SHOULD YOU REFINANCE YOUR MORTAGE? WELL … IT DEPENDS!
July 17th, 2009 categories: Real Estate Resourcing
It seems that every time I turn on my computer, there is an advertisement on the screen encouraging me to refinance my mortgage. “OBAMA ENCOURAGES YOU TO REFINANCE YOUR MORTGAGE” says one advertisement. Surely I should then, Right? … Well, it depends.
There are a number of factors that need to be considered in determining whether you should refinance your mortgage. The following is a copy of a Mortgage Calculator that we have on our website (I’ll give you the link at the end of this article) that helps you consider all of those factors:
The point is that the interest rate is not the only factor you need to look at. If you extend your loan term and are charged a whole lot of fees to lock in a lower interest rate, you could end up paying a whole lot more for your mortgage than you might think … especially if you don’t plan to stay in your house for the entire term of the mortgage.
Our recommendation is to always be sure and test out the costs/benefits by using a Mortgage Comparison Calculator similar to the one we have on our website and ALWAYS ask your lender UP FRONT what their fees are. Mortgage lenders are required by law to give you a disclosure that estimates those costs! It is referred to as the Truth-in-Lending Disclosure and it takes all of the costs associated with the loan and annualizes them over the term of the loan and comes up with a REAL (APR) rate. As a general rule, the stated rate and the APR rate should not differ by more than 1%.
Obviously, people refinance for more than interest rate savings (e.g., decreasing monthly payment, pulling out equity, etc.), but you should go into the loan knowing the true effect.
We hope this information helps both in your understanding and in the practical application of deciding whether to not to refinance. Our goal is to provide you with “above and beyond” service. Please keep us in mind the next time you or a friend or family member is in need of a real estate agent whether buying or selling.
Click Here to go to the Mortgage Calculator pictured above. Just be sure and scroll down until you get to the right calculator.
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JUNE SALES UP IN KERR COUNTY
July 9th, 2009 categories: Assessing the Local Market
Finally, some good news for the Kerrville real estate market! Kerr County Sales were up in June just over $1.5 million from last year.
There were 57 Sales last month (June 2009) with an average List/Sold % of 91.23% as compared with 54 Sales during the same period in 2008 (June 2008) with an average List/Sold % of 92.99%. A few more sales and at a slightly deeper discount. Hopefully, this signals a good finish for the year!
As always, we are here to help you with your real estate needs. 830-995-2511
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Looking for a Getaway in the Hill Country? Efficiency Cottage on 2.5 Acres, Close to Kerrville, Comfort schools $107,9000
July 6th, 2009 categories: Featured Properties
Unbelievably Cute Efficiency Cottage on 2.5 Acres, Kerrville address, Comfort schools. Just 5 minutes to Kerrville, convenient to Hospitals and Shopping. Easy Drive to Fredericksburg and San Antonio. Great for a weekend getaway or it easily could easily be added onto. Central well system and septic in place plus RV hookup. $107,900. Currently being rented out as an extended stay/vacation rental. For more information and to schedule a showing, call 830-995-2511. Broker/Owner
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4TH OF JULY PARADE IN COMFORT
July 1st, 2009 categories: Comfort Community News, Views & Faces, Local Events
You won’t want to miss this year’s 4th of July Celebrations in Comfort. The Comfort parade begins at 10:30 a.m. on Saturday, July 4th. The parade starts at Hwy 87 and Idlewilde Blvd. (with a large number of local motorcycle enthusiasts leading the pack followed by Local Fire Engines and then floats, antique cars and such) and continues down High Street through the Historic District (lined with locals, visitors, and lots of smiling faces) and ends up at the Comfort Park.
Celebrations continue at the Park with barbeque ($8 for adults, $5 for children), arts and crafts (11:30-4), fun activities, and the Miss Comfort pageant at 6:30p.m.
It’s “Small Town Texas Fun” worth attending!
