the debate could affect tens of millions of homeowners.

“Is the middle class going to have a homeownership option going forward, or is homeownership going to become a luxury?” is how David Abromowitz, a partner at the Goulston & Storrs law firm and a senior fellow at the left-leaning Center for American Progress, frames the debate.

BREAKING UP FANNIE, FREDDIE

Geithner has said he sees some need for a government role in the housing market, which could face further sales and price declines if the support were retracted entirely.

“There is a strong case to be made for a carefully designed guarantee in a reformed system with the objective of providing a measure of stability in access to mortgage finance even in future economic downturns,” he said last August.

Fannie Mae and Freddie Mac, which were seized by the Bush administration in 2008 as mortgage losses mounted, have been the main players in the government efforts to foster homeownership. Since being seized, they have been propped up with more than $150 billion in direct taxpayer aid.

The two congressionally chartered companies buy mortgages from lenders and then repackage them as securities to sell to investors, thereby ensuring a steady source of liquidity for the market. They also hold mortgages in their own portfolios.

Their charter, and the implicit guarantee of a government backing that accompanied it, allowed the firms access to cheaper funds than their competitors, which boosted their profits and enriched their shareholders in good times.

A number of industry groups and policy think-tanks believe the two companies could be replaced by a handful of new firms that would take over their securitization role. However, unlike Fannie Mae and Freddie Mac, these firms would not be able to hold securities in their portfolios, lowering their risk profile.

These new firms would also be required to maintain a “capital cushion” to offset possible losses. In addition, investors buying their securities would need to put money into a rainy-day fund. If the capital cushion were depleted, the fund would back the securities, not the firms.

While any changes could take years to be worked out, homeowners can expect to be saddled with bigger downpayments, higher closing costs and higher interest rates when the process finally draws to a close.

(Reporting by Corbett B. Daly; Editing by Leslie Adler)

REAL ESTATE SALES TAX TO GO INTO EFFECT 2013 (Part of HC Bill)

admin — Thu, 30 Sep 2010 19:59:53 +0000

Nation’s Building News
The Official Online Newspaper of NAHB

Health Care Tax Changes to Have Little Impact on Principal Residence Sellers

Among the many policy changes in the recently enacted health care legislation (click here, for a story in the April 5 NBN), builders and the residential construction industry should be aware of two tax policy changes in particular:

New Tax on Capital Income
Set to take effect in 2013, a tax increase on capital income — such as capital gain and rents — will affect some real estate investments. However, it should have a negligible impact on sellers of principal residences.

The new 3.8% Medicare tax on so-called unearned income will affect high-income taxpayers who report taxable income due to capital gains and other non-wage income. It will not affect income that is currently tax-exempt, including most capital gain due to the sale of a principal residence (due to the $250,000/$500,000 gain exclusion rules). Taxpayers with less than $250,000 in income will not see any increase in tax.

Under prior law, Social Security and Medicare benefits are financed by payroll taxes on wages. The tax is equal to 12.4% of covered wages up to a maximum amount ($106,800 in 2010), with half paid by the employer and half paid by the employee; and 2.9% of covered wages uncapped, again with half paid by the employer and half paid by the employee. Self-employed individuals — including independent contractors — generally pay both the employee and employer parts of the tax. Unearned income (e.g. rents, dividends, interest and capital gains) were not subject to these taxes.

As a result of the Patient Protection and Affordable Care Act of 2010, this system is changing. Under revised law, the Medicare tax will increase for taxpayers earning more than $250,000 (if married) or $200,000 (if single). In particular, the individual’s Medicare portion of the tax — which was previously 1.45% or half of the 2.9% — increases to 3.8%, but only for certain income amounts. The rate of 3.8% applies to the smaller of: (1) the amount of income above $250,000/$200,000 of modified adjusted gross income; or (2) net investment income. The tax also applies to self-employed individuals.

