Details

• The $8000 tax credit for first-time homebuyers is extended for those who sign a contract by April 30, 2010 and close by June 30, 2010.
• Homebuyers who have lived in their current residence at least five years are now eligible for a new $6500 tax credit on their primary residence.
• Couples earning as much as $225,000 a year and individuals earning up to $125,000 qualify.  This is an increase from $75,000 for individuals and $150,000 for couples.
• Tax credit is limited to homes worth $800,000 or less.
• Those who sell their new home or stop using it as their main residence within three years would have to repay the credit.
• Members of the military who have served outside the U.S. for at least 90 days from Jan. 1, 2009, to May 1, 2010, have an extended deadline of April 30, 2011.

How to get the credit

• Buyers can claim the credit on their federal income tax returns. If the credit exceeds their tax bill, the government will issue a payment.
• Those who want immediate refunds can amend their tax returns for 2008 to claim the credit.

Added bonus

Mortgage rates are at historically-low levels.  Combined with the tax credit, now is a great time to secure a super-low rate on a purchase loan.  Find out what rate you qualify for…anonymously…on Zillow Mortgage Marketplace.

The deadline has been extended
Many news outlets are referring to the credit as being extended through May, others are referencing June as the deadline. Specifically: to be eligible, binding purchase agreements must be signed by April 30, 2010 and deals must be closed by June 30, 2010.

Not just for first-timers anymore
Existing homeowners (or “repeat buyers”) who have lived in their principal homes for 5 consecutive years (out of the past 8 years) and are purchasing a new principal residence may be now eligible for a credit of up to $6,500.

You can make a higher salary
Buyers filing as single or head-of-household taxpayers can claim the full credit if their modified adjusted gross income is less than $125,000. Married couples filing joint returns are eligible if their combined income is less than $225,000.  Single or head-of-household taxpayers who earn between $125,000 and $145,000, and married couples who earn between $225,000 and $245,000 are eligible to receive a partial credit.

More homes will qualify
All homes with a purchase price of less than $800,000 qualify. Vacation home and rental property purchases are not eligible.

The credit can be a part of your refund
If the amount of income taxes you owe is less than the credit amount you qualify for, the government will send you a check for the difference.  For example: a first-time buyer qualifying for the full $8,000 credit who owes $5,000 in federal income taxes would receive a $3,000 refund. Qualified home buyers can take the tax credit on their 2009 or 2010 income tax return.

You can keep the cash
The tax credit does not have to be repaid unless the owner sells, or stops using the home as their principal residence, within three years after the date of purchase.

Stay current
Keep up-to-date with tax credit developments: follow the credit on Twitter (@FTHBtaxcredit) and on Facebook (become a fan of $8,000 Home Buyer Tax Credit).

It’s the government’s withdrawal from the mortgage backed securities market.  We’ve already talked about how the government’s market share in the residential mortgage market has climbed to an all time high.   But this is something else.   In addition to that, the government has committed to spending almost $1 Trillion (that’s $1,000,000,000,000) in buying mortgage backed securities in an effort to keep rates lower.

If you recall, when the Fed announced they were buying Mortgage Backed Securities, rates dropped by .375% over night.    As we’ve discussed on here before, many people believe that it’s reasonable to expect rates will edge up by about that amount over the next 5 months as the Fed winds down their purchase plans.

But this article, and the report that Meredith Whitney gave yesterday (see the next post) give serious credence to the fact that it could be substantially worse than that.   Why?

• Because the credit qualify of mortgages has deteriorated substantially since then.
• Because the investment market has changed since then.
• The appetite for mortgage backed securities is probably substantially less than what they expect that it is.

Now if we apply the Vanderwell Rule of 50% (what’s that? - simple, take their estimates and “tone them down” by 50%) what does that say for mortgage rates?

It essentially says that we’re going to be looking at a minimum of .5 to .75% higher rates in the next 6 months.

Viewpoint: Like Us, Whitney Sees Risks in Fed’s MBS Exit : HousingWire || financial news for the mortgage market

I’d qualify that – I’d say let’s hope it emerges into the public view over the next four months, because it could be – if the Fed exits as planned at the end of first quarter 2010 – the biggest kick in the stomach housing and financial markets have gotten since surviving the near total shut down of credit last fall.