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BERGES FEST IN BOERNE THIS FATHER’S DAY WEEKEND
June 17th, 2009 categories: Local Events
June 19-21 is Berges Fest Weekend in Boerne. Here’s the lineup:
Friday evening:
Berges Fast Pageant from 6-8 with music extending later
Saturday morning:
10-12 Parade (Starts at North Main at Frederick by the Fire House and Ends at River Road)
Weekend Festival Hours (at Herff Park):
Saturday 10-4 with music extending into the evening hours, Sunday 12-? with music also extending later.
Special Events: Lawnmower Races, Washer Pitcher Tournament, Egg Toss, Balloon Stomp, Tug of War, Dachshund Races, Horseshoe Pitching Tournament, Little Tractor Races.
Parking $5.00 per car.
For more information, go to the BergesFest website.
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REAL ESTATE SALES IN KERR COUNTY: $5.7 MILLION FOR MONTH OF MAY, $33 MILLION FOR YEAR SO FAR
June 2nd, 2009 categories: Assessing the Local Market
Given the recessionary climate that we have been in this last year, every one is watching and waiting for the real estate market to turn around. Will it happen this month? Will it be next?
There have been some statistics showing encouragement of late … particularly, the stock market that has been leveling out, consumer confidence is rising, and interest rates are continuing to be very low.
Most people in real estate will tell you that there has been a significant increase in traffic this last month. Real Estate sales normally begin to increase in the month of May as Summer is traditionally the high season for moving.
In Kerr County, there were 35 sales totaling $5,676,350 during the month of May as compared with 59 sales totaling $11,879,775 during the same period last year. Still significantly down; however, encouraging from the previous months.
For the year so far, here’s the data for Kerr County:
170 units sold totaling just over $33 million as compared with $273 units totaling $53.8 million. That’s 103 Units down for a total of just over $20 million! WOW! That’s quite an impact on the overall economy and particularly those in real estate.
We remain encouraged though. Things are looking up! As of June 2, There are currently 70 Listings totaling $15.7 Million in Kerr County listed as pending or active with a contingency.
People are learning to accept our new market conditions. Prices are being lowered! People are getting creative! We’re all working harder! Real Estate always comes back around!!!
With every obstacle is an opportunity for a change for the better! We’re doing our best to work smarter for our clients! And, as you can see, we are actively watching the real estate market so that we can provide YOU with the best information. Give us a call 830-995-2511 for more information and to find out how we can help you with your purchase or sale in the Hill Country. We are members of the San Antonio, Kerrville & Gillespie MLS services and so can help you anywhere in that market area!
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Numbers Aren’t Yet Reflecting Increased Market Activity in Comfort, Texas
June 2nd, 2009 categories: Assessing the Local Market
I was surprised to discover that the increased market activity that we have been seeing in the area has not yet turned into actual sales (at least for Comfort). For the months of April and May, there were NO sales (as compared to 2 the preceding year totalling $962,264). Here’s where we are for the year:
I guess the surprise is due to the increased number of properties under contract (5 currently). It is likely that next month’s figures will be much better. Also, there are several Comfort properties listed only in the Kerrville MLS. None have sold to my knowledge; however, at least one is under contract.
The other interesting piece of data that I found for Comfort:
There are 202 Units of Real Estate currently on the market with a total market value (e.g., list price) of $73 Million.
Pretty significant for a little community of just over 5,000, huh?
If you’d like to add to or substract from that number, we’d love to help you! We’re your source for real estate & community information for Comfort and the surrounding area! Give us a call 830-995-2511.
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PLAN TO GIVE COUNTIES AUTHORITY TO ESTABLISH DEVELOPMENT DENSITIES, SETBACK LINES & IMPOSE FEES STILL IN WORKS!
