The Mortgage Corner by Christian Draheim 800-506-3076

Purchase or Refinance with the FHA 203k Renovation Home Loan

2010-04-02T13:31:00.000-04:00

The FHA Section 203k loan program allows buyers to purchase (or refinance) a home and finance renovation costs all in one loan. Typically homes in need of repair sell below current market values. What better than to buy a home and have the cash to fix it up the way would like too?

Home repairs can be anywhere from cosmetic to a complete home renovation...you can include new appliances too. The minimum repair amount is $5,000 and the maximum is subject to 110% of the home's value or the FHA County loan limit, whichever is less.

Do not be afraid, you do not have to be experienced in home repairs. An FHA 203k HUD Consultant will inspect the home to determine the required repairs and the costs to meet FHA standards. You choose your own licensed and insured general contractor and the FHA 203k HUD Consultant will work with you and your general contractor to coordinate your work write up for your home renovations.

Credit standards are the same as the traditional FHA loan program. Basically a mid credit score of 620 and the last 12 months of your monthly payments on time. Down payment is 3.5% of the purchase price and renovation costs.

Once you close on the purchase (or refinance) of your home you can begin your home renovation. You can request your 1st Draw (money for repairs)at the time of closing and up to 4 more Draws with your final Draw being given after completion and final inspection. The FHA Section 203k loan program allows you up to 6 months to complete your home renovation project.

Please call or email me with questions.

Thank you for reading!!!

Christian L. Draheim
Vice President of Government Lending
Gold Star Mortgage Financial Group

cdraheim@goldstarfinancial.com

http://www.facebook.com/cdraheim1
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http://www.christiandraheim.com

800-506-3076

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Home Buyer Tax Credit Q & A

2010-03-25T20:32:00.005-04:00

We've been getting a ton of questions lately about the Home Buyer Tax Credit, so we have put together some Q & A to help clarify some things. We are not certified tax consultants and we highly recommend you speak to one prior to making your decision.

The question we receive most often is regarding the deadline...

YOU MUST SIGN A PURCHASE AGREEMENT BY APRIL 30TH 2010 AND CLOSE BY JUNE 30TH 2010.

Q. What is the credit?

A. The first-time homebuyer credit is a tax credit for individuals and couples who purchase a new home after April 8, 2008, and before May 1, 2010. There are several versions of the credit depending upon when the home was purchased:

* For homes purchased in 2008, the credit, with some exceptions, must be repaid and takes the form of a $7,500 interest-free loan.
* For homes purchased in 2009 prior to November 7, the credit is for a maximum of $8,000 and, with some exceptions, does not have to be repaid, but it's only for new home owners who have not owned a home in the prior three years.
* Beginning November 7, 2009, an additional category of new homebuyers, long-time residents (who owned their own homes), was added. The credit for this group is a maximum of $6,500, which, with some exceptions, does not have to be repaid. (1/27/10)

Q. How much is the credit?

A. The credit is 10 percent of the purchase price of the home, with a maximum available credit of $7,500 ($8,000 if you purchased your home in 2009 or early 2010) for either a single taxpayer or a married couple filing a joint return, but only half of that amount for married persons filing separate returns. The full credit is available for homes costing $75,000 or more ($80,000 in 2009 or early 2010). Long-time homeowners who buy a replacement home after Nov. 6, 2009, or in early 2010 may qualify for a credit of up to $6,500, or $3,250 for a married person filing a separate return. (11/19/09)

Q. Which home purchases qualify for the first-time homebuyer credit?

A. Any home purchased as your principal residence and located in the United States qualifies. You must buy the home after April 8, 2008, and before May 1, 2010 (with closing to take place before July 1), to qualify for the credit. For a home that you construct, the purchase date is considered to be the first date you occupy the home.

For homes purchased after April 28, 2008, and before November 7, 2009, taxpayers (including spouse, if married) who owned a principal residence at any time during the three years prior to the date of purchase are not eligible for the credit. This means that you can qualify for the credit if you (and your spouse, if married) have not owned a home in the three years prior to a purchase. For homes purchased after November 6, 2009, long-time residents can also get the credit under a special rule for a qualifying replacement home. To qualify, you must have owned and used the same home as your principal residence for at least five consecutive years of the eight-year period ending on the date you buy your new principal residence.

If you made an eligible purchase in 2008, you claim the first-time homebuyer credit on your 2008 tax return. For an eligible purchase in 2009, you can choose to claim the credit on either your 2008 or 2009 income tax return. For an eligible purchase in 2010, you can choose to claim the credit on either your 2009 or 2010 return. (1/27/09)

Q. If a taxpayer purchases a mobile home (manufactured home) with land and qualifies for the credit, is the amount of the credit based on the combined cost of the home and land?

A. Yes. The first-time homebuyer credit is ten percent of the purchase price of a principal residence. The total purchase price (mobile home and land) is used to determine the amount of the first-time homebuyer credit.

Q. Is a taxpayer who purchases a mobile home and places the home on leased land eligible for the first-time homebuyer credit?