Did they change anything on their statement?

Nope.

Will it have an impact on mortgage rates?

I don’t think so.

What’s driving people to refinance their homes?  Historically low mortgage rates. 

Current mortgage rates are significantly lower than they were just a few months ago. Today’s average 30-year mortgage rate of 4.78 percent is now 77 basis points (or 14 percent) lower than it was in June, when the 30-year fixed mortgage rate was at 5.55 percent, the highest level this year.

That means that on a $200,000 loan (assuming a home value of $250,000), the monthly principal and interest payment would now be $1,046.91 versus $1,141.86 for the same loan in June, saving the borrower $94.95 per month, or $34,182.00 over the life of a 30-year loan.

If you are thinking about refinancing, now is a great time. An easy way to shop for a mortgage is through Zillow Mortgage Marketplace.

• Submit an anonymous loan request, and receive unlimited custom quotes from lenders.  On average, borrowers receive 26 quotes within seconds. 
• Sort and filter quotes by APR, rate, fees, monthly payment, lender rating, distance to the lender, or True Cost, which incorporates interest rate, fees, points, and time into one easy-to-compare number.
• Use the interactive Break-Even graph to determine how long you need to live in your home to offset the cost of refinancing.  This graph also show the cumulative savings that will occur over the life of the new loan.
• After comparing quotes side-by-side and reading lender reviews and ratings, you decide which lenders to contact…they don’t call you.

Happily, there are things you can do to raise that FICO® score!

Last week, I posted tips on managing debt and credit cards. This week, I’ll cover how to rate shop for a loan without hurting your score and more overall credit scoring tips.  Remember, there are no quick fixes to improve your credit score, but it can be done.

1. Do your mortgage rate shopping in a timely manner. FICO scores make a distinction between a search for a single loan and pursuing many new credit lines. Making several rate inquiries in a short period of time for the same kind of loan, such as a car loan, is usually treated as a search for a single new loan. Stretch those inquiries out over several months, though, and it could look like you’re applying for several new credit lines. That would hurt your score. Learn more about what to know about rate shopping.  
2. If you’ve had problems, take immediate steps to re-establish your credit history.
   Open new accounts in a responsible manner, pay them on time, and keep any credit card balances low. Your credit score will slowly rise.
3. Don’t be afraid to check your own credit report. Contrary to popular belief, requesting your credit report doesn’t lower your score, as long as you order it directly from the credit reporting agency or through an organization authorized to provide consumers with reports. It is important to review your credit report to make sure it’s accurate and make corrections if you find discrepancies. 
4. Open new credit accounts only as needed. Applying for and opening new accounts or credit cards probably won’t raise your score and could lower it.
5. Have credit cards, but use them responsibly. Generally, having credit cards and installment loans will raise your credit score — if you pay them on time and keep balances low. Someone without credit cards may be seen as a higher risk than someone with credit cards who has handled them responsibly.
6. Remember that closing an account won’t make it go away. It will still appear on your credit report and may be taken into consideration by the score.

These actions won’t instantly improve your score, but as you start to manage your credit and pay on time, your score will eventually go up. If you need extra help, don’t hesitate to consult with a credit counselor.

Good news to keep things stable: The Committees on Appropriations agreed this week in a Continuing Resolution (CR) to maintain housing loan limits for FHA, GSE and HECM single-family mortgages at $729,750 through end of calendar year 2010. And, Congress passed a stopgap funding plan that the loan limit extension is attached to — it just needs President Obama’s signature, which is expected today, if not early next week.

That means FHA loans, and GSE (Fannie Mae and Freddie Mac) loan limits will stay the same for another year.

Earlier this week, Treasury Secretary Shaun Donovan was urging Congress to approve the conforming loan limit measure, which is part of his three-part proposal to help heal the housing market:

• Extend the First Time Homebuyer Credit, with strong anti-fraud measures
• Extend Loan Limits for Mortgage Loans
• Secure Financing for the Housing Trust Fund

• 31% of the consumers thought it was harder to get a mortgage.
• 5% thought it was easier.
• By default that means that 64% thought it was about the same as 6 months ago.

What do I think?

