The Kestner Team

$8,000 First Time Home Buyer’s Tax Credit Now Available along with other options pass by the Obama Administration.

Whether you are a first time home buyer, you owned a home a few years ago and are thinking of buying again, you have been struggling to pay your mortgage, you have an adjustable rate mortgage that has gone up or is fixing to go up, or your house has lost considerable value due to the down market and have not been able to qualify for a re-finance, the Obama administration has recently passed bills that offer you excellent opportunities.

First Time Home Buyers:

Last year, the government passed a bill that provided a $7,500 tax credit to first time home buyers. The tax credit was essentially a no interest loan that would be repaid over the course of 15 years. As part of the economic stimulus package, the government has made some changes to that tax credit that give a first time home buyer even more of an incentive to buy.

• The Amount of the tax credit has been increased to 10% of the cost of the home, up to a max. of $8,000.
• It is refundable, so if you owe less than $8,000 in taxes for the year, any remainder will be refunded to you.
• There is an income limit of $75,000 for an individual and $150,000 for a joint return. The amount available begins to phase out above those amounts.
• In order to qualify, you must be a First Time Homebuyer or May not Have Owned a Home for the Past 3 Years.
• If you use the THDA program to purchase, you now qualify. You did not qualify under the 2008 tax credit.
• You must keep the home for at least 3 years, or repay the $8,000 when you sell the house. On the 2008 credit, you had to re-pay up to 15 years.
• This program runs from January 1, 2009 – December 1, 2009.
• THE MOST IMPORTANT CHANGE: THIS $8,000 TAX CREDIT IS NOT A LOAN!!! - As long as you keep the house for at least 3 years, you do not have to repay the credit.

Homeowner Affordability and Stability Plan:

The Obama administration passed a bill this week that is designed to help those who have lost value in their homes and can’t re-finance their current loans, are facing a payment increase from an adjustable rate mortgage, are having trouble making payments on their mortgage due to the recession and reduced income, and those whose homes have lost value as more homes in their neighborhoods are foreclosed on by the banks.

In this bill:

Under current rules, most mortgage companies prefer that you have at least 20% equity in your home in order for them to re-finance your mortgage. That means that you only owe 80% of the value of your home. However, due to the decline in the housing market, many people have lost some of the equity in their home and are no longer able to qualify for a re-finance. The administration’s plan will help as many as 4 to 5 million responsible homeowners who took out conforming loans owned or guaranteed by Fannie Mae or Freddie Mac to refinance through those two institutions.

Many people have lost value in their home and can no longer afford to sell it. Or they have been faced with reduced income and their mortgage payment is now 40 – 50% of their monthly income. And many people purchased their homes with subprime loans and are now faced with a higher payment than they have been making over the past years. The administration’s plan will increase the access to and possibility of modifying the homeowner’s current mortgage to a more sustainable payment. For instance, if a homeowner’s mortgage rate is currently7.5% and the owner is struggling to make their payments, the mortgage company could modify the loan so to a 5% interest only payment. The terms of the loan modification must stay in place for five years. After that, the rates would gradually go back to where they were before the loan modification. The plan also provides incentives for the mortgage company to provide loan modifications. The hope is that this option will also prevent many people from being foreclosed on by the banks. By avoiding foreclosures in a neighborhood, the administration hopes that prices in that neighborhood would stabilize or even rise.

The administration has also laid out goals in this plan to keep the current interest rates low.