Net investment income is the sum of income from interest, dividends, annuities, royalties, rents and capital gain — except income derived from active participation in a trade or business, including sole proprietorships, partnerships and S Corporations.

As noted earlier, tax-exempt unearned income (excluded gain from the sale of a principal residence or interest income allocable to a tax-exempt bond) is not subject to this new tax.

Here are two examples:
- Suppose a couple has wage income of $260,000 and $9,000 in capital gains. The extra 3.8% tax applies to the smaller of $19,000 (the difference between $269,000 and $250,000) and $9,000. $9,000 is smaller, so the increased tax is equal to $342 ($9,000 times 3.8%).
- Suppose a couple has wage income of $50,000 and gains income of $210,000. The extra 3.8% tax applies to the smaller of $10,000 (the difference between $260,000 and $250,000) and $210,000. $10,000 is smaller, so the increased tax is equal to $380 ($10,000 times 3.8%).
Small Employer Health Insurance Tax Credit
For 2010, the legislation establishes a tax credit for certain small businesses that provide health insurance. In general, the credit is available for businesses that pay at least half the cost of health insurance for their employees.

Partial tax credits are available for small businesses with no more than 25 full-time employees and whose employees have average wages no higher than $50,000. Full tax credits are available for businesses with no more than 10 full-time employees with average wages not exceeding $25,000. The maximum credit amount is equal to 35% of the employer’s qualified health insurance expenses.

The credit will be available for tax years 2010 through 2013. After 2013, the credit will only be available for a maximum of two years and only for employers that purchase health insurance for their workers via a state exchange, as provided in the new legislation.

3.8% Sales tax on realestate in 2013

admin — Thu, 30 Sep 2010 19:57:59 +0000

Hope you are well this evening! What an interesting weekend this has been with crazy weather and crazy misinformation (half truths) going around the local real estate industry.

Well – let’s try and set the information straight so you can help dispell the rumors with real information.

First, there are ALOT of new taxes in the Healthcare Bill . . . how else will the new coverage be paid for?? We are not tax experts and with the complexity of the law, we need to refer our clients to their CPA or tax advisors. But for now, here is my take on the issue.

One of those taxes is the 3.8% medicaid surtax on investment income beginning in 2013 (including capital gains, rents, dividends, etc.). Note that Capital Gains do come from investment sale or transfer of real estate. The Medicaid Surtax is assessed on individuals earning over $200,000 individually or $250,000 as a couple. Thus, since real estate is a capital gains transaction and in the case of a sale of a principal residence for a gain of more than the exclusion amount ($250,000 individually or $500,000 for a married couple) then in addition to capital gains (which is already scheduled to go up next year to 20%) you could possibly have an additional medicaid surtax of 3.8% on top of that amount. This will only kick in for the income that is above the $200,000/$250,000 modified adjusted gross income. Now, the kicker is that if you are not in a principal residence transaction and capital gains hits you right away (i.e. investment or rental income or a sale of principal residence held for less than 2 years) then if you have capital gains it could likely be hit with the 3.8% medicaid surtax – again ONLY if you are above the $200,000/$250,000 modified adjusted gross income levels.

I like these examples from RERockstar.com and his explanation of the same issue.

REAL WORLD EXAMPLES.

Example #1: Meet Bob and Susie, a couple who make $300,000 in income a year. They have a beautiful home that they sell for $2 million, this nets them $750,000 in profit (sale price of the home – commissions and fees – price they paid for the home = profit from the sale of the home). Because they are defined as “high earners” (making more than $250,000 a year for a married couple), they will be required to pay the Medicare tax.

Calculating the tax:
profit from the sale – capital gains threshold = taxable investment income
taxable investment income x 0.038 (3.8%) = tax due

Using the above formula, Bob and Susie would plug in these values:
profit from the sale: $750,000
capital gains threshold: $500,000 (married couple filing jointly)
taxable investment income: $750,000 – $500,000 = $250,000
tax due: $250,000 x 0.038 (3.8%) = $9,500

Example 2: Meet Frank and Cindy, a married couple whose combined income totals $200,000. They are selling their home for $400,000. Frank and Cindy are excluded from the 3.8% tax because they do not meet the “high earner” criteria (income of $250,000 or more).

