Las Vegas Real Estate Blog » Mark Madsen

$8000 Tax Credit Extended For Las Vegas First Time Home Buyers

Mark Madsen — Wed, 06 Jan 2010 08:34:30 +0000

If you’re a First-Time home buyer looking to purchase a new property in Las Vegas, you may have heard that the $8,000 tax credit has been extended through June 30, 2010.

In addition to extending the tax credit for Las Vegas First-Time Home Buyers, this program also allows move-up buyers a $6,500 credit if they have occupied a primary residence for a period of five consecutive years during the last eight.

While some can argue that the tax credit is artificially boosting property values in most areas, your unique scenario and home buying goals should be the determining factor as to whether you wait for prices to decrease or sign a contract before April 30, 2010 in order to be eligible for the home buyer’s tax incentive.

Tax Credit Extension Bullets:

$8,000 First Time Home Buyer tax credit is extended for buyers who sign a contract by April 30, 2010, and close by June 30, 2010.

A First-Time home Buyer is defined as someone who hasn’t owned a home for at least three years.

$6,500 Move-Up tax credit is available to buyers that have lived in their current residence for at least five of the past eight years and want to buy a new home.

Single taxpayers earning up to $125,000 can get the full credit, with partial payments for those who earn up to $145,000.

Married couples with joint income can max out at $225,000 in earnings.

$800,000 purchase prices and higher do not qualify for either tax credit.

If you sell your home or stop using it as your primary residence within three years, you’ll have to repay the credit.

The income limits for sales occurring on or after January 1, 2009 and on or before November 6, 2009, are $75,000 for single taxpayers and $150,000 for married taxpayers filing joint returns.

$8,000 Las Vegas First Time Home Buyer Questions:

via federalhousingtaxcredit.com

The Worker, Homeownership, and Business Assistance Act of 2009 has extended the tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence. The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.

For sales occurring after November 6, 2009, the Act establishes income limits of $125,000 for single taxpayers and $225,000 for married couples filing joint returns.

The income limits for sales occurring on or after January 1, 2009 and on or before November 6, 2009, are $75,000 for single taxpayers and $150,000 for married taxpayers filing joint returns.

The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.

Who is eligible to claim the $8,000 tax credit?
First-time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and on or before April 30, 2010. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner. A limited exception exists for certain contract for deed purchases and installment sale purchases. See the IRS website for more detail.

However, the law also allows home sales occurring by June 30, 2010 to qualify, provided they are due to a binding sales contract in force on or before April 30, 2010.

Persons who are claimed as dependents by other taxpayers or who are under age 18 are not qualified for the tax credit program.
What is the definition of a first-time home buyer?
The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.

For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. However, IRS Notice 2009-12 allows unmarried joint purchasers to allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.
How is the amount of the tax credit determined?
The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
Are there any income limits for claiming the tax credit?
Yes. For sales occuring after November 6, 2009, the income limit for single taxpayers is $125,000; the limit is $225,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $125,000 for single taxpayers and $225,000 for married taxpayers filing a joint return. The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $145,000 (single) or $245,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.
The income limits for claiming the tax credit were raised when the tax credit was extended. Are the higher limits retroactive?
No. The new income limits are only applicable to purchases occurring after November 6, 2009.

The income limits for sales occuring on or after January 1, 2009 and on or before November 6, 2009 are $75,000 for single taxpayers and $150,000 for married couples filing jointly.
What is “modified adjusted gross income”?
Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine “adjusted gross income” or AGI. AGI is total income for a year minus certain deductions (known as “adjustments” or “above-the-line deductions”), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.

To determine modified adjusted gross income (MAGI), add to AGI certain amounts of foreign-earned income. See IRS Form 5405 for more details.
If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
Possibly. It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose MAGI exceeds the phaseout limits.
Can you give me an example of how the partial tax credit is determined?
Just as an example, assume that a married couple has a modified adjusted gross income of $235,000. The applicable phaseout to qualify for the tax credit is $225,000, and the couple is $10,000 over this amount. Dividing $10,000 by the phaseout range of $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.

Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $138,000. The buyer’s income exceeds $125,000 by $13,000. Dividing $13,000 by the phaseout range of $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.

Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.
How is this home buyer tax credit different from the tax credit that Congress enacted in early 2009?
The tax credit’s income limits were increased, the documentation requirements were tightened, and the program’s deadlines were extended.
How do I claim the tax credit? Do I need to complete a form or application? Are there documentation requirements?
You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on line 67 of the 1040 income tax form for 2009 returns (line 69 of the 1040 income tax form for 2008 returns). No other applications are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests. Note that you cannot claim the credit on Form 5405 for an intended purchase for some future date; it must be a completed purchase. Home buyers must attach a copy of their HUD-1 settlement form (closing statement) to Form 5405 as proof of the completed home purchase.
What types of homes will qualify for the tax credit?
Any home that will be used as a principal residence will qualify for the credit, provided the home is purchased for a price less than or equal to $800,000. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.

It is important to note that you cannot purchase a home from, among other family members, your ancestors (parents, grandparents, etc.), your lineal descendants (children, grandchildren, etc.) or your spouse or your spouse’s family members. Please consult with your tax advisor for more information. Also see IRS Form 5405.
I read that the tax credit is “refundable.” What does that mean?
The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.

For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).
Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been “purchased” on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after January 1, 2009 and on or before April 30, 2010 (or by June 30, 2010, provided a binding sales contract was in force by April, 30, 2010).

In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.
Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
Yes. The tax credit can be combined with an MRB home buyer program. Note that first-time home buyers who purchased a home in 2008 may not claim the tax credit if they are participating in an MRB program.
I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?
No. You can claim only one.
I am not a U.S. citizen. Can I claim the tax credit?
Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of “nonresident alien” in IRS Publication 519.
Is a tax credit the same as a tax deduction?
No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS.

A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $8,000 in income taxes. If the taxpayer receives an $8,000 deduction, the taxpayer’s tax liability would be reduced by $1,200 (15 percent of $8,000), or lowered from $8,000 to $6,800.
I bought a home in 2008. Do I qualify for this credit?
No, but if you purchased your first home between April 9, 2008 and January 1, 2009, you may qualify for a different tax credit. Please consult with your tax advisor for more information.
Is there a way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 or 2010 tax return?
Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment.

Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.