If you have good credit, can document your income and assets, have enough assets for a downpayment, and are working with a MORE THAN competent mortgage lender who knows how to navigate the complexities of today’s market, then it’s no harder now than it was 6 months ago.

If your credit is struggling, you can’t document your income (sorry – self employed people who write everything off are out of luck) and don’t have either equity or a downpayment or you’re working with a lender who isn’t on top of things, then it is harder.

So, tell me – what’s the perception that you’re seeing?

31% of BAI Survey Respondents Find Mortgage Access Worsening : HousingWire || financial news for the mortgage market

Financial services information and intelligence provider Bank Administration Institute (BAI) launched the BAI & Finacle Banking Confidence Index, which tracks the effect of upheaval in the financial services industry on consumers’ views.

The index measures consumer views across five areas: financial stress and the economy, access to credit, fees and disclosure, managing personal finances and consumer trust.

The index’s findings, released Tuesday, indicate one-third of consumers feel their financial situation has deteriorated in recent months, but few expect conditions to grow even worse.

Of those surveyed, nearly one-third — or 31% — indicated access to mortgages is worse now than six months ago, while only 5% said it improved. The projections indicate 12% of respondents expected access to improve in another six months, while 15% expect access to worsen.

“In today’s fast-changing scenario, consumer opinion counts more than ever before and technology has made the consumer highly empowered,” said Haragopal Mangipudi, global head at Finacle, a solution from Infosys (INFY: 46.39 -1.70%). “Presented with diverse and ever-dynamic consumer segments, banks need to anticipate changing requirements and fine-tune business strategy.”

• Gross Domestic Product for the 3rd quarter came in on a preliminary reading at 3.6% up.   That’s great news, right?  Well, it’s good news, but look at the temporary stimulus measures that propped that up.   The cash for clunkers auto stimulus program is supposed to have added 1.7% to the overall number.   So we’d be at 1.9% without that.    What do you suppose the housing market would look like without it’s $8,000 version of cash for clunkers?   Yeah, that’s right.    So, besides for the temporary stimulus measures, which are exactly that, temporary, we’re not looking all that good.   Temporary euphoria going on in the stock markets and on CNBC right now though.
• Speaking of temporary euphoria - the markets are happy because initial jobless claims fell by 1000.   That’s right ONLY 530,000 people got laid off last week.   Whew, that feels better.    NOT.
• Exxon Mobil’s earnings fell - but remember what oil prices were like a year ago?   No big surprise there.
• The talk continues in Washington about whether there really is a too big to fail and what to do with the likes of Citibank, AIG, GMAC and the like.   
• The talk continues about an “extend and pretend” home buyer tax credit designed to push the housing troubles down the road.   Lots of talk, lots of people saying that it’s passed.   It hasn’t yet.    Passed a couple of committees, yes, but a true up or down vote in front of the House and Senate and signed by the President, nope.    When we do have a solid plan, I’ll tell you what I know and what I like or don’t like about it.   Until then, it’s all rumor and innuendo.

So what are mortgage rates doing with all of this news?   Really nothing.   Rates have remained stable today.

My recommendation remains to lock all loans because the potential for an increase in rates is greater than a potential for a decrease.

Stay tuned, it could be an interesting week with the jobs claim next Friday, the Fed meeting soon and just a lot of stuff going on.

Great news on the $8,000 first-time home buyer tax credit! If you bought your first home this year — or are in the process of closing on or before November 30th, 2009 — you won’t have to wait until April 2010 to get your tax credit. You can file an amended 2008 return and claim your 2009 tax credit on your 2008 return. In other words, you can get paid much sooner than you thought.

Here is a summary of how to qualify for the credit:

• You must buy the home between 1/1/09 and 11/30/09
• The purchase must close by 11/30/09
• If you are building a house, you must be living in the house by 11/30/09
• The home must be a primary residence - the credit does not cover second homes, vacation homes, or investment properties
• Your adjusted gross income must be less than $75,000, or $150,000 for married filing jointly, to obtain any credit
• If you cease to use the residence as your primary anytime in the next 36 months, you will have to give back the credit

Get the complete overview of how to claim the $8,000 first-time home buyer tax credit, and get an overview of other things you need to consider before amending your 2008 tax return. And please remember to consult your tax accountant before actually filing an amended 2008 tax return.