May 26th, 2009 categories: Real Estate Resourcing
Last year there was a big outcry (locally) regarding a Kendall County Commissioner’s resolution that sought to establish greater authority over development in the county. Apparently, that agenda is still at work! Here is an article in the Austin American-Statesman reporting on the fate of a proposal before the State Legislature:
ECONOMIC DEVELOPMENT
Hill Country efforts to control growth stall
Measure’s fate shows difficult road in Legislature.
Hill Country county judges had spent the better part of a year marshaling their forces to craft a proposal that would give them more authority to regulate the development that has put stress on the roads, water and land in their fast-growing areas. With state Rep. Patrick Rose, D-Dripping Springs, shepherding it along, it won passage out of one committee.
But before it could get a hearing on the House floor, it got shut out by a more powerful committee that acts as a doorkeeper.
The path of the proposal by Rose shows, once again, the reluctance of the Legislature to hamper development. More broadly, its trajectory reflects that of so many other measures that waste away as the clock ticks on the final week of the Legislature.
The proposal would have given Bandera, Blanco, Comal, Edwards, Gillespie, Hays, Kendall and Medina counties the authority to establish development densities and setback lines and to impose an infrastructure fee on new construction.
“Locally elected officials are capable of not only understanding the dynamics and consequences of development,” said Rose, “but also are accountable to voters and ought to be empowered with that authority.”
Some of the counties targeted in the bill are among the fastest-growing in the state. Between 2000 and 2008, according to estimates by the Texas Data Center, Hays County’s population increased 45.8 percent, Comal’s 38.6 percent and Kendall’s 36.8 percent.
Voters in each county would have had to approve the new powers. At a hearing before the House County Affairs Committee in early April — the last time the bill showed its face in public — the proposal enjoyed widespread support from land conservation advocates and county commissioners, who say they need the Legislature’s help to prepare for growth and demands on water.
“It’s an opportunity for us to take a major step forward in empowering our counties in giving them the necessary tools to ensure we’ll continue to prosper while preserving integrity of Hill Country and protect our natural resources,” said Gene Miertschin, a commissioner in Kendall County.
But homebuilders testified against the proposal, which they said would undercut the market for starter homes by making them too expensive.
Others said the proposal violates private property rights. Larry Meyer, who is involved in the development of Rancho San Miguel, a proposed 6,000-home Blanco County subdivision, told the committee, “As a property owner, I should have right to use (my land) as I see fit.”
Texas Association of Realtors attorney Edra Anderson said: “This bill simply goes too far, is just too broad. The power to limit development in these counties is just much too great.”
The measure made it out of the County Affairs Committee but has languished in the Calendars Committee, which is the arbiter of which bills reach the floor.
Lawmakers have consistently turned away proposals the past few sessions to broaden the power of counties. Proposals by state Sen. Jeff Wentworth, R-San Antonio, to expand county authority across the state have repeatedly failed to go very far, despite the state’s fast growth over the past couple of decades.
Meanwhile, far-reaching rules on development enacted by Texas cities, such as Austin’s Save Our Springs ordinance, have been narrowed by lawmakers.
“The Legislature has not reacted positively as a whole to the needs for these changes,” said Elna Christopher, a spokeswoman for the Texas Association of Counties, which supported the Rose measure. The counties are “up against some pretty potent lobby groups for large organizations.”
In the 2008 election cycle, covering the years 2007 and 2008, candidates received $11.7 million from homebuilders, developers and real estate agents, or about 7 percent of the total money they received, according to Texans for Public Justice, a nonprofit that tracks money in politics.
Rose says the bill would give counties tools they need to manage growth, “mindful of how much water they have available in the middle and long term.”
Rose, who is 30 years old, said he thought that with generational change among lawmakers, the Capitol would become amenable to giving counties more authority as they grapple with skyrocketing populations.
“Sometimes it takes a long time to overcome institutional opposition,” Rose said. “Arguments against counties having authority in areas that are delicate and fast-growing and have finite resources, like the Hill Country, are increasingly difficult for opponents to make.”