In addition, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. As a result, some state housing finance agencies have introduced programs that provide short-term second mortgage loans that may be used to fund a downpayment. Prospective home buyers should check with their state housing finance agency to see if such a program is available in their community. To date, 18 state agencies have announced tax credit assistance programs, and more are expected to follow suit. The National Council of State Housing Agencies (NCSHA) has compiled a list of such programs, which can be found here.
HUD is now allowing “monetization” of the tax credit. What does that mean?
It means that HUD allows buyers using FHA-insured mortgages to apply their anticipated tax credit toward their home purchase immediately rather than waiting until they file their 2009 or 2010 income taxes to receive a refund. These funds may be used for certain downpayment and closing cost expenses.

Under HUD’s guidelines, non-profits and FHA-approved lenders are allowed to give home buyers short-term loans of up to $8,000. The guidelines also allow government agencies, such as state housing finance agencies, to facilitate home sales by providing longer term loans secured by second mortgages.

Housing finance agencies and other government entities may also issue tax credit loans, which home buyers may use to satisfy the FHA 3.5 percent downpayment requirement. In addition, approved FHA lenders can purchase a home buyer’s anticipated tax credit to pay closing costs and downpayment costs above the 3.5 percent downpayment that is required for FHA-insured homes.

More information about the guidelines is available on the NAHB web site. Read the HUD mortgagee letter (pdf) and an explanation of the FHA Mortgagee Letter on Tax Credit Monetization (pdf). An FAQ about monetization (pdf) is available at the NAHB web site.
If I’m qualified for the tax credit and buy a home in 2009 (or 2010), can I apply the tax credit against my 2008 (or 2009) tax return?
Yes. The law allows taxpayers to choose (“elect”) to treat qualified home purchases in 2009 (or 2010) as if the purchase occurred on December 31, 2008 (or if in 2010, December 31, 2009). This means that the previous year’s income limit (MAGI) applies and the election accelerates when the credit can be claimed. A benefit of this election is that a home buyer in 2009 or 2010 will know their prior year MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.

Taxpayers buying a home who wish to claim it on their prior year tax return, but who have already submitted their tax return to the IRS, may file an amended return claiming the tax credit using Form 1040X. You should consult with a tax professional to determine how to arrange this.
For a home purchase in 2009 or 2010, can I choose whether to treat the purchase as occurring in the prior or present year, depending on in which year my credit amount is the largest?
Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in the present year and a larger credit would be available using the prior year MAGI amounts, then you can choose the year that yields the largest credit amount.
How can two unmarried buyers allocate the tax credit if one qualifies for the $8,000 first-time home buyer tax credit and the other qualifies for the $6,500 repeat home buyer credit?
The buyers can allocate the tax credit in any reasonable manner, provided neither claims a tax credit higher than the one they qualify for and the home purchase does not yield a total of more than $8,000 in tax credits. For example, the repeat home buyer could claim $6,500 and the first-time home buyer could claim $1,500. Alternatively, both buyers could claim a $4,000 tax credit.
Does a married couple qualify for any home buyer tax credit in the following situation? Spouse A has lived in and owned the same principal residence for at least five years. Spouse B has lived in and owned the same principal residence for less than five years.
In this situation, the couple does not qualify for any home buyer tax credit. Because the couple is married, the law tests the ownership history of both spouses. Spouse A clearly does not qualify for the $8,000 first-time home buyer tax credit, so neither does Spouse B.

Spouse A does appear to qualify for the $6,500 repeat buyer credit, but because Spouse B has not owned and lived in the same principal residence for at least five years, neither of them can claim the repeat home buyer tax credit.

$6,500 Repeat Buyer Tax Credit Frequently Asked Questions:

The Worker, Homeownership, and Business Assistance Act of 2009 has established a tax credit of up to $6,500 for qualified move-up/repeat home buyers (existing home owners) purchasing a principal residence after November 6, 2009 and on or before April 30, 2010 (or purchased by June 30, 2010 with a binding sales contract signed by April 30, 2010).

The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.

Who is eligible to claim the $6,500 tax credit?
Qualified move-up or repeat home buyers purchasing any kind of home are eligible to claim this credit.
What is the definition of a move-up or repeat home buyer?
The law defines a tax credit qualified move-up home buyer (“long-time resident”) as a person who has owned and resided in the same home for at least five consecutive years of the eight years prior to the purchase date. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. That is, both spouses must qualify as long-time residents, with at least five years of principal residency for each. Repeat home buyers do not have to purchase a home that is more expensive than their previous home to qualify for the tax credit.
How is the amount of the tax credit determined?
The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $6,500. Purchases of homes priced above $800,000 are not eligible for the tax credit.
Are there any income limits for claiming the tax credit?
Yes. The income limit for single taxpayers is $125,000; the limit is $225,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) above those limits. The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $145,000 (single) or $245,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.
What is “modified adjusted gross income”?
Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine “adjusted gross income” or AGI. AGI is total income for a year minus certain deductions (known as “adjustments” or “above-the-line deductions”), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and the first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.

To determine modified adjusted gross income (MAGI), add to AGI certain amounts of foreign-earned income. See IRS Form 5405 for more details.
If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
Possibly. It depends on your income. Partial credits of less than $6,500 are available for some taxpayers whose MAGI exceeds the phaseout limits.
Can you give me an example of how the partial tax credit is determined?
Just as an example, assume that a married couple has a modified adjusted gross income of $235,000. The applicable phaseout to qualify for the tax credit is $225,000, and the couple is $10,000 over this amount. Dividing $10,000 by the phaseout range of $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $6,500 by 0.5. The result is $3,250.

Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $138,000. The buyer’s income exceeds $125,000 by $13,000. Dividing $13,000 by the phaseout range of $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $6,500 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,275.

Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.
How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008? How is this different than the rules established in early 2009?
The previous tax credits applied only to first-time home buyers and were for different amounts of money.
How do I claim the tax credit? Do I need to complete a form or application? Are there documentation requirements?
You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on line 67 of the 1040 income tax form for 2009 returns (line 69 of the 1040 income tax form for 2008 returns).

No other applications are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and repeat home buyer tests. Note that you cannot claim the credit on Form 5405 for an intended purchase for some future date; it must be a completed purchase. Home buyers must attach a copy of their HUD-1 settlement form (closing statement) to Form 5405 as proof of the completed home purchase.
What types of homes will qualify for the tax credit?
Any home that will be used as a principal residence will qualify for the credit, provided the home is purchased for a price less than or equal to $800,000. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.

