Clarification On $8000 Tax credit Use

With HUD’s new announcement that the First-Time home buyer’s tax  can be used toward (and at the time of) the purchase of a home has misled many. The money may be used for closing costs or ADDITIONAL downpayment beyond the required 3.5%. This simply translates to- HUD wants the buyer to have some of their cash in the home purchase…  No more 100% financing.  But there is need for clarification… If you read the prior blog entry, which is a direct quote from FHA/HUD, in one paragraph it states it can be used for the down payment but further in the announcement, it reads “Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5 percent of appraised value or their closing costs, which can help achieve a lower interest rate. To read the FHA’s new mortgagee letter, visit HUD’s website.”

$8000 Tax Credit for Down Payment Announced

FHA ANNOUNCES RECOVERY ACT’S HOMEBUYER TAX CREDIT CAN IMMEDIATELY HELP THOUSANDS OF FIRST-TIME HOMEBUYERS TO BUY A HOME
FHA plan will stimulate new home sales and help stabilize housing market

WASHINGTON – Speaking to the National Association of Home Builders Spring Board of Directors Meeting, U.S. Housing and Urban Development Secretary Shaun Donovan today announced that the Federal Housing Administration (FHA) will allow homebuyers to apply the Obama Administration’s new $8,000 first-time homebuyer tax credit toward the purchase costs of a FHA-insured home. Donovan said that today’s action will help stabilize the nation’s housing market by stimulating home sales across the country.

The American Recovery and Reinvestment Act of 2009 offers homebuyers a tax credit of up to $8,000 for purchasing their first home. Families can only access this credit after filing their tax returns with the IRS. Today’s announcement details FHA’s rules allowing state Housing Finance Agencies and certain non-profits to ‘monetize” up to the full amount of the tax credit (depending on the amount of the mortgage) so that borrowers can immediately apply the funds toward their down payments. Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5 percent of appraised value or their closing costs, which can help achieve a lower interest rate. To read the FHA’s new mortgagee letter, visit HUD’s website.

“We believe this is a real win for everyone,” said Donovan. “Today, the Obama Administration is taking another important step toward accelerating the recovery of the nation’s housing market. Families will now be able to apply their anticipated tax credit toward their home purchase right away. At the same time we are putting safeguards in place to ensure that consumers will be protected from unscrupulous lenders. What we’re doing today will not only help these families to purchase their first home but will present an enormous benefit for communities struggling to deal with an oversupply of housing.”

Currently, borrowers applying for an FHA-insured mortgage are required to make a minimum 3.5 percent downpayment on the purchase of their home. Current law does not permit approved lenders to monetize the tax credit to meet the required 3.5 percent minimum down payment, but, under the terms of today’s announcement, lenders can now monetize the tax credit for use as additional down payment, or for other closing costs, which can help achieve a lower interest rate. Buyers financing through state Housing Finance Agencies and certain non-profits will be able to use the tax credit for their downpayments via secondary financing provided by the HFA or non-profit. In addition to the borrower’s own cash investment, FHA allows parents, employers and other governmental entities to contribute towards the downpayment. Today’s action permits the first-time homebuyer’s anticipated tax credit under the Recovery Act to be applied toward the family’s home purchase right away. Unlike seller-funded down-payment assistance, which was a vehicle for abuse, this program will allow homebuyers to shop for the best home price and services using their anticipated tax credit.

According to estimates by the National Association of Home Builders, the Administration’s homebuyer tax credit will stimulate 160,000 home sales across the nation – 101,000 of which will be first-time buyers who will receive the credit. Another 59,000 existing homeowners will be able to buy another home because a first-time buyer purchased their home. Given FHA’s current market share, it’s estimated that thousands of families will be able to purchase a home by allowing the anticipated tax credit to be applied toward their purchase together with an FHA-insured mortgage.

Quick Turn Around Part Deux

Good News for our Orlando Home Market…10 days ago we posted an article “Is there a quick Turn Around Coming?” Well the latest figures are in…According to the MLS sales figures from the Orlando Regional Realtor Association, February 2009 sales are up 28% over the same time last year!

Is this a fluke? For you doubting Thomas’s, sales are up for the last three months…                                

Orlando Homes Sale Up

In fact, Pending Contract Sales are equal to mid 2006-2007 levels! No wonder… home prices are now way more affordable… Along with Obama’s Housing Plan offering First-Time buyers (or those who haven’t owned in 3 years) an $8,000 tax credit and mortgage interest rates the lowest in most people’s lifetimes, buyers are now seizing these great opportunities to buy at the bottom of the market.

Will the great deals last? The window is open for now but these great values won’t last forever…

Along with the tax credit in Obama’s plan, people behind on their mortgages are now able to save their homes with the new loan modification rules in the plan. This basically means many of the short sale and pre-foreclosure opportunities will come off the market. With the brisk surge in sales, the inventory of homes for sale will begin to decline… This has already begun to happen…

Inventory is now at the lowest level in the past 12 months and trending downward…

What does this all mean?

Simply speaking, when demand increases and the supply decreases, prices go up. So, if you or someone you know are looking to get a great value on real estate, now could be that time, while this window is still open…

Search all Orlando MLS Properties including Bank Foreclosures and remaining Short Sales Here.

Is there a quick turn around coming?

Is there a quick turn around coming in the Housing Market? Could be… And here is why… Basically, it’s a matter of Supply and Demand… First, what nobody has been reporting is the fact there have been plenty of real estate buyers out there… circling, ready to buy for months… They have either had trouble obtaining financing because of the over-tightened mortgage guidlines… they’ve gotten involved in short sale nightmares which go on for months without closing or they are on the fence, fearful that the market hasn’t hit bottom… We have just as many people searching for real estate on our websites in the last few months as we did 2 years ago! So there is already a demand, its dormant but its there. And the Housing Stimulus bill may just release it (and increase it). Easing credit will make mortgages easier to obtain, allowing the pendulum to swing back to center making it possible for more people to qualifly for mortgage loans. The first time buyer tax credit will bring 1,000′s into the market allowing sellers to become move up buyers creating an upwards domino effect. The Housing Stimulus Bill Loan modification programs will allow many to stay in their homes and may substantially reduce the preforclosure and short sale inventory. This one step, if done correctly and swiftly will decrease inventory and help turn around the current home value trend quickly. With less homes in foreclosure and the government incentives, banks will be swifter to process the short sales, getting these properties to settlement and off the market… And as values begin to rise because of the change in Supply and Demand, investors will start shifting funds back into real estate and away from the ailing stock market… There are a few “If’s” but there’s a very good chance we could see the housing market changing very soon… We will keep you updated as things unfold…