Example 3: Frank (from Example 2) gets a promotion and begins making $50,000 more a year. This pushes Frank and Cindy’s combined income to $250,000, which now qualifies them as “high earners.” They finally sell their home for $400,000, but after paying their mortgage and the fees associated with a real estate transaction, they take home $50,000 as profit from the sale of their home. They are again excluded from the tax thanks to the capital gains threshold of $500,000 for married couples filing jointly (they would need to take home $500,000 or profit more from the sale of their home to be required to pay the Medicare tax in the health care bill.

So, there you have it – with examples. This is an incredibly complicated bill and the tax provisions are just as complex. The RUMOR of a sales tax on every transaction is just that – it is a medicaid surtax NOT a sales tax. The medicaid surtax is not a tax on every real estate transaction. The tax is part of the surtax that Obama and our Congress have passed to help pay for the mandated health insurance we as an industry will help pay for. The TRUTH is that some of our very fortunate clients COULD face another increased tax when they sale highly appreciated real estate.

There are other taxes and powers in the bill – below are just a few: (directly from a number of Congressional Members Websites and the GOP)

Middle-class tax increases . There are at least a dozen direct and indirect tax increases.

* a $32 billion “Cadillac tax” on high-cost plans,
* an individual mandate tax on Americans who do not purchase government-approved health insurance,
* an increase in the 7.5% AGI floor for medical expense deductions to 10%,
* limits on Flexible Spending Accounts in cafeteria plans,
* increased penalties for nonqualified HSA distributions,
* other restrictions on Health Savings Accounts, Health Reimbursement Accounts, and Flexible Spending Accounts,
* a tax on tanning services,
* an employer mandate tax,
* a sales tax on medical devices,
* a tax on health insurance premiums,
* a tax on prescription drugs, and
* a tax on insured and self-insured health plans.

There is a special deal for union members. Starting in 2018, a single union worker in a multiemployer health plan would be completely exempt from the “Cadillac tax” (a 40% tax on high-cost plans) unless the price of that plan exceeds $27,500. In contrast, a single, non-union worker living right next door would start paying that Cadillac tax as soon as the value of her health plan exceeds $10,200.

Medicare surtaxes. The Medicare surtaxes on both earned income (imposed at a rate of 0.9%) and investment income (imposed at a higher rate of 3.8%) have lower thresholds now of $200,000 for singles and $250,000 for couples.

Higher taxes on real estate investments. The 3.8% Medicare surtax would hit average, middle-class investors in real estate. A middle-class taxpayer who happens to sell real estate for a significant gain in a particular year would be liable for this new tax, regardless of how low her income might be in other, more typical years.

Broad new IRS powers. This health care bill vastly expands the responsibilities of the Internal Revenue Service and would strengthen the IRS’s heavy hand in dealing with ordinary taxpayers who play by the rules. If this bill becomes law, the IRS may have to hire up to 16,500 additional auditors, agents, and other employees just to enforce all the new taxes and penalties. The bill would empower the IRS to: (1) verify that Americans have “acceptable” health care coverage; (2) fine Americans up to $2,085 or 2 percent of income (whichever is greater) for the failure to purchase “minimum essential coverage”; (3) confiscate tax refunds; and (4) increase audits.

New marriage penalties. Because the subsidies for health insurance are solely based on the federal poverty level, if two people make $32,000 per year, they would pay between $6,000 and $10,000 more for health insurance than before they said “I do.” This is because as singles they were poor enough to receive health care subsidies, but as a married couple, these Americans are too rich for federal assistance.