It is important to note that you cannot purchase a home from, among other family members, your ancestors (parents, grandparents, etc.), your lineal descendants (children, grandchildren, etc.) or your spouse or your spouse’s family members. Please consult with your tax advisor for more information. Also see IRS Form 5405.
I read that the tax credit is “refundable.” What does that mean?
The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.

For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $6,500 home buyer tax credit. As a result, the taxpayer would receive a check for $5,500 ($6,500 minus the $1,000 owed).
Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been “purchased” on the date the owner first occupies the house. In this situation, the date of first occupancy must be after November 6, 2009 and on or before April 30, 2010 (or by June 30, 2010, provided a binding sales contract was in force by April 30, 2010).

In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date. Be sure to check with a tax advisor in cases where a HUD-1 form is not used at settlement to be sure you have sufficient documentation to attach to IRS Form 5405.
Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
Yes. The tax credit can be combined with an MRB home buyer program.
I am not a U.S. citizen. Can I claim the tax credit?
Perhaps. Anyone who is not a nonresident alien (as defined by the IRS) and who has owned and resided in a principal residence in the United States for at least five consecutive years of the eight years prior to the purchase date can claim the tax credit if they meet the income limits. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. The IRS provides a definition of “nonresident alien” in IRS Publication 519.
Is a tax credit the same as a tax deduction?
No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $6,500 in income taxes and who receives an $6,500 tax credit would owe nothing to the IRS.

A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $6,500 in income taxes. If the taxpayer receives a $6,500 deduction, the taxpayer’s tax liability would be reduced by $975 (15 percent of $6,500), or lowered from $6,500 to $5,525.
Is there a way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 or 2010 tax return?
Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment.

Buyers should adjust the withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.

In addition, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. As a result, some state housing finance agencies have introduced programs that provide short-term second mortgage loans that may be used to fund a downpayment. Prospective home buyers should check with their state housing finance agency to see if such a program is available in their community. To date, 18 state agencies have announced tax credit assistance programs, and more are expected to follow suit. The National Council of State Housing Agencies (NCSHA) has compiled a list of such programs, which can be found here.
HUD allows “monetization” of the tax credit. What does that mean?
It means that HUD will allow buyers using FHA-insured mortgages to apply their anticipated tax credit toward their home purchase immediately rather than waiting until they file their 2009 or 2010 income taxes to receive a refund. These funds may be used for certain downpayment and closing cost expenses.

Under the guidelines announced by HUD, non-profits and FHA-approved lenders are allowed to give home buyers short-term loans. The guidelines also allow government agencies, such as state housing finance agencies, to facilitate home sales by providing longer term loans secured by second mortgages.

Housing finance agencies and other government entities may also issue tax credit loans, which home buyers may use to satisfy the FHA 3.5 percent downpayment requirement.

In addition, approved FHA lenders can purchase a home buyer’s anticipated tax credit to pay closing costs and downpayment costs above the 3.5 percent downpayment that is required for FHA-insured homes.

More information about the guidelines is available on the NAHB web site. Read the HUD mortgagee letter (pdf) and an explanation of the FHA Mortgagee Letter on Tax Credit Monetization (pdf). An FAQ about monetization (pdf) is available at the NAHB web site.
If I’m qualified for the tax credit and buy a home in 2009 (or 2010), can I apply the tax credit against my 2008 (or 2009) tax return?
Yes. The law allows taxpayers to choose (“elect”) to treat qualified home purchases in 2009 (or 2010) as if the purchase occurred on December 31, 2008 (or if in 2010, December 31, 2009). This means that the previous year’s income limit (MAGI) applies and the election accelerates when the credit can be claimed. A benefit of this election is that a home buyer in 2009 or 2010 will know their prior year MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.

Taxpayers buying a home who wish to claim it on their prior year tax return, but who have already submitted their tax return to the IRS, may file an amended return claiming the tax credit using Form 1040X. You should consult with a tax professional to determine how to arrange this.
For a home purchase in 2009 or 2010, can I choose whether to treat the purchase as occurring in the prior or present year, depending on in which year my credit amount is the largest?
Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in the present year and a larger credit would be available using the prior year MAGI amounts, then you can choose the year that yields the largest credit amount.
How can two unmarried buyers allocate the tax credit if one qualifies for the $8,000 first-time home buyer tax credit and the other qualifies for the $6,500 repeat home buyer credit?
The buyers can allocate the tax credit in any reasonable manner, provided neither claims a tax credit higher than the one they qualify for and the home purchase does not yield a total of more than $8,000 in tax credits. For example, the repeat home buyer could claim $6,500 and the first-time home buyer could claim $1,500. Alternatively, both buyers could claim a $4,000 tax credit.
Does a married couple qualify for any home buyer tax credit in the following situation? Spouse A has lived in and owned the same principal residence for at least five years. Spouse B has lived in and owned the same principal residence for less than five years.
In this situation, the couple does not qualify for any home buyer tax credit. Because the couple is married, the law tests the ownership history of both spouses. Spouse A clearly does not qualify for the $8,000 first-time home buyer tax credit, so neither does Spouse B.

Spouse A does appear to qualify for the $6,500 repeat buyer credit, but because Spouse B has not owned and lived in the same principal residence for at least five years, neither of them can claim the repeat home buyer tax credit.

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VA Loan Basics For Las Vegas Veterans

Mark Madsen — Tue, 05 Jan 2010 17:49:28 +0000

If you’re a Las Vegas Veteran, a VA Mortgage may be an excellent option to consider when pre-qualified for new home loan.

What Are VA Loans?

As a way to honor and serve those who served the nation in World War II, the U.S. government created the VA Loan Guaranty program.

Since then, the Department of Veterans Affairs has helped more than 18 million veterans and their families achieve the dream of homeownership.

Faced with deployments across the globe and frequent domestic relocation, active duty military members and veterans have struggled at times to build the financial stability necessary to secure reasonable lending options. VA loans have served as a crucial bridge for this deserving demographic.

VA loans are guaranteed by the federal government. In essence, the Department of Veterans Affairs agrees to cover about one quarter of a borrower’s mortgage in the event of default. That fiscal safety net gives VA-approved lenders a greater degree of security, which often translates into excellent rates and loan terms for qualified borrowers.

VA loans are also one of the few remaining ways for borrowers to purchase a home without putting any money down. The no-down payment feature is routinely cited as the program signature benefit as it is also a cornerstone of the programâ€™s mission to make homeownership possible for as many veterans and military members as possible.