The push for the greater county authority comes as Rose faces an imbroglio in his own district about whether he watered down a measure that would have given a groundwater conservation district more authority. Halfway through the 140-day legislative session, Rose told the Hays-Trinity Groundwater District he could get it $100,000 more a year but could not expand its authority because he didn’t think he had full on-the-ground support for such a measure.
The groundwater district, which has been hamstrung by the Legislature since it was created in 2003, rejected the compromise as too weak and developer-friendly, and Rose withdrew the measure.
The Texas Observer reported that Rose has received nearly $300,000 in campaign contributions from real estate interests and developers, according to the nonprofit watchdog Texans for Public Justice.
Asked about the groundwater district flap, Rose said, “I’m concerned about the Hill Country, particularly Hays and Blanco, because that’s who I represent.”
The county authority bill would “make sure we’re reasoned in our approach, sustainable in our approach, particularly with water, as we grow,” he said.
The measure has support from environmental groups, which link development to underground water quality and water supply problems.
Prominent Austin land use lawyer David Armbrust supports the proposal, calling the Hill Country an economic engine that is serving as the “region’s golden goose.”
“These high-growth counties will keep at it, and yes, eventually, the Legislature will catch up,” Christopher said. “I just hope it’s not too late to preserve a good quality of life in these areas.”
asherprice@statesman.com; 445-3643
AMERICAN-STATESMAN STAFF
Tuesday, May 26, 2009
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TIPS FOR INCREASING YOUR CREDIT SCORE
May 25th, 2009 categories: Real Estate Resourcing
We have had several clients of late who are “on the edge” of the score needed to obtain financing and needed some tips to increase their points by anywhere from 10-50 points. We found this entry on the website, Bankrate.com and thought it was helpful. It was written by Pat Curry. For the full article, go to Tips For Boosting Your Credit Score. Hope this helps!
What you’re looking for on your report are factors that could be affecting your score. Look for errors in the report, such as accounts that aren’t yours, late payments that were actually paid on time, debts you paid off that are shown as outstanding, or old debts that shouldn’t be reported any longer (negatives are supposed to be deleted after seven years, with the exception of bankruptcies, which can stay for as long as 10 years).
After repairing errors, the fastest route to a better score is paying down balances on credit cards, says Watts.
Though it’s not an instant cure, paying down credit lines over a two month period can boost your score a substantial amount, and may be enough to put it over the edge if you’re lurking just beneath the next tier of loan pricing.
Had a few late payments in your past?
Even if you’ve paid your bills late in the past, you can improve your credit score by paying every bill on time from now on, says John Ventura, a consumer law attorney and author of “The Credit Repair Kit.”“Forget about grace periods,” he says. “If you want to have a really good record with the credit agencies, pay your debt before it’s due and keep your balances low.”
A big no-no
One thing you shouldn’t do if you’re just trying to boost your score is close unused accounts, Watts says.“If someone tells you to close unused accounts to improve your score, they’re pulling your leg,” he says. “It won’t help you and it can hurt you.”
Closing unused accounts without paying down your debt changes your utilization ratio, which is the amount of your total debt divided by your total available credit.
“You appear closer to maxing out your accounts,” he says. “That’s why your score can drop. It doesn’t mean people shouldn’t close them, but don’t close them to improve your score.”
If you do cut up cards, though, leave the oldest one open, says Steve Rhode, former president of Myvesta.org, a national nonprofit financial crisis center.
The length of your credit history is another factor in your score. If you close the account of the credit card you got when you were a freshman in college and leave open the ones you just got within the last couple years, it makes you look like a much newer borrower.
“Keep a couple of the oldest open; I don’t care what the interest rate is,” he says. “Creditors don’t care what the rate is.”
Working with credit card balances
Another strategy for bringing up your score: Transfer balances from a card that’s close to being maxed out to other cards to even out your usage, says David Chung, managing director for Maryland-based CreditXpert Inc., which provides credit tools to lenders. Or just spread out your charges between a few cards.“Try to get the usage on all of them at 20 to 30 percent instead of a bunch at zero and one at 80 percent,” Chung says. “You’re not spending less, you’re just shifting it around to different cards.”