A Cadillac tax. The Cadillac tax in the health care bill would not keep pace with medical inflation after it comes into effect in 2018, meaning a larger and larger tax hit over time. Beginning in 2020, this tax would be indexed by only the consumer price index. Given that health insurance premiums will likely increase faster than CPI, the Cadillac tax would hit more and more plans each year and take a bigger bite from those already covered

Non-indexed surtaxes. Instead of learning the lesson of the Alternative Minimum Tax, which hits more and more Americans every year because the exemption level is not indexed for inflation, the Democrats’ bill repeats this mistake by failing to index the exemption threshold for the Medicare surtaxes on both earned and unearned income.

Higher catastrophic costs. Current law provides important tax relief to Americans who suffer catastrophic out-of-pocket medical expenses, permitting a deduction for costs above 7.5% of income. The law raises that threshold to 10% of income in 2012 (2016 for seniors and the disabled).

Higher taxes on investments. Under the law, the Medicare tax would, for the very first time, apply to capital gains, dividends, interest, rents, royalties, and other investment income of singles earning over $200,000 and couples earning over $250,000. Currently, capital gains and dividends are taxed at a top rate of 15%, but those rates are already scheduled to rise in 2011 to 20% and 39.6%, respectively. When the expansion of the Medicare tax is coupled with the already scheduled rate increase, capital gains rates on these types of investment income, long-term capital gains rates would rise by almost 60% – from 15% to 23.8% – and the top tax rate on dividends would nearly triple – from 15% to 43.4%.

Neighborhood Experts

admin — Mon, 29 Jun 2009 19:24:59 +0000

What a Difference when you give the power to the people. Once we joined WeGotLand.com, we have had substantially more traffic in our neighborhoods and have gained more contact with out of town buyers who can now visit and compare neighborhoods online before ever coming to visit them. We can shoot them linkes to neighborhoods they might like and they can research other neighborhoods as well. The buyers prefer to do their home work anyway and we are there when they need us. We put forth a little effort gathering information and the home buyer compares neighborhoods and homes and contacts us when they are ready to by.

Doug Henjes

Keystone Realty

NAHB Answers How to Pay Upfront Costs With Tax Credit

admin — Thu, 18 Jun 2009 15:41:00 +0000

NAHB Answers How to Pay Upfront Costs With Tax Credit

NAHB is providing answers to frequently asked questions from prospective first-time home buyers who qualify for the $8,000 tax credit and are seeking information on how they can get a loan to help cover downpayment or closing costs.

The U.S. Department of Housing and Urban Development announced on May 29 that the Federal Housing Administration will allow state housing finance agencies to provide second mortgages “monetizing” the tax credit so that borrowers can use the funds for upfront costs for the purchase of homes with FHA-insured mortgage loans.

“This is great news for thousands of families who want to take advantage of today’s low interest rates, competitive prices, great selection and the federal tax credit that is only available until Nov. 30, but could not save enough money for a downpayment and closing costs,” said NAHB Chairman Joe Robson.

HUD announced that FHA-approved lenders can purchase the tax credit from the home buyer in advance, so that the home buyer can use the funds for closing costs or make a downpayment in addition to the 3.5% minimum. Home buyers who go directly to FHA-approved lenders still need to come up with the 3.5% minimum downpayment that is required for an FHA-insured loan.

Home builders in recent weeks and months have reported that the tax credit has helped bring more prospective first-time buyers into the marketplace. To spread the word, builders and home builders associations around the country have been providing consumers with information on the availability of the credit.

The new FHA monetization program is expected to result in an additional 40,000 home sales, many of which will be made to trade-up buyers who have been able to sell their existing home to a first-timer.

For NAHB’s FAQ PDF on monetization, click here. Builders can direct consumers to this information by sending them to www.federalhousingtaxcredit.com. The new PDF can be found by going to the “Frequently Asked Questions” section of this site and scrolling down to question 20.