The VA Loan Guaranty Program backed more than $68 billion in single-family loans for the fiscal year ending Sept. 30, an 80-percent increase from last year.

Some Key Benefits of VA Loans:

VA loans feature some of the most powerful financial benefits of any loan product on the market, in large part as a tribute and service to America’s veterans and active duty military members.

VA loans are one of the few remaining avenues for qualified borrowers to buy a house without a down payment â€” that no-cost option is routinely cited by veterans as the program’s most compelling benefit. In most parts of the country, veterans who qualify can purchase a home worth up to about $729,000 without putting down a single dollar.

There are also several other key benefits that can make a huge financial difference for military members and their families:

No private monthly mortgage insurance, which is a staple of conventional loans when the buyer puts down less than 20 percent

No penalties for loan pre-payment

Higher debt-to-income ratio allowed than for most conventional loans

Sellers can pay up to 6 percent of closing costs

Veterans often have an easier time qualifying for a VA loan. In fact, about 8 in 10 VA borrowers could not have obtained a conventional loan. The program does not have income or credit restrictions.

But remember that the VA doesn’t issue loans – it guarantees them. Prospective borrowers should expect VA-approved lenders to examine an applicant’s financial standing and credit history. In general, borrowers with a credit score below 620 may struggle initially to obtain financing.

Who Is Eligible For VA Mortgage Loans?

Millions of American veterans and active duty military members are eligible for the VA Loan Guaranty Program. But fewer than 10 percent of the country’s 24 million veterans have taken advantage of their entitlement.

Many veterans think they’re ineligible for benefits. Others don’t know how to apply or where to look for information. In fact, a 2004 VA survey found that 20 percent of veterans weren’t even aware of the home loan program’s existence.

The sad reality is millions of military members who bravely served our country are still missing out.

Anyone who meets the following criteria is eligible to qualify for a VA loan:

Military members who have served 181 days on active duty or three months during war time may be eligible.

People who have spent at least a half-dozen years in the National Guard or Reserves

Spouses of those killed in the line of duty

Prospective borrowers who meet the criteria must first obtain a Certificate of Eligibility from the VA. The COE is a formal military document that essentially verifies an applicant’s entitlement to participate in the program.

These forms can be found online at the VA website or through qualified VA lenders and brokers.

Not everyone who qualifies will wind up obtaining a VA loan. But those who do qualify have access to one of the most flexible and powerful lending options in the country.

What Can VA Loans Be Used For?

VA loans are surging in popularity nationwide, as more and more veterans turn to these low-cost loans in the face of a hardened credit market and a declining economy. Qualified buyers can purchase a home with no down payment and enjoy an array of significant financial benefits, from no private mortgage insurance to closing costs paid by the seller.

While VA loans are flexible, there are some limitations. These government-guaranteed loans can be used for a range of purposes that fit the needs of most military members and their families. But veterans and active duty military cannot use their VA entitlement for certain types of purchases.

First, here’s a look at the acceptable uses of a VA loan:

To buy, build or refinance an owner-occupied residence
To refinance an existing VA-guaranteed or direct loan
To repair, alter or improve a veteran-owned residence
To simultaneously purchase and improve a home
To buy a single-family residential unit in a VA-approved condominium development
To buy a farm residence owned and occupied by the veteran

So, VA loans are applicable for a range of uses for military members and their families. The main thrust of the program is home purchasing and refinancing. There are options for purchasing manufactured homes, but there are specific criteria regarding the units and lending institutions have become increasingly wary of these types of loans.

Now, here’s a look at the non-acceptable purposes of VA Loans:

Land loans

Investment properties

Buying or building a combined residential and business property unless

The property is primarily residential, with no more than one business unit and a nonresidential area that doesn’t exceed 25 percent of total floor space

Buying more than one separate residential unit or lot unless one is owner-occupied and there’s evidence that:

The units are not available separately

The units have a common owner, were considered one unit in the past or are assessed as one unit

How Much Can I Borrow With My VA Loan?

As with any home loan, the final loan amount will vary based on a number of factors, including an applicantâ€™s financial standing and credit score.

Underwriters will generally seek to identify and verify income that can be used to cover the mortgage payment; other shelter expenses; debts and obligations; and family living expenses. They will also seek to verify that the income is stable, reliable and likely to continue.

The VA has a lending limit in place that varies by geography. In most parts of the country, the loan limit is $417,000. There are higher limits in some of the nationâ€™s more expensive real estate markets. In those markets, the VA Loan limit is $1,094,625.

In essence, qualified buyers who want to purchase a home above the loan limit are on the hook for covering the difference. There are also jumbo loan options available.

Article Provided By: VAMortgageCenter.com

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Top 5 Las Vegas Mortgage Links / Articles / Questions

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Raintree Mortgage (Las Vegas)

9488 West Flamingo Rd. Suite 102
Las Vegas, NV 89147 | NV LIC 2511
702-432-5626 | Email
>> Apply Online

Las Vegas FHA First-Time Home Buyer Guide

Mark Madsen — Mon, 25 May 2009 00:44:38 +0000

Many Las Vegas First-Time Home Buyers are realizing their dream of home ownership with the help of FHA mortgage programs.

The low down payment requirements, flexible credit guidelines, common sense underwriting, and low mortgage rates make an FHA mortgage loan a popular choice.

Between contract negotiations on Las Vegas short sales or bank owned properties, dealing with appraisal requirements, home inspections, and relocation logistics, purchasing a Las Vegas property for the first time can be an overwhelming experience without the right real estate and mortgage team at your side.

Even though we load this real estate blog with valuable information to help give our clients the confidence that they’re making the most educated decision, our main objective is to earn your trust through service and communication.

Please feel free to contact us directly at any time via phone, email, or online application form if you desire personal attention gaining a better understanding of some of these complex details.

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FHA First-Time Home Buyer Basics / FAQ

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What is a Mortgage?

A mortgage loan is simply an agreement with predetermined terms of re-payment between a borrower and a lender where a property is used to secure the debt.

How is mortgage money made?

Home mortgage loans are either backed by a specific lender’s deposits or funded by a group of investors through a slightly complex relationship organized by financial firms which involves Mortgage Backed Securities (MBS), Government Sponsored Enterprises (GSEs) such as Fannie Mae and Freddie Mac, or other institutions on Wall Street that buy and sell these instruments on the secondary market.

