Christina Longo at Prospect mortgage sent me the following email this morning:

Senators have agreed to extend the $8,000 first-time homebuyer tax credit originally set to expire on November 30. Once the Senate officially votes on the bill it will move to the House of Representatives, which strongly supports the extension. The Obama administration has also signaled its strong support for an extension of the tax credit.

Aside from the first-time homebuyer credit, the new plan would offer a $6,500 credit for repeat or move-up homebuyers who have lived in their primary residence for five years or more. The tax credits would be available to buyers who sign purchase agreements on a new or existing primary residence between December 1, 2009 and April 30, 2010. Buyers would have until June 30 to close on their new homes.

There is an $800,000 price limit on all homes eligible for the credit. The income limits for all buyers would rise to $125,000 per year for individuals and $225,000 for married couples. Under the current program, the limits are $75,000 and $150,000 respectively. The first-time homebuyer credit is also available to those who have not owned a home in the previous three years. The credit does not have to be repaid unless the home is sold or ceases to be the primary residence within three years.

According to the Treasury Department, more than 1.2 million borrowers have claimed $8.5 billion of the $13.6 billion set aside for the first-time homebuyer tax credit.

Please be advised that this legislation has not yet passed, but I will be sure to keep you informed as it moves through Congress toward approval.

My Thoughts:  Hurray!  This is great news.  I am really excited about the fact that they are most likely going to also allow move-up buyers to take advantage of the program with the $6,500 tax credit.  I think this is just what we need to keep home sales active during the slow season and really get them fired up during the Spring.  Let’s just cross our fingers that the House approves it too!

Our good friend David Bolton over at Prospect Mortgage (one of Boston’s best mortgage brokers) just sent me an advisory memorandum from MassHousing explaining the new $8000 tax credit loan program.  I’ve posted it below and will explain some of the quick details in bullet points afterwards:

“Governor Patrick announced today the establishment of a Tax Credit Loan Program for
eligible first-time home buyers to be utilized in conjunction with MassHousing’s first
mortgage programs. The homebuyer credit is a new tax credit included in the recently
enacted federal Housing and Economic Recovery Act of 2008 (“HERA”) for homes
purchased in 2008 and 2009. The maximum available credit is $8,000 and it is claimed
when the homeowner files their 2009 tax return. To be eligible, the homeowner must
purchase the property before December 1, 2009. All other first time requirements
associated with MassHousing first mortgages will remain in place.

In an effort to stimulate home sales, several states have initiated programs that make this
tax credit available up-front in the form of cash by “monetizing” the tax credit. The
funding of this tax credit is through the state housing finance agencies and is used for
downpayment, closing costs, and other closing related expenses and is available at the
time of loan closing. The terms of this MassHousing program are similar to those offered
by other states.

Due to the complexity of this tax credit loan program, MassHousing has selected a small
number of our most active lenders to participate in the pilot phase of the program
implementation. Those lenders must be trained by MassHousing staff on the guidelines of
the program and the operational issues that differ from those usually associated with
registering and funding MassHousing loans. The training agenda will be announced next
week and new required documents, i.e., note and disclosure forms, will be available
shortly and distributed to the selected lenders.

MassHousing will be expanding the network of lenders to additional MassHousing
lenders in the near future.

Additional information will be sent to all “pilot” lenders in the next few weeks. If you
have any questions, please contact your Business Development representative.

A FAQ document will be available on the MassHousing website in the next few days.”

In case you didn’t understand what was said in the above memorandum or if you just don’t have the attention span to read the entire thing, here are some quick facts:

1. Homebuyers who are using a MassHousing first mortgage loan to purchase their first home apply for the Tax Credit Loan program through their lender
2. The Tax Credit Loan is used to cover closing costs or as part of the down payment
3. In 2010, the home buyer claims the $8,000 tax credit on their 2009 federal tax return
4. The home buyer then repays the MassHousing tax credit loan (No interest is charged if the Tax Credit Loan is repaid by June 1, 2010. Otherwise, the Tax Credit Loan is amortized over the next 10 years, at the same interest rate as the first mortgage).

So basically, MassHousing is allowing you to take a no-interest loan for your down payment which you then repay with your tax credit once you receive it.

Please feel free to contact me directly on my cell at 617-933-9776 or via email at nwarren@warrenre.com for more information or questions.

Great news for first time home buyers released today!  The Federal Housing Administration (FHA) will allow home buyers to apply the Obama Administration’s new $8000 first-time home buyer tax credit towards the purchase costs of a FHA-insured home.

Prior to this the tax credit was only accessible to buyer’s after filing their tax returns with the IRS.  Now, home buyer’s using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5% of appraised value or their closings costs, which can help achieve a lower interest rate.

What this doesn’t allow you to do is use the $8000 towards the minimum 3.5% down required for an FHA-insured mortgage.

According to the National Association of Home Builders, the Administration’s homebuyer tax credit will stimulate 160,000 home sales acroos the nation – 101,000 of which will be first-time home buyers who will receive the credit.  59,000 existing homeowners will be able to buy another home because a first-time buyer purchased their home.

One of the major real estate related topics of the Obama stimulus bill is the first time home buyer tax credit.  While nothing is set in stone as of right now here is a rough play-by-play.

The Tax Credit Right Now:

-As of right now, first time home buyers who fit w/in income guidelines of not more than $95,000 per individual and $170,000 for married taxpayers get a $7500 tax credit if they purchase a home.

-The easiest way to explain a tax credit is by example.  Say after doing your 2008 taxes you realize you owe the IRS $2000.  After applying the $7500 tax credit to that you would actually get a refund of $5500.  Another example would be if your refund was going to be $1500 and then you applied the tax credit, you would actually get a check from the IRS for $9000.  Pretty sweet deal huh?

-However, there is a small catch.  The Tax Credit as it stands right now has to be paid back.  It is considered an interest free loan for 15 years.  After the first two years you must start paying it back at the rate of $500/year.

The Original Proposal for the Stimulus Bill:

- The original proposal for the stimulus bill was to increase this tax credit to $15,000 and make is so you wouldn’t have to pay the loan back.

The New Proposal Set to Be Finalized by the President This Week:

-After long negotiations the “final plan” is that the credit will be increased to $8000 and also made so it won’t have to be repaid.

My Thoughts: This is great for first time home buyers and hopefully will get some people off the fence.  We have clients that when combining this with some developer incentives at new projects are getting a significant amount of cash to play with which can be put towards upgrades, future condo fees, etc.  I think to really make this an effective proposal and stimulate the real estate market it has to become available to every purchaser, not just first time home buyers.