Following is the new information that has been posted on the tax credit site:

What exactly does “monetizing” the tax credit mean?
The term “monetization” is defined as the act of converting something into money. In the context of the first-time home buyer tax credit, monetization means treating the payment of the credit as if it were cash and allowing its use as a payment for certain closing and downpayment expenses.
What is a “bridge” loan?
A bridge loan is a type of loan that is intended to be outstanding for a very short time period, often only a few days or weeks. Bridge loans are used to provide funds in situations where the borrower is expected to receive funds, such as the payment of this tax credit, within a very short time.
What is a state housing finance agency?
A state housing finance agency, often referred to as an “HFA,” is an organization that provides funding for a variety of loan and grant activities related to for-sale and rental housing. HFAs are also typically responsible for distributing grant funds from federal agencies, such as the U.S. Department of Housing and Urban Development (HUD).
How do I find out if my state housing finance agency is providing this service? Most state HFA Web sites include phone numbers and e-mail addresses by which they can be contacted.

The best way to locate information about your state’s HFA is via the Internet. The National Council of State Housing Agencies (NCSHA) maintains a directory of state HFAs at: www.ncsha.org/section.cfm/4/39/187.
What kinds of lenders are doing this? How can I find a list of lenders who are providing these short-term loans? In addition to state agencies, FHA-approved lenders may be offering to purchase a first-time home buyer’s tax credit in conjunction with an FHA-insured mortgage loan. Interested buyers should check with area lenders, home builders or real estate agents for the names of participating lenders.
The Federal Housing Administration (FHA) also has an online tool to find FHA-approved lenders: www.fhaoutreach.gov/FHALookup.

Many state housing finance agencies are either running or sponsoring programs that will use a tax credit for a downpayment. These programs often place a second lien on the home as collateral to secure the eventual repayment of the tax credit funds. Some state HFAs lend directly to home buyers while other HFAs work through networks of state-approved lenders.
What types of loans qualify?
Any lender can offer a program that would permit a first-time home buyer to apply the tax credit to funds needed for a loan that is obtained in conjunction with a home purchase. At this time, however, only the FHA has issued guidance regarding the monetization of the first-time home buyer tax credit in conjunction with FHA-insured mortgage loans.
Can this short-term loan be applied to the minimum 3.5% downpayment required by my FHA loan or is it only available above and beyond the initial downpayment required? However, many HFAs are offering tax credit loan programs that offer home buyers a short-term loan backed by the anticipated tax credit and secured by a second lien, which in general will be paid off after the home buyer receives their income tax credit from the IRS. The proceeds of these loans may be used to satisfy the 3.5% downpayment requirement for FHA-insured loans. The National Council of State Housing Agencies (NCSHA) maintains a list of such tax credit loans programs at: www.ncsha.org/section.cfm/3/34/2920.

If an FHA-approved lender or state housing finance agency is purchasing a tax credit and therefore making a short-term loan that is secured only by the repayment of the first-time home buyer tax credit, these funds cannot be applied to a downpayment in lieu of the home buyer’s funds. A home buyer still has to provide the 3.5% downpayment from his or her own funds. The money from the short-term loan can be used to pay closing costs and prepaid expenses, such as escrow for taxes, insurance and community association assessments. These funds can also be used to make a larger downpayment or to “buy down” the interest rate on the mortgage loan.
Is this an interest-free loan or are there fees associated with this type of short-term loan?
If a governmental agency — such as a state housing finance agency or an FHA-approved lender — purchases a first-time home buyer tax credit, it is allowed to charge no more than 2.5% of the amount of the credit.
How can I tell if the short-term loan on the tax credit is being offered by a reputable company?
If the organization is a unit of state government, it is safe to say that it is reputable. Otherwise, a home buyer may want to check with their local Better Business Bureau or a state or local government’s department of consumer affairs.