An easier explanation is that banks and investors lend money to homeowners based on their own guidelines. To ensure their safety in the case of borrower default, most lenders will require a form of mortgage insurance depending on the amount of equity a property has compared to the loan amount (Loan-to-Value).

Is the FHA a lender?

No, The Federal Housing Administration (FHA) is a US Government agency that was created in 1934 for the purpose of stabilizing the housing market by providing adequate insurance on mortgage loans.

Basically, the FHA is a form of mortgage insurance provider with more flexible qualifying guidelines.

In order to originate and fund FHA insured mortgage loans, mortgage companies have to meet strict licensing requirements that include special FHA audits, as well as state and federal regulation.

If you can gain anything from this short history lesson, working with an FHA licensed mortgage company should make you feel a little more safe and confident in the professionals you are trusting with your mortgage transaction.

Qualifying for a Las Vegas FHA Mortgage:

To qualify for an FHA mortgage, underwriters will evaluate the following factors:

Choosing the right home:

Las Vegas First-Time Home Buyers looking to qualify for an FHA mortgage need to make sure that their real estate agent is familiar with the new FHA appraisal guidelines and other FHA property requirements.

Name two good reasons I should buy a Las Vegas home now?

Besides the fact that FHA mortgage rates and property values are very low, there is a new $8000 First-Time Home Buyer tax incentive that sweetens up the deal.

While it is certainly understandable to be cautious about the potential for future decline in property values, the low rates should make up for the difference in any short term losses. From a negotiating perspective, sellers are more willing to play by the buyer’s rules when prices appear to be going down vs up.

Another timeline to pay attention to is that the Fed may stop purchasing Mortgage Backed Securities by November of 2009 which may have a significant impact on interest rates.

What is my next step?

Great question! It is important to present an offer to a seller once you have had the opportunity to get a full mortgage approval from your mortgage lender.

Since banks have tightened up their guidelines, it is a good idea to get your financing and approval in place so that you can be ready to take advantage of a great property deal the day it hits the market.

We work through a full financial strategy session with each of our clients before sending them out to find a new home. Just as your real estate agent’s mission is to protect your interests with regards to your property investment, your loan officer has a fiduciary responsibility to make sure you obtain an affordable mortgage loan that you can feel safe and secure paying on over time.

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Top 6 Las Vegas Mortgage Links / Articles / Questions

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Raintree Mortgage (Las Vegas)

9488 West Flamingo Rd. Suite 102
Las Vegas, NV 89147 | NV LIC 2511
702-432-5626 | Email
>> Apply Online

Las Vegas $8000 FHA First-Time Home Buyer Tax Credit

Mark Madsen — Mon, 25 May 2009 00:21:21 +0000

Update on $8,000 First-Time Home Buyer Tax Credit >> click here

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There are just about 6 months left for Las Vegas First-Time Home Buyers to take advantage of the $8000 Tax Credit.

*Update – Even though the HUD Secretary mentioned the possibility of using the $8000 tax credit as a down payment, it isn’t a reality quite yet for Las Vegas First-Time Home Buyers.

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$8000 Tax Credit Basics

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The $8000 First-Time Home Buyer Tax Credit is part of the original $787 Billion American Recovery and Reinvestment Act of 2009, and is intended to help stimulate the economy by giving money to buyers who purchase a home between Jan 1, 2009 and Dec. 1, 2009.

This is for first-time buyers only who have not owned a principle residence in the past 3 years.

The credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009.

Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.

The tax credit does not have to be repaid.

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Frequently Asked Questions

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Q: Is the $8000 First-Time Home Buyer Tax Credit for FHA loans only?

No – The tax credit applies to any home that is purchased as a principal residence, regardless if FHA financing was used or not.

Q: Do I have to pay the $8000 back?

No – This is a credit to your 2008 taxes, which are due on April 15, 2009.

EX 1: If you owe $5,000 in taxes, then you would be receive $3000 from the IRS.

EX 2: If you do not own any money, then you would receive a check for $8000.

The $7500 tax credit launched in 2007 does have to be re-paid over a 15 year term.

Q: Are there income restrictions?

Yes – The income restriction is based on the tax filing status of the borrower. If you file as Single, then the max Adjusted Gross Income you can show is $75,000 to receive the full credit. If you make more than $75,000, but less than $95,000, then the credit is phased out based on a ratio. For couples filing as Married, then the max Adjusted Gross Income is $150,000 – $170,000 based on the same scale.

Q: How is income determined?

Income for the $8000 tax credit is determined based on the Adjusted Gross Income which includes salaries, wages, interest, dividends, pension, retirement earnings, rental income, and several other things that your CPA or tax consultant should review with you.

Q: Do I have to apply for the tax credit?

No – You simply have to fill out IRS form 5405. If you have already filed your 2008 tax returns, then you just have to file an amended form 1040X.

Q: Can I use the tax credit as part of my down payment?

No – Speak with your CPA, but logistically it is impossible to take a credit on something that hasn’t been purchased yet.

Q: What if I filed my 2008 tax returns for the $7500 on a home that was purchased in 2009?

Just file the amended form 1040X.

Q: Will I ever have to pay the $8000 tax credit back?

Yes – If you sell the property within 3 years from the time of purchase, you’ll have to pay back the full amount. There are special provisions made for homes that are sold as a result of a divorce settlement.

Q: What if I’m building a new home?

You can still qualify for the tax credit as long as you occupy the home prior to Dec. 1, 2009.

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Top 6 Las Vegas Mortgage Links / Articles / Questions

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Raintree Mortgage (Las Vegas)

9488 West Flamingo Rd. Suite 102
Las Vegas, NV 89147 | NV LIC 2511
702-432-5626 | Email
>> Apply Online

April 1, 2009 Las Vegas FHA Appraisal Guidelines

Mark Madsen — Mon, 25 May 2009 00:20:59 +0000

If you are First-Time Home Buyer looking to take advantage of some of the great Las Vegas real estate deals with the help of FHA mortgage financing, there are a few new FHA appraisal guidelines that you should be aware of.

Not to be confused with the recent Home Valuation Code of Conduct (HVCC) agreement that went into effect on May 1, 2009, these FHA appraisal guidelines relate more specifically to the listing price and appraisal valuation reporting required by the appraiser.

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There are basically 10 major points of interest that sellers, buyers, and agents need to pay attention to with regards to the new FHA Appraisal Guidelines:

The Market Conditions Addendum (Fannie Form 1004MC/Freddie Form 71) needs to be completed. This basically has to do with creating more transparency for appraisals conducted in declining markets.

