Senators agreed Wednesday to extend a popular tax credit for first-time homebuyers and to offer a reduced credit to some repeat buyers.

The tax credit provides up to $8,000 to first-time homebuyers  but is set to expire at the end of November.

Senators agreed to extend the existing tax credit, and offer a reduced credit up to $6,500 to repeat buyers who have owned their current homes for at least five years.

The tax credits will be available to homebuyers who sign sales agreements by the end of April 2010.  They would have until the end of June 2010 to close on their new homes.

As soon as we get some more information, we will update you further!

First Time Home Buyer, New to California, Considering Buying that Home: The Advantages are Clear, read on…

The American Recovery and Reinvestment Act of 2009 expanded the first-time homebuyer credit by increasing the credit amount to $8,000 for purchases made in 2009 before Dec. 1.

For home purchased in 2009, the credit does not have to be paid back unless the home ceases to be the taxpayer’s main residence within a three-year period following the purchase.

First-time homebuyers who purchase a home in 2009 can claim the credit on either a 2008 tax return, due April 15, 2009, or a 2009 tax return, due April 15, 2010. The credit may not be claimed before the closing date. But, if the closing occurs after April 15, 2009, a taxpayer can still claim it on a 2008 tax return by requesting an extension of time to file or by filing an amended return. News release 2009-27 has more information on these options.

If you’re like most first-time home buyers, you’ve probably listened to friends, families and coworkers advice, many of whom are encouraging you to buy a home. However, you may still wonder if buying a home is the right thing to do. Relax. Having reservations is normal. The more you know about why you should buy a home, the less scary the entire process will appear to you. Here are eight good reasons why you should buy a home.

Pride of Ownership
Pride of ownership is the number one reason why people yearn to own their home. It means you can paint the walls any color you desire, turn up the volume on your CD player, attach permanent fixtures and decorate your home according to your own taste. Home ownership gives you and your family a sense of stability and security. It’s making an investment in your future.

Appreciation
Although real estate moves in cycles, sometimes up, sometimes down, over the years, real estate has consistently appreciated. The Office of Federal Housing Enterprise Oversight tracks the movements of single family home values across the country. Its House Price Index breaks down the changes by region and metropolitan area. Many people view their home investment as a hedge against inflation but its important to remember that everything in real estate is local and hard to generalize about, it is a market made up of many micro markets. For local Santa Cruz County up-to-date information on real estate market trends & conditions and complete information on a particular neighborhood or property, call me, (831) 247-9140.

Mortgage Interest Deductions
Home ownership is a superb tax shelter and our tax rates favor homeowners. As long as your mortgage balance is smaller than the price of your home, mortgage interest is fully deductible on your tax return. Interest is the largest component of your mortgage payment.

Property Tax Deductions
IRS Publication 530 contains tax information for first-time home buyers. Real estate property taxes paid for a first home and a vacation home are fully deductible for income tax purposes. In California, the passage of Proposition 13 in 1978 established the amount of assessed value after property changes hands and limited property tax increases to 2% per year or the rate of inflation, whichever is less.

Capital Gain Exclusion
As long as you have lived in your home for two of the past five years, you can exclude up to $250,000 for an individual or $500,000 for a married couple of profit from capital gains. You do not have to buy a replacement home or move up. There is no age restriction, and the “over-55″ rule does not apply. You can exclude the above thresholds from taxes every 24 months, which means you could sell every two years and pocket your profit–subject to limitation–free from taxation.

Preferential Tax Treatment
If you receive more profit than the allowable exclusion upon sale of your home, that profit will be considered a capital asset as long as you owned your home for more than one year. Capital assets receive preferential tax treatment.

Mortgage Reduction Builds Equity
Each month, part of your monthly payment is applied to the principal balance of your loan, which reduces your obligation. The way amortization works, the principal portion of your principal and interest payment increases slightly every month. It is lowest on your first payment and highest on your last payment. On average, each $100,000 of a mortgage will reduce in balance the first year by about $500 in principal, bringing that balance at the end of your first 12 months to $99,500.

Equity Loans
Consumers who carry credit card balances cannot deduct the interest paid, which can cost as much as 18% to 22%. Equity loan interest is often much less and it is deductible. For many home owners, it makes sense to pay off this kind of debt with a home equity loan. Consumers can borrow against a home’s equity for a variety of reasons such as home improvement, college, medical or starting a new business. Some state laws restrict home equity loans.