Favorite Neighborhoods

admin — Thu, 18 Jun 2009 15:35:32 +0000

WeGotLand is the most detailed neighborhood directory on the internet today. We Got Land has photos of neigbhorhood amenities, photos of new homes in those neighborhoods and plats of the neighborhood to seek out your favorite building lot for your new home. Virtually view the neighborhood before you ever go to see it. Compare up to 3 neighborhoods at time to help choose the one that is right for you. Compare up to 3 new homes or building lots at a time to see the advantages and disadvantages of each side by side. Check demographics, climate and school information for your new neighborhood or community.

1031 Exchange

admin — Thu, 18 Jun 2009 02:54:39 +0000

1031 Exchange – The intelligent way for real estate buyers

Section 1031 of the Internal Revenue Code (IRC) offers real estate buyers a golden opportunity by means of significant tax advantage. Section 1031 of the IRC gives a chance to real estate buyers to defer the capital gain taxes that they incur by selling a property. It states, a real property owner can sell his property and then reinvest the proceeds to purchase of like-kind property and defer the capital gain taxes. However, to qualify for 1031 like kind property exchange aka, 1031 tax deferred exchange and gain tax benefits, the transaction has to be done in accordance to the 1031 exchange rules set forth in the tax code and the treasury regulations. Like-kind exchange is considered as one of the best-kept secrets of the Internal Revenue Code.

1031 Like-kind Exchange – is it for YOU ?

Yes, if you have a real property that will get you a profit on sale (may be due to property value depreciating for tax purposes or due to appreciation of real estate in fair market value) then you are the ideal person to go in for a 1031 real estate exchange. Section 1031 of the IRC applies to “Property used in taxpayer’s trade or business”, “Property held for investment” and also potentially for “Property used as a vacation home.” In normal circumstances, the exchange can take the form of a direct interchange or the taxpayer may take assistance from a Qualified Intermediary to hold the sale proceeds until the taxpayer directs the Qualified Intermediary to use them to acquire like-kind replacement property. Completing a qualified exchange keeps you in the real estate business and may preserve your capital gains as far as the IRS is concerned.

Under Internal Revenue Code Section 1031, generally no gain or loss is recognized when you exchange business or investment property exclusively for business or investment property of a like-kind. In a like-kind exchange, properties are believed to be of a like-kind if the property acquired is alike in nature and situated in the United States. However, real property in the United States and real property outside the United States are not considered as like-kind properties. Some common examples of 1031 like-kind exchange property include apartments, commercial, condos, duplexes, raw land and rental homes. Although Section 1031 is not applicable to exchanges of inventory, stocks, bonds, notes, other securities or evidence of indebtedness, or on certain other assets.

Examples of certified 1031 like-kind properties and like-kind exchanges:

Apartment building for farm/ranch
Office building for hotel
Raw land for retail space
Unimproved property for commercial property

Personal properties of a like class are also considered as like-kind properties. Regardless of whether the properties are improved or unimproved, real properties generally are of like-kind. But, livestock of different sexes are not like-kind properties. In a 1031 Like-Kind exchange you can exchange any real property for any other real property within the United States or its possessions if said properties are held for productive use in trade or business or for investment purposes.

At 1031 Assistance we have a team of exchange experts willing to assist you in building your equity faster by performing a 1031 exchange instead of completing a traditional sale for your investment property. We provide comprehensive facts about 1031 tax deferred exchange, the role of a Qualified Intermediary or Exchange Accommodator, 1031 Tenants In Common Exchange and 1031 Triple Net Lease Exchange.

There are literally thousands of variations possible in a 1031 Exchange or Starker Exchange. At 1031 Assistance we are glad to consult with you at any time without charge and provide solutions to your queries about any aspect of 1031 exchange. We help you determine the most appropriate investment strategy for your real estate portfolio. We give you a complete step-by-step guide on setting up your 1031 property exchange and also provide latest information and opportunities related to the 1031 exchange. Our exchange specialists offer you the protection and insurance you need to complete a 1031 exchange successfully.