At least two comparable sales within 90 days of appraisal date.

A minimum of two active listings or pending sales, in addition to three closed comparables.

Bracketed listings using both dwelling size and sales price when possible.

Adjust active listings to reflect the List To Sales Price Ratio.

Adjust pending sales to reflect contract sales price when possible.

Include original list price and any revised list prices.

Reconciliation of adjusted values of active or pending sales with adjusted values of closed comparable sales.

Absorption Rate Analysis.

Known or reported sales concessions on active pending sales.

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How will this impact Las Vegas home buyers?

FHA defines that a declining market is any “neighborhood, market area, or region that demonstrates a decline in prices or deterioration in other market conditions as evidenced by an oversupply of existing inventory or extended marketing times.”

The 1004MC form will identify a declining trend in the market. FHA reminds Direct Endorsed lenders that both the lender and the appraiser are equally responsible for the integrity, accuracy, and thoroughness of an appraisal submitted to FHA.

Obviously, the lower priced homes is a direct result in the overwhelming amount of inventory, which includes Short Sales and bank owned properties.

How should real estate agents and sellers respond to the new FHA Appraisal Guidelines?

You can read how some real estate agents feel about this here and here.

Basically, agents need to be prepared to give a value of a property based on the most recent 90 days (three months) neighborhood comps to avoid complications on a new purchase transaction.

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Online Resources

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Top 6 Las Vegas Mortgage Links / Articles / Questions

______________

Raintree Mortgage (Las Vegas)

9488 West Flamingo Rd. Suite 102
Las Vegas, NV 89147 | NV LIC 2511
702-432-5626 | Email
>> Apply Online

Las Vegas Buyers Dealing With HVCC Appraisal Guidelines

Mark Madsen — Mon, 25 May 2009 00:20:39 +0000

Las Vegas buyers and sellers need to be aware of the new Home Valuation Code of Conduct (HVCC) that went into effect on May1, 2009.

The HVCC regulations will have a significant impact on all real estate purchase and mortgage refinance transactions that involve a conventional Fannie Mae or Freddie Mac mortgage, and it may also apply to FHA in the near future.

HVCC is a new agreement between the Federal Housing Finance Agency (FHFA) and the New York Attorney General’s office to help enhance the integrity of the home appraisal process in the mortgage finance industry by implementing policies that govern the way appraisals are ordered for all single-family mortgage loans that are sold to Fannie Mae and Freddie Mac.

Even though FHA or VA mortgage loans are not included in this agreement at the moment, many lenders may adopt a blanket policy where they require all appraisals to be ordered through a third party (unregulated) Appraisal Management Company (AMC).

Basically, HVCC is intended to restrict any communication between an appraiser and those who derive their income on the lending side from closed transactions.

As defined by the federal agencies, the “loan production staff” consists of those responsible for generating loan volume or approving loans, as well as their subordinates.

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HVCC History / Overview

HVCC is the result of a 2007 lawsuit where Attorney General Andrew Cuomo sued an appraisal division of First American Corp. for alegidly inflating home values on an estimated 260,000 Washington Mutual loans between 2006 and 2007.

While there are many mixed emotions by the mortgage broker community, real estate agents and appraisers, here are a few main bullets for everyone to consider before making your own determination as to whether or not the HVCC will end up costing mortgage consumers more money:

Appraiser / Loan Officer relationships just became obsolete due to the fact that anyone who has an income based on the loan closing will not be able to speak with the appraiser.

No more courtesy calls from an appraiser to the loan officer if they feel that the value is off.

All appraisals will be ordered through a third party AMC that will randomly select an appraiser. This means that buyers and sellers will not have control over the quality or experience of the appraiser.

Appraisal Management Companies may take a large fee as the middle man, as well as control who they give business to, which will put added pressure on an already underpaid appraiser industry.

Since communication between loan officers and appraisers will not be permitted, rush files, appraisal updates, and value conflicts will prolong closings and may require extended loan lock costs.

An increase in the cost of appraisals is a likely result, as well as extra appraisal fees if a file needs to be moved between lenders.

Lenders have up until 3 days prior to the closing of a transaction to provide a consumer with a copy of the report.

Instead of using an AMC, some lenders may choose to establish in-house appraisal ordering departments that follow the HVCC guidelines. This may result in a politically self-serving “Approved List” for the banks, which could affect the way values are determined or loans are underwritten and denied.

Personal Commentary:

I have been a Las Vegas Mortgage professional since 2000, and have witnessed the drastic rise and fall of real estate prices in our market.

The only real benefit that I can see from this HVCC is that loan originators will not be pressured by sellers, agents, or homeowners to “bring in value” by finding a liberal appraiser.

Unfortunately, this lender / appraiser collusion has had an impact on the current foreclosure mess that we’re dealing with in Las Vegas.

Even though the HVCC agreement is a direct result of value pushing between a major Bank (WAMU) and their internal appraisal management company, the street level loan officers and real estate agents seem to be taking the brunt of the blame.

Either way, HVCC is here to say, so we all have to learn how to adjust to the new rules and inconveniences.

What do you need to be aware of for future real estate / mortgage transactions?

Allow plenty of time for closings, due diligence periods for appraisals, and rate locks.
Update the MLS listng description with as much info that will help support your values.
Have all of the neighborhood comps readily available to give to the AMC if there is a discrepancy.
Be patient and confident knowing that we are in this together.

Other Resources:

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Top 6 Las Vegas Mortgage Links / Articles / Questions

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Raintree Mortgage (Las Vegas)

9488 West Flamingo Rd. Suite 102
Las Vegas, NV 89147 | NV LIC 2511
702-432-5626 | Email
>> Apply Online

Where Can I Get My Down Payment For A Las Vegas FHA Mortgage?

Mark Madsen — Mon, 25 May 2009 00:20:17 +0000

With only a 3.5% minimum down payment requirement, FHA Mortgage programs are being used by more Las Vegas First-Time Home Buyers.

Some people easily get down payment and equity confused, especially in a market like Las Vegas which has a significant number of undervalued bank owned and foreclosure deals.

However, on a purchase transaction, the FHA clearly defines that the minimum down payment needs to be 3.5% of the lesser of the appraised value or the sales price.

Keep in mind that the down payment does not include borrower-paid closing costs, pre-paid taxes, insurance, title, appraisal, and home inspection fees.