It could work, Watts from FICO says. “Transferring the balance to a card with a lower utilization could help,” he says, “but it’s much better to actually pay down the debt if you have the cash kicking around.”
If you’re really into finessing the system, check your credit report to see what day of the month your creditors send updates on payments to the credit bureaus, Chung says. They’re rarely on the same cycle as your payment due date. That’s why you can pay off your card every month and your credit report will show you carrying a balance. Then, make your payments several days before the reporting date.
All of these strategies generally take at least 30 days because lenders don’t report payments more than once a month.
Rapid rescoring
If you’re in the throes of qualifying for a mortgage and need a score boost in a hurry, you can speed the process along with rapid rescoring. If you’ve got legitimate negative information on your credit report, such as late payments or accounts in collections, you’re out of luck. But the process of rapid rescoring can help increase your score within a few days by correcting errors or paying off account balances.You can’t do this one yourself; you’ll need a lender who is a customer of a rapid rescoring service. Generally, the service will run roughly $50 for every account on your credit report that needs to be addressed, but it could save you thousands on your loan.
If a consumer can find a lender who is a customer of a rapid rescoring service, new information can be posted within 72 hours, Watts says.
Some nifty online tools are available to find out which strategies could have the most impact on your score. Fair Isaac’s www.myfico.com site offers a credit score simulator when you purchase a credit score. It offers seven simulated scenarios, such as how paying down your account balances — or not paying any of your bills on time this month — would affect your score.
CreditXpert’s “What-If” simulator lets you play with several variables, such as buying a car, paying off a student loan and opening a department store account, all at the same time. They don’t sell the simulator directly to consumers, though. You can get a list of places that do sell it on the consumer page of its Web site.
The bottom line, the experts say, is that you’re not powerless when it comes to your credit score.
“There are a lot of things you can do to improve your score,” Chung says. “You need to understand what your credit is like now and what’s influencing your score today. Then you can take an objective look at the different options available.”
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How the $8000 First Time-Homebuyer Tax Credit Works
May 25th, 2009 categories: Real Estate Resourcing
For 2009 Home Purchases: Information on $8,000 First-Time Homebuyer Tax Credit
Frequently Asked Questions
Information written by Linda Goold, Tax Counsel for the National Association of Realtors (NAR)
What’s this new homebuyer tax incentive for 2009?
The 2008 $7500, repayable credit is increased to $8000 and the repayment feature is eliminated for 2009 purchasers. Any home that is purchased for $80,000 or more qualifies for the full $8000 amount. If the house costs less than $80,000, the credit will be 10% of the cost. Thus, if an individual purchased a home for $75,000, the credit would be $7500. It is available for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009.
Who is eligible?
Only first-time homebuyers are eligible. A person is considered a first-time buyer if he/she has not had any ownership interest in a home in the three years previous to the day of the 2009 purchase.
How does a tax credit work?
Every dollar of a tax credit reduces income taxes by a dollar. Credits are claimed on an individual’s income tax return. Thus, a qualified purchaser would figure out all the income items and exemptions and make all the calculations required to figure out his/her total tax due. Then, once the total tax owed has been computed, tax credits are applied to reduce the total tax bill. So, if before taking any credits on a tax return a person has total tax liability of $9500, an $8000 credit would wipe out all but $1500 of the tax due. ($9,500 – $8000 = $1500)
So what happens if the purchaser is eligible for an $8000 credit but their entire income tax liability for the year is only $6000?
This tax credit is what’s called “refundable” credit. Thus, if the eligible purchaser’s total tax liability was $6000, the IRS would send the purchaser a check for $2000. The refundable amount is the difference between $8000 credit amount and the amount of tax liability. ($8000 – $6000 = $2000) Most taxpayers determine their tax liability by referring to tables that the IRS prepares each year.