Part Four: Non-traditional Credit

By now we’ve covered lots of ground regarding credit from how scores are calculated through how to dispute errors on your credit report. But what if you have no established credit? Is no credit a bad thing?

Of course the goal is a history of established credit with an excellent payment record but no credit is certainly not as damaging as bad credit. If you are thinking about buying a home but are concerned about your lack of established credit, read on.

According to First American Credco, over the next decade, a projected 60% of first-time home purchases in the U.S. will be made by those who fall into traditionally underserved markets. Many of these consumers have little or no traditional credit, but are still credit worthy. Some of these consumers just do not believe in incurring debt and pay their bills in cash. This should not preclude them from obtaining a home loan.

FHA loans have always made allowances for borrowers with no established credit and lots of first time homebuyers are taking advantage of the FHA program’s low down-payment options. However, most lenders who make FHA loans do have specific requirements for potential borrowers without an established credit history.

For instance, if you had no traditional credit history, you would be asked to provide 3 credit references which might include:

• rental payments
• utility company payments (ie: gas, water, land-line phone, cable)
• insurance (ie: medical, auto, life, renter’s)
• child care
• cell phone

These are all accounts that are not usually seen on a traditional credit report. After you provided us these references, we would have our credit company verify your last 12 months’ history from each them and then they would genereate a non-traditional credit report.

One thing to remember however is that non-traditional credit reporting is not helpful if you already have poor credit. If this is the case, please see my previous post regarding credit repair.

I hope that this series has given you a good solid base of understanding how a mortgage lender views credit. As always, we are available to answer any further questions or concerns you may have. Everyone’s credit history is unique but we can always find a way to help you improve yours which can in turn afford you better interest rate or possibly the path to your first home.

Give us a call any time at 925-964-1213 for a free credit evaluation!

~Cari

First-time homebuyers in the Orlando mortgage market will come across a lot of difficulties in having to comprehend the overall process of buying homes, and finding out which Mortgage program would suit them the best. Advice from loved ones who mean well could be helpful; however, buying homes is a huge financial commitment, so it would be smart to educate yourself when it comes to the process of buying homes before doing anything else.
You need to speak to real estate agents because they will be able to offer you expert advice if you have questions regarding your decisions in buying a home. The overall purpose of such a meeting would not be to sign representation agreements with the real estate agent, but to become more aware of local customs of real estate in the Orlando market, customs and procedures can vary form one area to another within the same state. If your agent doesn’t have time to talk about the process of buying homes, keep searching for one that will. Good real estate agents will provide you with information on the local real estate market, as well as give you ideas on the kinds of mortgage products you may consider. Mortgage brokers can also offer up valuable information whenever you opt to buy homes.
The questions you need to ask your mortgage broker or real estate agent should include how you can make offers on homes you are interested in buying, as well as specifics involved between making initial offers and finally accepting the seller’s offer. Ask about settlement costs, the size of your down payment you might need, and the time length that is involved between accepting an offer and the actual closing date.
Ensure that you comprehend your overall credit situation, as well as its meaning to you when it comes to your mortgage application. Requirements of down payment and the rate of interest you will get will be directly related to the credit score. You have to know exactly what the credit report says and make sure it is accurate prior to starting the process of buying homes.
Buying homes could become stressful once in a while, so calm attitudes and the overall ability to calmly handle any issues which might arise can make buying your very first home a much better experience. Having guidance will offer you a great start in making smart decisions whenever you purchase that first home. Purchasing first homes would be a highly exciting event in anybody’s life. Find for yourself the required information and take expert advice whenever you start the process of buying homes. This will make your experience less stressful; plus, you can benefit from this new knowledge in the end.
The current real estate market represents a great time to buy real estate. It is a buyer’s market but to take advantage and realize the benefits of that buyers market a person actually has to purchase real estate. If you have ever thought about purchasing real estate for either investment or your own residence now is the time. The first thing you need to do is find a knowledgeable Realtor and Mortgage Broker and explain your goals. Realtors and Mortgage Brokers are tuned into the market and can help you obtain financing if needed, find the right home and ensure you get a good deal on it. Happy hunting!