Las Vegas Real Estate Blog » Mortgage

Tips For Buyers

Richard Soto — Mon, 12 Apr 2010 15:06:22 +0000

How much house can you afford?

Before you sign up with a real estate agent – and before you visit your first home – you need to know exactly how much house you can realistically afford. The best way to do this is to list the following figures:

Net (not gross) income from employment – after taxes are deducted
Any other income received on a regular basis.

Add these two figures.

List your regular monthly expenses:

Amount of car payment

Car insurance payment

Gas and lunches related to employment

Average utility bills

Credit card payments

Average food bills

Ongoing medical/dental bills

Typical amount you spend on entertainment

Any other loans or ongoing expenses

Amount earmarked for savings or vacation.

Total these expenses and deduct them from your income. The amount that is left is approximately how much you can realistically afford to spend on a monthly home mortgage payment.

You can now check out free mortgage calculators on Google to estimate how much you will have to pay on a home that interests you. You can also calculate the amount of down payment you have and the average home loan interest rate since you do not know exactly how much interest you will have to pay until you are in contact with lenders.

You should not exceed this amount even though you see your dream home for a higher monthly mortgage than you can afford. If you are somehow approved for a higher mortgage, you will wind up making a number of financial and lifestyle sacrifices and may wind up in foreclosure as are so many buyers who went in over their heads

Author Bio:

Richard is an expert in the Irving real estate & Coppell real estate markets. We can also assist you with commercial real estate in Dallas.

$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.

______________

Top 5 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

4 Misconceptions from Today’s Home Buyer

Marc Rasmussen — Thu, 30 Jul 2009 15:56:27 +0000

1) Getting a mortgage is easy

Financing is not easy these days. I currently have some clients under contract trying to buy a vacation condo on the beach. My clients have great credit, make a good living and are putting 20% down. It is still questionable as to whether they will get money to buy the property. The problem is that it is a condo in Florida and banks have tightened their lending guidelines on these properties.

With that being said there are some great loan programs available. For some financing is relatively easy. If you are a first time home buyer, have great credit, money for a down payment, buying within your means and a primary residence you should be able to get a mortgage.

2) Homes aren’t selling

This is not true either. Homes are selling out there. Depending on where you are in the country sales are relatively active. Obviously, some areas are going to be better than others. I heard on the nightly news the other night that sales on a national lever were up. Keep in mind real estate is local so you need to find out what is happening in your area. Inventories might still be high but there is a lot of demand for a properly priced property. Talk to a competent Realtor to find what is happening in your market.

3) Foreclosures and short sales are the only properties to consider

Foreclosures and short sales make up a good portion of the sales today. There are some great deals to be found in foreclosures and short sales however there are also some great properties available for sale that are not bank owned or short sales. Don’t ignore these properties. If you are looking to buy a home hire a good Realtor that will narrow down your best options which will include bank owned properties, short sales and realistic sellers who are not upside down.

4) Realtors are not busy

Every now and then I get a wise guy that thinks he can walk all over me because he thinks I have nothing to do. They tend to speak down to me, want to be catered to, their needs and wants go over and above what is required from a Realtor and have little or no respect for my time. Fortunately, I am busy enough to fire these types of buyers and sellers. Don’t make the assumption that all Realtors are twiddling their thumbs in the office.

What misconceptions are you running into today?

Marc Rasmussen

Realtor in Sarasota, Florida

Sarasota real estate

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

_____________________

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.

_____________________

$8000 Tax Credit Basics

_____________________

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.

_____________________

Frequently Asked Questions

_____________________

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.

______________

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

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.

____

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.

____

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.

____

Online Resources

______________

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.

________

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:

______________

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.

______________

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.

______________

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

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

Las Vegas Real Estate: Basics of a Home Mortgage

Doug Yates — Fri, 24 Apr 2009 04:15:28 +0000

This article is provided to answer many of your questions about how to obtain a Las Vegas home loan. At the very least, it will clarify to some extent just exactly how much your credit report, job history, and bank accounts matter to your mortgage company.

There are four types of mortgage programs; Conventional- non-government loan which is primarily used by investors and/or those putting 10% or more as a down payment. Interest rates usually are slightly better for owner occupied loans. FHA- government loan which is for owner occupied buyers ONLY, and is quite lenient in their guidelines with regards to credit unlike Conventional. VA- government loan which is for those who have served in any branch of the military only! JUMBO- Are loans over $417,000 (NV, varies by State!) that are not Fanniemae/Freddiemac purchased loans. They require more down payment and higher interest rates due to the lack of Wall Street’s interest in the “higher risk” loans.