To be approved for an FHA loan, all sources of funds have to be properly documented and verified by an underwriter who will be looking to see if there were any undocumented debts incurred by the borrower to obtain the FHA down payment cash investment.

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Acceptable sources of borrower funds include the following:

Earnest Money Deposit
Savings and Checking Accounts
Cash saved at home
Private savings club
Savings Bonds
IRAs
401 (k) and Keogh Accounts
Stocks and Bonds
Thrift Savings Plans
Gift Funds
Sales Proceeds
Sale of personal property
Commissions from sale
Trade Equity
Rent Credit
Sweat Equity
Collateralized Loans
Disaster Relief Grants and Loans
Employer’s Guarantee Plans
Employer Assistance Plans

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Questions About Sourcing FHA Down Payment Funds:

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Q: How is the Eearnest Money Deposit verified?

The EMD is the initial deposit submitted with an accepted purchase contract offer which is held in an escrow account. These funds count towards the borrower’s down payment and/or closing costs.

The EMD is verified by a cancelled check, certification from the deposit-holder acknowledging receipt of funds, or separate evidence of the source of funds.

*If the EMD exceeds 2% of the sales price or appears to be excessive based on the borrower’s history of savings, there may be more documentation required to source and document the money trail.

Q: How are Savings and Checking Accounts verified?

A verification of deposit (VOD), along with the most recent bank statement is one way a lender may request to verify these funds. If there is a significant increase in an account, or the account was recently opened, a written letter of explanation may be required as well.

Q: What if I have been saving money in a jar or under the mattress?

The borrower will need to provide a written letter of explanation and evidence of the ability to accumulate the cash. This can include analyzing a borrower’s income stream, the time period which the funds were saved, spending habits, documented expenses, and a history of using financial institutions.

Q: How is a down payment documented from a 401 (k) or IRA?

While liquidation of the account is not required, underwriters will only use up to 60% of the value of the assets, unless the borrower can prove that a higher percentage an be withdrawn after subtracting any Federal income tax and penalties.

Q: Do I have to show liquidation of funds from Stocks or Bonds?

No, you may not have to show actual liquidation of funds from a Stock or Bond, but the accounts will be verified by providing monthly or quarterly statements.

Q: Who can give a Gift Fund?

A gift fund can be considered as an acceptable source of down payment as long as there is no expected of implied terms of repayment to the donor by the borrower.

Gift funds can be given by the following:

A relative
Borrower’s employer or labor union
A charitable organization
A government agency or public entity that has a home ownership program
A close friend with a clearly defined and documented interest in the borrower

As a general rule, the FHA is not concerned with how the donor obtained the Gift Funds, as long as the funds are not associated with the sales transaction.

Q: Can real estate agents use their commissions as part of the down payment?

Yes, a family member who is a licensed real estate agent may also donate their commission.

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There are many more down payment options that can be considered by an FHA underwriter as acceptable funds to close.

It is important to be completely transparent with your loan officer at the time of the initial application and financial strategy session so that we can put a game plan together for your individual scenario and goals.

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Top 6 Las Vegas Mortgage Links / Articles / Questions

______________

Raintree Mortgage (Las Vegas)

9488 West Flamingo Rd. Suite 102
Las Vegas, NV 89147 | NV LIC 2511
702-432-5626 | Email
>> Apply Online

Las Vegas Mortgage Approval and Funding Process

Mark Madsen — Mon, 25 May 2009 00:19:56 +0000

Purchasing a new Las Vegas property can be an overwhelming process between the various contract negotiations, mortgage approvals, inspections, and new appraisal guidelines.

The following outline will help buyers with the overall time line:

1. Loan Application –

The loan application should be one of the first places home buyers start, especially if you are planning to apply for an FHA mortgage.

This is where the loan officer can spend a little time with a potential borrower to discuss their unique lending scenario, financing goals, and qualifying guidelines.

Depending on the amount of information requested by both parties, a typical loan application generally can take between 15 minutes to an hour.

It is highly beneficial to get all of the required documentation submitted at this time as well so that any potential underwriting challenges can be addressed.

2. Pre-Approval Letter –

A pre-approval lets the borrower and seller know how much they can qualify for, and is issued once the loan officer has verified income, assets, and credit.

As lending guidelines continue to change, most loan officers will take the pre-approval a step further and run a full online Fannie Mae (DU) or Freddie Mac (LP) automated underwriting approval to make sure the borrower has an additional layer of confidence prior to shopping for a new home.

Most sellers are requiring a full approval be submitted with a purchase offer.

Keep in mind, DU or LP approvals are not considered full underwritten approvals, unless an underwriter has physically analyzed the submitted documentation. Every bank has their own quality control systems for this process, but the average time it should take for a full underwritten approval is 48-72 hours.

So basically, it is a good idea to get everything in and wait an extra day or so for an underwriter to issue a full approval.

3. Loan Search / Good Faith Estimate –

Once a pre-approval has been issued, it is important that the lender and borrower agree on the actual terms of the new mortgage prior to submitting offers on a new property.

A Good Faith Estimate is a form that outlines the interest rate, down payment, purchase price / loan amount, and other estimated closing costs so that the borrower can make an educated decision.

Even though the GFE is an “Estimate” based on the disclosed costs of the new loan, there are several things that the loan officer does not have control over. Make sure you ask your loan officer what specific line items you can expect to be consistent or change at the time of closing.

4. Purchase Offer -

Depending on which market you are in, the purchase offer and acceptance process can be an entirely new beast to deal with.

Short Sales, Bank Owned (REO), and Rehab properties may take several weeks of negotiation before a perceived win / win deal is reached. It is important to hire a full-time real estate professional who is familiar with the landscape and knows how to navigate these types of transactions.

Recent neighborhood sales, pending foreclosures, and the actual terms of the purchase agreement are a few things that you need to pay close attention to before you commit to putting a sizable earnest money deposit down.

4. Due Diligence Period –

This is the time, as defined in the purchase agreement, that the borrower and seller have to complete all inspections, appraisal, review HOA / title documents, and anything else that may have an impact on the successful closing of the purchase transaction.

Due to new HVCC and FHA Appraisal guidelines, it may take a few extra weeks before an appraisal can be delivered.

5. Appraisals / Inspections Completed –

Typically, the appraisal and home inspection are paid for in advance by the borrower and have to be completed within 10 days of an accepted offer. Obviously, an extended period of time will have to be given if the mortgage falls under HVCC guidelines.