How does withholding affect my tax credit and my refund?
A few examples are provided at the end of this document. There are several steps in this calculation, but most income tax software programs are equipped to make that determination.
What are the filing options to consider?
The filing options to consider are:
File an extension. Taxpayers who haven’t yet filed their 2008 returns but are buying a home soon can request a six-month extension to October 15. This step would be faster than waiting until next year to claim it on the 2009 tax return. Even with an extension, taxpayers could still file electronically, receiving their refund in as few as 10 days with direct deposit.
File now, amend later. Taxpayers due a sizable refund for their 2008 tax return but who also are considering buying a house in the next few months can file their return now and claim the credit later. Taxpayers would file their 2008 tax forms as usual, then follow up with an amended return later this year to claim the homebuyer credit.
Amend the 2008 tax return. Taxpayers buying a home in the near future who have already filed their 2008 tax return can consider filing an amended tax return. The amended tax return will allow them to claim the homebuyer credit on the 2008 return without waiting until next year to claim it on the 2009 return.
Claim the credit in 2009 rather than 2008. For some taxpayers, it may make more financial sense to wait and claim the homebuyer credit next year when they file the 2009 tax return rather than claiming it now on the 2008 tax return. This could benefit taxpayers who might qualify for a higher credit on the 2009 tax return. This could include people who have less income in 2009 than 2008 because of factors such as a job loss or drop in investment income.
The IRS reminds taxpayers the amount of the credit begins to phase out for taxpayers whose modified adjusted gross income is more than $75,000, or $150,000 for joint filers. Taxpayers can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately.
Is there an income restriction?
Yes. The income restriction is based on the tax filing status the purchaser claims when filing his/her income tax return. Individuals filing Form 1040 as Single (or Head of Household) are eligible for the credit if their income is no more than $75,000. Married couples who file a Joint return may have income of no more than $150,000.
How is my “income” determined?
For most individuals, income is defined and calculated in the same manner as their Adjusted Gross Income (AGI) on their 1040 income tax return. AGI includes items like wages, salaries, interest and dividends, pension and retirement earnings, rental income and a host of other elements. AGI is the final number that appears on the bottom line of the front page of an IRS Form 1040.
What if I worked abroad for part of the year?
Some individuals have earned income and/or receive housing allowances while working outside the US. Their income will be adjusted to reflect those items to measure Modified Adjusted Gross Income (MAGI). Their eligibility for the credit will be based on their MAGI.
Do individuals with incomes higher than the $75,000 or $150,000 limits lose all the benefit of the credit?
Not always. The credit phases-out between $75,000 – $95,000 for singles and $150,000 – $170,000 for married filing joint. The closer a buyer comes to the maximum phase-out amount, the smaller the credit will be. The law provides a formula to gradually withdraw the credit. Thus, the credit will disappear after an individual’s income reaches $95,000 (single return) or $170,000 (joint return). For example, if a married couple had income of $165,000, their credit would be reduced by 75% as shown: Couples income $165,000 Income limit 150,000 Excess income $15,000 The excess income amount ($15,000 in this example) is used to form a fraction. The numerator of the fraction is the excess income amount ($15,000). The denominator is $20,000 (specified by the statute). In this example, the disallowed portion of the credit is 75% of $8000, or $6000 ($15,000/$20,000 = 75% x $8000 = $6000). Stated another way, only 25% of the credit amount would be allowed. In this example, the allowable credit would be $2000 (25% x $8000 = $2000)
What’s the definition of “principal residence?”
Generally, a principal residence is the home where an individual spends most of his/her time (generally defined as more than 50%). It is also defined as “owner-occupied” housing. The term includes single-family detached housing, condos or co-ops, townhouses or any similar type of new or existing dwelling. Even some houseboats or manufactured homes count as principal residences.