In general there are four basic factors used to qualify a borrower for a loan, regardless whether its Conventional, FHA or VA (Slight differences between the programs).

-Credit Worthiness

-Cash

-Job/Income Stability

-Debt/Income Ratios

(1) CREDIT WORTHINESS

It is not necessary that you have accumulated pages and pages of excellent credit references. In fact you don’t need much credit at all. Having very little credit history is sometimes better than having poor credit history. Even if you have no credit at all, we can still verify that you have paid your rent, telephone bill, and utilities on time for the past year. If you do have some credit history, it is not necessary that you “walk on water”. Whether you have a lot of credit accounts or only a few is not important. What matters is that these accounts have been handled in a responsible manner. Special focus is given to payments made in the last 12 to 24 months. Never, under any circumstances, should you make a late payment on a mortgage if you intend to apply for a new mortgage in the next year. This can be “the kiss of death” on a loan application. If you must take a late payment on some credit account, why not make it a big one? One late car payment of $350 hurts you no more than a late payment of $10 to Sears- and it may be easier to explain.

(2) CASH

Believe it or not, even if you have all your ducks in a row, and you have 10 years on the job, with gold card credit and plenty of income, your loan will not be approved unless you can prove ahead of time that you have sufficient funds to close the deal. Only a portion of the cash must come from your own pocket, 3.5%-10% (depending on program). *FHA allows 100% gift from a family member for all your down payment and closing costs. You will need cash for four things.

-DOWN PAYMENT (this is a set figure that is not negotiable. 3.5% up to 10% of the purchase price)

-PREPAID TAXES, INTEREST, INSURANCE and PMI (private mortgage insurance), (lenders will usually collect up to 6 months of taxes and 14 months of homeowners insurance and 2 months of PMI)

-CLOSING COSTS (lender fees include 1% origination fee, Doc prep fees $200-$400, Underwriting fee $400-$700, appraisal $450, Realtor Transaction fees $400-$600, Title and escrow fees $700 +, etc…)

-RESERVES (Cash in the bank AFTER closing to prove 1-6 payments can be made! Varies per program)

(3) INCOME/JOB STABILTY

The underwriter wants to make sure that the income used to qualify you for this loan is likely to be ongoing for the foreseeable future. Since there is obviously no way to guarantee that any job will last forever, it makes sense to look at job stability. Basic FHA/FNMA guidelines require that the borrower(s) be on the job for at least 12 months. There are currently programs available for those who have recently moved or changed jobs but remained in the same field. It can be a problem if a borrower changed jobs, more than 3 times in the last 2 years. Each case is treated individually and you should consult your loan officer for a program that fits your situation.

(4) DEBT RATIOS

The only part of the whole loan process that is more or less written in stone is the debt ratio. There are two ratios that matter most, the FRONT END & BACK END. They are pure math and are calculated as follows:

The front ratio is equal to your proposed mortgage payment, including principle, interest, taxes and insurance (P.I.T.I.) divided by your combined monthly gross income. The back end ratio is your proposed mortgage payment (P.I.T.I) plus all other monthly credit obligations (that will be ongoing for more than 6 months) divided by your monthly gross income.

*The front-end ratio must be less than or equal to 31% Most loan programs require that the back end ratio must be less than or equal to 41%. **We have programs that allow up to 55% on the back end ratio. (must “walk on water” financially!)

**FIRST** SECURE THE MORTGAGE

Home buyers in the Las Vegas Valley are constantly surprised at the fact that it can take as little as one day to find a home they are happy with: Since it may take longer to process a loan application than it does to find a suitable property, it makes sense to begin the mortgage process first. Everyone benefits from a “head start” on the mortgage process. The seller, because he knows he has a qualified buyer. The agent, because they have not wasted time with an unqualified prospective client. The buyer because he is confident he is getting a home he is approved for and can afford. Any problems with credit, employment, ratios or cash can be addressed early on so that a timely closing can be expected.

Should you need an estimate on a home you would like to buy, please email me the request and I’ll prepare one for you!

Courtesy of:

“Doug Yates Mortgage Team!”
Direct: #702 521-LOAN
Fax: # 702 577-1065
Email:Doug@DougYates.com
Website:www.dougyates.com