Steps to buying a new home

admin — Thu, 18 Jun 2009 02:52:29 +0000

You’re Only 11 Steps Away From Buying a Home
A Step By Step Look at Home Buying
The specific way you progress through a home buying transaction varies depending on the real estate laws and customs where you live, but there are many home buying steps that are standard, even though they might not be accomplished in the same order in every location.
You’ll feel more confident about your home buying journey when you understand what is required of you and every other person who is involved in the transaction. This guide takes you through it, and shows you that you’re only 11 steps away from buying a home.
Step 1, Get Your Finances in Order
Your credit reports are an ongoing look at how you manage your finances. You must know exactly what your credit reports say about your financial history before you apply for a mortgage, because the reports play an important role in the mortgage approval process and in determining the interest rate and other loan terms that a lender offers you.

If you haven’t looked at your credit reports, you might be surprised at their contents, because errors are common.

Step 2, Get Familiar with the Mortgage Industry
Finding the right loan and lender is crucial to your home buying success. It’s up to you to determine which lender is best for your needs, and it’s always a good idea to have at least a bit of background about the loan process before you talk to a lender.

Step 3, Get Pre-Approved for a Mortgage
Do you know how much house you can afford? Probably not, unless you’ve talked with a lender.

Pre-approval helps you in other ways. Consider this scenario. A home seller gets two similar offers. One is accompanied by a letter from the buyer’s bank that states she is pre-approved for a mortgage in the amount of the offer. The other has no supporting documents. Which offer do you think the seller will consider first?

Step 4, Determine Your Wants and Needs
Buying a home isn’t as difficult as you might think, even if you’re short on funds, but the process will go a lot smoother if you get familiar with your real estate market and narrow down your wants and needs before you start looking at houses.

Step 5, Learn to Work with Real Estate Agents
Real estate agents represent buyers, sellers, or both–and in some states they can work as neutral facilitators for either party. It’s essential to understand agent duties and loyalties before you make that first phone call.

Step 6, Start Searching for a Home

Your agent will give you multiple listing sheets to study. I’m sure you’ll also pick up House For Sale magazines and read classified ads in your local newspapers. You’ll probably spend time surfing the Internet for homes. You might even plan afternoon drives to preview neighborhoods. Those are all excellent ways to see what’s available. Here are some tools to help you narrow your home buying search.

Step 7, Handle Pre-Offer Tasks
Deciding whether or not you want to buy a house involves a look at its structure and its features, but there are many other topics that are every bit as important to your purchase. Here are a few topics you should explore before you make an offer.

Step 8, Make an Offer
There’s no one set of instructions that can cover all the differences in real estate laws and customs that exist throughout the United States, so the mechanics of making an offer and its specific contingencies depend greatly on your location. However, there are some home buying tips that can help you fine-tune your offer, no matter where you live.

Step 9, Home Inspections and Other Tests
In some states, home inspections are accomplished before the final purchase contract is signed. In other states, inspections take place after an offer is finalized. No matter when you do them, it’s critical to decide which inspections and tests you want to perform.

Talk with your real estate agent or other advisor to find out when inspections should be handled and if additional types of testing are important for your specific area.

Step 10, Avoiding and Correcting Last Minute Problems
As your closing date nears, everyone involved in your real estate transaction should check its progress on a daily basis, because staying on top of things means you’ll know immediately if there’s a problem that must be dealt with. Here’s a bit of information that focuses on a few common problems that home buyers must deal with before they close on a house.