Are there restrictions on the location of the property?
Yes. The home must be located in the United States. Property located outside the US is not eligible for the credit.
Are there restrictions related to the financing for the mortgage on the property?
In 2009, most financing arrangements are acceptable and will not affect eligibility for the credit. Congress eliminated the financing restriction that applied in 2008. (In 2008, purchasers were ineligible for the $7500 credit if the financing was obtained by means of mortgage revenue bonds.) Now, mortgage-revenue bond financing will not disqualify an otherwise-eligible purchaser. (Mortgage revenue bonds are tax-exempt bonds issued by a state housing agency. Proceeds from the bonds must be used for below market loans to qualified buyers.)
Do I have to repay the 2009 tax credit?
NO. There is no repayment for 2009 tax credits. Unless they sell within 3 years of closing using this credit.
Do 2008 purchasers still have to repay their tax credit?
YES. The $7500 credit in 2008 was more like an interest-free loan. All eligible purchasers who claimed the 2008 credit will still be required to repay it over 15 years, starting with their 2010 tax return.
How do I apply for the credit? ?
There is no pre-purchase authorization, application or similar approval process. All eligible purchasers simply claim the credit on their IRS Form 1040 tax return. The credit will be reflected on a new Form 5405 that will be attached to the 1040. Form 5405 can be found at www.irs.gov.
So I can’t use the credit amount as part of my down payment?
No. Congress tried hard to devise a mechanism that would make the funds available for closing costs, but found that pre-funding would require cumbersome processes that would, in effect, bring the IRS into the purchase and settlement phase of the transaction.
So there’s no way to get any cash flow benefits before I file my tax return?
Yes, there is. Any first-time homebuyers who believe they are eligible for all or part of the credit can modify their income tax withholding (through their employers) or adjust their quarterly estimated tax payments. Individuals subject to income tax withholding would get an IRS Form W-4 from their employer, follow the instructions on the schedules provided and give the completed Form W-4 back to the employer. In many cases their withholding would decrease and their take-home pay would increase. Those who make estimated tax payments would make similar adjustments.
What if I purchase later this year but can’t get to settlement before December 1?
The credit is available for purchases before December 1, 2009. A home is considered as “purchased” when all events have occurred that transfer the title from the seller to the new purchaser. Thus, closings must occur before December 1, 2009 for purchases to be eligible for the credit.
I haven’t even filed my 2008 tax return yet. If I buy in 2009, do I have to wait until next year to get the benefit of the credit?
You’ll have a helpful choice that might speed up the process. Eligible homebuyers who make their purchase between January 1, 2009 and December 1, 2009 can treat the purchase as if it had occurred on December 31, 2008. Thus, they can claim the credit on their 2008 tax return that is due on April 15, 2009. They actually have three filing options.
- If they purchase between January 1, 2009 and April 15, 2009, they can claim the $8000 credit on the 2008 return due on April 15.
- They can extend their 2008 income-tax filing until as late as October 15, 2009. (The IRS grants automatic extensions, but the taxpayer must file for the extension. See www.irs.gov for instructions on how to obtain an extension.)
- If they have filed their 2008 return before they purchase the home, they may file an amended 2008 tax return on Form 1040X. (Form 1040X is available at www.irs.gov)
Of course, 2009 purchasers will always have the option of claiming the credit for the 2009 purchase on their 2009 return. Their 2009 tax return is due on April 15, 2010.
I purchased my home in early 2009 before the stimulus bill was enacted. I claimed a $7500 tax credit on my 2008 return as prior law had permitted. Am I restricted to just a $7500 credit?
No, you would qualify for the $8000 credit. Eligible purchasers who have already claimed the $7500 credit on a 2008 return for a 2009 purchase may file an amended return (IRS Form 1040X) for the 2008 tax year. This amended return will enable them to obtain the additional $500 credit amount.
If I claim my 2009 $8000 credit on my 2008 tax return, will I have to repay the credit just as the 2008 credits are repaid?
