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First Time Home Buyer Tax Credit HUD Requirements

by Mark Rieger, Duke Warner Realty

When the law was changed to extend and expand the credit, IRS changed the requirements on the new Form 5405 and the instructions for claiming the tax credit.  The new requirement state that a FINAL Settlement Statement signed by ALL parties must be attached to their personal (1040) tax return. 

* If you have a pending transaction and are planning to obtain this tax credit – please notify your Escrow Officer right away. This will help aid in getting the escrow authorization forms signed through closing (while we transition with this requirement).

IRS Releases New Forms, Instructions

The IRS has released IR-2010-006 providing a revised Form 5405 to reflect the changes to the tax credit made in the extension and expansion legislation enacted in November 2009. The release reminds taxpayers that all tax returns claiming the tax credit must be filed manually (i.e., they cannot utilize the IRS E-File automatic system). The revised form includes a section for those repeat buyers who are eligible to claim the $6500 tax credit. The HUD-1 or evidence of the transaction must be filed with all returns claiming the credit (both the $8000 and $6500 credits). Individuals who claim the repeat buyer credit must also provide evidence that they have owned and used the prior residence for five consecutive years. The instructions indicate that property tax or homeowners insurance records are sufficient for this purpose.

Click here for:

IRS release, instructions, and forms

The Home Buyer Tax Credit

Can a Buyer Still Qualify If He/She Closes After April 30, 2010?
Under the Extended Home Buyer Tax Credit, as long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close.

As always, if you or anyone you know is looking to either Buy or Sell real estate anywhere in Central Oregon, please let me know.

FHA is raising fees and tightening lending standards

by Mark Rieger, Duke Warner Realty

It's hard to believe that when the real estate market has been struggling around the nation, new regulations and higher fees going into effect will make it even tougher to get a loan. The following information was released in the last 48 hours and has lots of people scrambling to get their purchase in the works before the new regulations and fees take effect.

WASHINGTON - The Federal Housing Administration (FHA) is raising fees and tightening lending standards to shore up its strapped finances and avoid a taxpayer bailout. The government agency has seen its losses rise with the foreclosure rate. Its reserves have sunk below the minimum level required by Congress. A healthy FHA is vital for the housing market because it insures roughly 30 percent of new loans, and is the largest backer of mortgages to first-time buyers.

The changes, which will go into effect in the first half of the year, "are among the most significant steps to address risk in the agency's history," FHA Commissioner David Stevens said in a prepared statement.

The FHA does not make loans, but rather offers insurance against default. Borrowers are willing to pay for the insurance because FHA loans only require down payments of 3.5 percent of the purchase price — and that didn't change.

The new policies, to be announced Wednesday, are designed to bring more revenue into the agency, while at the same time keeping loans available.

Under the changes, homebuyers will:

  • Pay an upfront mortgage insurance premium of 2.25 percent of the total loan amount, up from the current level of 1.75 percent. A borrower taking out a $200,000 mortgage would pay a $4,500 fee, for example, rather than the current fee of $3,500. Borrowers will still be able to wrap these fees into the total amount borrowed. FHA officials also plan to ask Congress to increase the maximum annual premium that FHA can charge.
  • Need a credit score of at least 580 to qualify. Many FHA lenders already require a higher score, but there had been no standard requirement across the program. Borrowers with a score lower than 580 will need a down payment of at least 10 percent.

The changes come as borrowers with loans backed by the agency have increasingly been falling into default. More than 18 percent of FHA borrowers are at least one payment behind or in foreclosure, compared with 14 percent for all loans, according to the Mortgage Bankers Association.

If you have any questions, or if you or anyone you know is looking to Buy or Sell real estate in Central Oregon, please let me know. I'm here to help.

2010 Real Estate Forecast

by Mark Rieger, Duke Warner Realty

2010 Forecast

So what will 2010 bring you ask? It remains to be seen what long term effect current policies will have on mortgage interest rates; it is very dependent on how well those policies work, how quickly we can burn through distressed inventory, and what happens if/when inflation kicks in. For certain we are in unprecedented times, so what we see today could be different tomorrow as World events (economies, terrorism, etc) now affect our markets more than ever before, and will continue to do so.

My predictions? Interest rates will likely remain low for the immediate future, especially since Fannie & Freddie have essentially been Nationalized; you & I are subsidizing low interest rates in hopes of stimulating the housing markets. Beyond about 6 months from now much could change. The short term trend over the past 30 days has been upward however, but overall, still very low.

There has been an amazing recovery of the U.S. dollar’s exchange rate against the currencies of most other major economic powers. According to information I received from B of A, as of last week, the dollar had regained all losses against those currencies since September of this year. What has fueled this resilient strength? The primary force is a belief that the economy is moving toward an increasingly sustainable recovery. This belief has had its ups and downs in recent months, of course, creating something of a roller coaster ride for interest rates (within a relatively narrow channel) and for commodity prices.

But there is more at work here. The unavoidable issue, even for those who have been certain that the dollar would continue to lose its exchange value, is that many foreign currencies look far worse than does the dollar and their countries’ economies appear to be far more tentative than ours. By contrast, the U.S. economy looks relatively strong.

Housing values, and an overall rebound in the housing market will occur…but when? Again, distressed inventories are affecting this big time, so much will depend on that. One thing is certain; every down-turn in the US economy has been followed by an up-turn; often the actual up-turn is in proportion to how bad the down-turn was. If that holds true we should see a better 2010 than 2009 in housing, followed by another increase in 2011, and again in 2012. I personally believe we will not return to boom times anytime soon, and hope for a slow and steady, sustainable, long-term recovery.

I hope this provides some assistance to you as we go forward into another year of a market that promises to be interesting and challenging! As always, if you or anyone you know is looking to Buy or Sell a home in Central Oregon, please feel free to give me a call at 541-923-3853.

Here’s to a better year for us all, and please enjoy a Happy & Safe New Year!

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