The mortgage company will have to order the appraisal through a third party Appraisal Management Company, but the buyer’s agent generally handles the logistics of the property inspection.

Most borrowers like to be present at the time of the home inspection, however, the appraisal is handled privately by an appraiser.

6. Final Conditions Submitted to Bank -

The appraisal, preliminary title report, and any addition borrower documents are submitted to an underwriter for final approval. This process takes 48-72 hours and is the final step, other than a loan lock, needed to order closing documents.

Proof of hazard insurance is also required prior to ordering loan documents.

Some mortgage programs allow a borrower the option of including their quarterly real estate tax payments and annual hazard insurance premium in the monthly mortgage payment by establishing a separate escrow (impound) account.

Make sure that you know what your total monthly mortgage payment is before ordering documents.

7. Loan Lock –

Mortgage rates have a tendency to change a few times a day depending on market conditions and adjusting credit / bank guidelines. It is important to regularly communicate with your loan officer to make sure you get the rate and closing cost scenario that you have budgeted for.

Some brokers have the ability to change banks or negotiate a lower rate if things change for the better, but you are ultimately putting full trust in your loan officer when it comes to the rate game.

Rates can be locked between 7 – 90 days. A good rule of thumb, the shorter the lock period, the lower the interest rate.

Since a .125% adjustment in rate may only impact your monthly payment by a few dollars, it is a good idea to find a rate you are comfortable with and lock as soon as possible.

With the rapid fluctuations in pricing due to the turbulence on Wall Street, rates could move .5% in a matter of hours causing monthly payments and closing costs to significantly change.

8. Final Loan Documents Signed -

The final loan documents are delivered to an escrow or title company for preparation. The borrowers will either sign with an escrow officer or meet an approved notary at a convenient location.

Sinings can take between 1-2 hours, depending on the amount of questions the borrower has about the transaction.

If there is additional funds to close, like a down payment or closing costs not covered by the seller, the borrower will bring a certified check to the escrow company.

*Make sure your loan officer knows where these funds are coming from so that there is a documented paper trail for the underwriter to approve.

The final property inspection is also completed during this time. If there are things that still need to be fixed before the you agree to close on the purchase, let your loan officer know if you want to hold off on funding, unless the rate or documents are set to expire.

9. Funding / Recording-

Once the final documents have been signed by the borrowers they are shipped back to the bank for a quick inspection and then set in line for funding.

A wire is sent from the lender through a few places and eventually ends up at the escrow company.

Since this process may take a few hours, it is common to hear about a delay between the time a bank “Funds” a loan and an escrow company “Records” a closing.

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Top 6 Las Vegas Mortgage Links / Articles / Questions

______________

Raintree Mortgage (Las Vegas)

9488 West Flamingo Rd. Suite 102
Las Vegas, NV 89147 | NV LIC 2511
702-432-5626 | Email
>> Apply Online

How Much Can I Borrow For A Las Vegas Mortgage?

Mark Madsen — Mon, 25 May 2009 00:19:38 +0000

The first question home buyers want to know generally revolves around how much mortgage money they can borrow or get qualified for.

Simply looking on a search engine for “Mortgage – how much can I borrow” will more than likely only produce a bunch of mortgage calculator results vs real information that describes the entire process.

While an online mortgage calculator may be a decent tool to use as measurement, there are several other factors that play a part in a full mortgage approval.

Banks look at a few things when qualifying a borrower for a new mortgage:

Credit

The most common measure of a borrower’s credit standing are the three scores which can range between 300 and 850.

A minimum 620 fico score is required for most FHA lenders, and anything higher may increase your chances of getting approved with a lower rate.

There is other criteria that banks look at regarding a borrower’s credit standing, such as payment history, total balances and limits, type of credit borrowed, and recent inquiries.

Since mortgage rates are also tied to credit scores on some loan products, knowing where you stand or how to improve this rating could make a significant impact on your monthly payment.

Debt-to-Income Ratio

The (DTI) is calculated by dividing a borrower’s total monthly liabilities (minimum credit payments, auto loans / leases, child support, mortgage payments…) by the verifiable monthly income.

* Verifiable income includes pay stubs, W2’s, Tax Returns, and in some cases 1099’s and bank statements.

Example Scenario:

Current liabilities + new mortgage payment = $1,500 a month

(divided by)

Gross Monthly Income of $3,500

The DTI would be 42%.

Most mortgage guidelines require a 45% or lower Debt-to-Income ratio.

Loan-to-Value

The (LTV) is calculated differently depending on whether the new transaction is a purchase, refinance, or rehab loan.

Basically, it is the amount of the new loan in comparison to the total value of the property.

When qualifying for a Las Vegas FHA loan on a purchase, a 3.5% down payment would equal a 96.5% LTV.

Keep in mind that banks will verify a paper-trail of the assets used for the down payment, so it is important to communicate with your loan officer about your current financial position.

There are a few factors to consider when deciding on the amount of your new mortgage:

1. Desired Down Payment

2. Budgeted Monthly Payment

3. Length of time you want to own the property

Updated Clark County Nevada lending limits will also play a role in determining the type of mortgage program and amount you are qualified for.

Since Las Vegas mortgage rates may also have an impact on your monthly mortgage payment, it is important to pay attention to the market.

Schedule a strategy session with our professional Las Vegas Mortgage staff by phone or at our office to discuss the best lending solution for you and your family.

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Top 6 Las Vegas Mortgage Links / Articles / Questions

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Raintree Mortgage (Las Vegas)

9488 West Flamingo Rd. Suite 102
Las Vegas, NV 89147 | NV LIC 2511
702-432-5626 | Email
>> Apply Online

New Las Vegas, NV Clark County FHA Loan Limits

Mark Madsen — Mon, 25 May 2009 00:19:17 +0000

Even though many First-Time Home Buyers can find a great real estate deal in the mid $100k – $200k range, Las Vegas, NV (Clark County) FHA lending limits are back up to the $400,000 mark.

County Name	Single Family	Two-Family	Three-Family	Four-Family
Clark	$400,000	$512,050	$618,950	$769,250

* Reverse Mortgage Loan Limits for the FHA HECM have also been raised to $625,500

______________

Top 6 Las Vegas Mortgage Links / Articles / Questions

______________

Raintree Mortgage (Las Vegas)

9488 West Flamingo Rd. Suite 102
Las Vegas, NV 89147 | NV LIC 2511
702-432-5626 | Email
>> Apply Online