No. Congress anticipated this confusion and has made specific provision so that there would be no repayment of 2009 credits that are claimed on 2008 returns.
I made an eligible purchase of a principal residence in May 2008 and claimed the $7500 credit on my 2008 tax return. My brother, who has never owned a home, wishes to purchase a partial interest in the home this spring and move in. Will he qualify for the $8000 credit, as well?
No. Any purchase of a principal residence (or interest in a principal residence) from a related party such as a sibling, parent, grandparent, aunt or uncle is ineligible for the tax credit. Since you and your brother are related in this way, he cannot qualify for the credit on any portion of the home that he purchases from you, even if he is a first-time homebuyer.
I live in the District of Columbia. If I qualify as a first-time homebuyer, can I use both the $5000 DC credit and the $8000 credit?
No; double dipping is not allowed. You would be eligible for only the $8000 credit. This will be an advantage because of the higher credit amount, plus the eligibility requirements for the $8000 credit are somewhat more easily satisfied than the DC credit.
I know there is no repayment requirement for the $8000 credit. Will I ever have to repay any of the credit back to the government?
One situation does require a recapture payment back to the government. If you claim the credit but then sell the property within 3 years of the date of purchase, you are required to pay back the full amount of any credit, including any refund you received from it. A few exceptions apply. (See below, #24). Note that this same 3-year recapture rule applies, as well, to the $7500 credit available for 2008. This provision is designed as an anti-flipping rule.
What if I die or get divorced or my property is ruined in a natural disaster within the 3 years?
The repayment rules are eased for many circumstances. If the homeowner who used the credit dies within the first three years of ownership, there is no recapture. Special rules make adjustments for people who sell homes as part of a divorce settlement, as well. Similarly, adjustments are made in the case of a home that is part of an involuntary conversion (property is destroyed in a natural disaster or subject to condemnation by eminent domain by an authorized agency) within the first three years.
I have a home under construction. Am I eligible for the credit?
Yes, so long as you actually occupy the home before December 1, 2009.
WITHHOLDING EXAMPLES: Note: The impact of estimated tax payments would be the same.
Situation 1: Sally plans her withholding so that her withholding is as close as possible to what she anticipates as her income tax liability for the year. When she fills out her 1040, her liability is $6000. She has had $6000 withheld from her paycheck. She also qualifies for the $8000 homebuyer credit.
Result: Sally’s withholding satisfies her tax liability and reduces it to zero. She will receive a refund of the full $8000.
Situation 2: Nick and Nora file a joint return. Nick is self- employed and makes estimated payments; Nora has taxes withheld from her salary. When they compute their taxes, their combined withholding and estimated tax payments are $11,000. Their income tax liability is $9800. They also qualified as first-time homebuyers and are eligible for the $8000 refundable tax credit.
Result: Ordinarily, their combined estimated tax payments and withholding would make them eligible for a refund of $1200 ($11,000 – $9800 = $1200). Because they are eligible for the refundable tax credit as well, they will receive a refund of $9200 ($1200 income tax refund + $8000 refundable tax redit = $9200)
Situation 3: Cesar and LuzMaria both have income taxes withheld from their salaries and file a joint return. When they file their income tax return, their combined withholding is $5000. However, their total tax liability is $7200, generating an additional income tax liability of $2200 ($7200 – $5000). They also qualify for the $8000 first-time homebuyer tax credit.
Result: Cesar and LuzMaria have been under-withheld by $2200. Ordinarily, they would be required to pay the additional $2200 they owe (plus any applicable interest and penalties). Because they are eligible for the refundable homebuyer tax credit, the credit will cover the $2200 additional liability. In addition, they will receive an income tax refund of $5800 ($8000 – $2200 = $5800). If they owed penalties and/or interest, that amount would reduce the refund.
Information written by Linda Goold, Tax Counsel for the National Association of Realtors (NAR)
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