Step 11, You’re on the Way to Closing
Most of your home buying problems are behind you now and you’re on your way to closing, also called settlement, the event that transfers ownership of the property to you. Just a few more things to learn, a few more things to do, and you’re there!
Elizabeth Weintraub
Home Buying / Selling Guide

NAHB Answers How to Pay Upfront Costs With Tax Credit

admin — Wed, 11 Feb 2009 11:43:36 +0000

Following is the new information that has been posted on the tax credit site:

What exactly does “monetizing” the tax credit mean?
The term “monetization” is defined as the act of converting something into money. In the context of the first-time home buyer tax credit, monetization means treating the payment of the credit as if it were cash and allowing its use as a payment for certain closing and downpayment expenses.
What is a “bridge” loan?
A bridge loan is a type of loan that is intended to be outstanding for a very short time period, often only a few days or weeks. Bridge loans are used to provide funds in situations where the borrower is expected to receive funds, such as the payment of this tax credit, within a very short time.
What is a state housing finance agency?
A state housing finance agency, often referred to as an “HFA,” is an organization that provides funding for a variety of loan and grant activities related to for-sale and rental housing. HFAs are also typically responsible for distributing grant funds from federal agencies, such as the U.S. Department of Housing and Urban Development (HUD).
How do I find out if my state housing finance agency is providing this service?
The best way to locate information about your state’s HFA is via the Internet. The National Council of State Housing Agencies (NCSHA) maintains a directory of state HFAs at: www.ncsha.org/section.cfm/4/39/187.

Most state HFA Web sites include phone numbers and e-mail addresses by which they can be contacted.
What kinds of lenders are doing this? How can I find a list of lenders who are providing these short-term loans?
Many state housing finance agencies are either running or sponsoring programs that will use a tax credit for a downpayment. These programs often place a second lien on the home as collateral to secure the eventual repayment of the tax credit funds. Some state HFAs lend directly to home buyers while other HFAs work through networks of state-approved lenders.

In addition to state agencies, FHA-approved lenders may be offering to purchase a first-time home buyer’s tax credit in conjunction with an FHA-insured mortgage loan. Interested buyers should check with area lenders, home builders or real estate agents for the names of participating lenders.

The Federal Housing Administration (FHA) also has an online tool to find FHA-approved lenders: www.fhaoutreach.gov/FHALookup.
What types of loans qualify?
Any lender can offer a program that would permit a first-time home buyer to apply the tax credit to funds needed for a loan that is obtained in conjunction with a home purchase. At this time, however, only the FHA has issued guidance regarding the monetization of the first-time home buyer tax credit in conjunction with FHA-insured mortgage loans.
Can this short-term loan be applied to the minimum 3.5% downpayment required by my FHA loan or is it only available above and beyond the initial downpayment required?
If an FHA-approved lender or state housing finance agency is purchasing a tax credit and therefore making a short-term loan that is secured only by the repayment of the first-time home buyer tax credit, these funds cannot be applied to a downpayment in lieu of the home buyer’s funds. A home buyer still has to provide the 3.5% downpayment from his or her own funds. The money from the short-term loan can be used to pay closing costs and prepaid expenses, such as escrow for taxes, insurance and community association assessments. These funds can also be used to make a larger downpayment or to “buy down” the interest rate on the mortgage loan.

However, many HFAs are offering tax credit loan programs that offer home buyers a short-term loan backed by the anticipated tax credit and secured by a second lien, which in general will be paid off after the home buyer receives their income tax credit from the IRS. The proceeds of these loans may be used to satisfy the 3.5% downpayment requirement for FHA-insured loans. The National Council of State Housing Agencies (NCSHA) maintains a list of such tax credit loans programs at: www.ncsha.org/section.cfm/3/34/2920.
Is this an interest-free loan or are there fees associated with this type of short-term loan?
If a governmental agency — such as a state housing finance agency or an FHA-approved lender — purchases a first-time home buyer tax credit, it is allowed to charge no more than 2.5% of the amount of the credit.
How can I tell if the short-term loan on the tax credit is being offered by a reputable company?
If the organization is a unit of state government, it is safe to say that it is reputable. Otherwise, a home buyer may want to check with their local Better Business Bureau or a state or local government’s department of consumer affairs.