A. Yes. A mobile home may qualify as a principal residence and it is not necessary that the taxpayer own the land to qualify for the first-time homebuyer credit.

Q. Can a taxpayer who purchases a travel trailer qualify for the credit?

A. A travel trailer that is affixed to land may qualify as a principal residence.

Q. Can an individual who has lived in an RV qualify for the credit?

A. For purposes of the first-time homebuyer credit, an RV with a built-in motor is personal property that is not affixed to land and does not qualify as a principal residence. Accordingly, someone who has owned and lived in an RV within the past three years may still qualify as a first-time homebuyer.

Q. Can I apply for the credit if I bought a vacation home or rental property?

A. No. Vacation homes and rental property do not qualify for this credit.

Q. Who is considered to be a first-time homebuyer?

A. Taxpayers who have not owned another principal residence at any time during the three years prior to the date of purchase are considered first-time homebuyers. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2005, through July 1, 2008.

In addition, under a special rule, long-time homeowners who buy a replacement home after Nov. 6, 2009. or in early 2010 can also qualify. To qualify as a long-time resident, you must have owned and used the same home as your principal residence for at least five consecutive years of the eight-year period ending on the date you by your new principal residence. For an eligible taxpayer who, for example, bought a home on Nov. 30, 2009, the eight-year period would run from Dec. 1, 2001, through Nov. 30, 2009. (1/27/10)

Q. Can a dependent on someone else’s tax return claim the first time homebuyer credit if they otherwise qualify?

A. Different rules apply depending upon whether a dependent buys a home after Nov. 6, 2009, or on or before that date. Dependents are not eligible to claim the credit on any purchase after Nov. 6, 2009. However, a dependent who buys a home on or before Nov. 6, 2009 may qualify for the credit. (11/19/09)

Q. Can a minor buy a home and claim the credit?

A. Usually, no. However, different rules apply to purchases after Nov. 6, 2009, and those on or before that date.

Minors are generally barred from claiming the credit on home purchases after Nov. 6, 2009. To qualify for the credit, a purchaser must be at least 18 years of age on the date of purchase. For a married couple, only one spouse must meet this age requirement. A dependent is not eligible for the credit, regardless of age.

For purchases on or before Nov. 6, 2009, the tax law does not bar a minor from buying a home and claiming the credit. However, taxpayers who do not otherwise qualify for the credit do not become eligible for the credit simply by using a minor child’s name. In addition, under state law, children under the age of 18 generally are not bound by any contract they sign and cannot be required to comply with the terms of the contract. Thus, it is extremely unlikely that a seller of a home, or a lender if financing is required, would enter into a bona fide sale of a home to a child. Merely using the child’s name to purchase a home does not qualify the child for the credit if, in substance, the child is not a bona fide purchaser of a home. (11/19/09)

Q. When do I have to buy a new home to get the credit?

A. The credit is available for eligible home purchases after April 8, 2008. You must enter into a binding contract to buy the home before May 1, 2010 and close before July 1, 2010, in order to obtain the credit. For a home you construct, the purchase date is considered to be the date you first occupy the home. (11/19/09)

Q. How do I apply for the credit?

A. The credit is claimed on IRS Form 5405, First-Time Homebuyer Credit (revised December 2009), and filed with your 2008, 2009 or 2010 federal income tax return. If you have already filed a 2008 or a 2009 tax return without claiming the credit, you can amend your return to claim the credit using Form 1040X with the December 2009 Form 5405 attached. Certain additional supporting documentation will be required when filing claim for the credit with your 2009 or 2010 return or amended return. (1/27/10)

Q. I submitted an amended 2008 return for the first-time homebuyer credit more than eight weeks ago. How long will it take the IRS to process my return?

A. The normal processing time for amended returns is approximately 8-12 weeks. Recent changes to the tax law have resulted and will continue to result in larger than normal volumes of amended returns. This increased volume has increased our processing time to 12-16 weeks. It is not necessary for you to follow-up with the IRS regarding your amended return if you are within these time frames. (11/23/09)

Q. Are there income limits?

A. Yes. The credit is reduced or eliminated for higher-income taxpayers. The credit is phased out based on your modified adjusted gross income (MAGI). Different income limits apply to purchases on or before Nov. 6, 2009 and those after that date.

For purchases on or before Nov. 6, 2009, for a married couple filing a joint return, the phase-out range is $150,000 to $170,000. For other taxpayers, the phase-out range is $75,000 to $95,000. This means that the full credit is available for married couples filing a joint return whose MAGI is $150,000 or less and for other taxpayers whose MAGI is $75,000 or less.

For purchases after Nov. 6, 2009, for a married couple filing a joint return, the phase-out range is $225,000 to $245,000. For other taxpayers, the phase-out range is $125,000 to $145,000. This means that the full credit is available for married couples filing a joint return whose MAGI is $225,000 or less and for other taxpayers whose MAGI is $125,000 or less. (11/19/09)

Q. Can a taxpayer claim the first-time homebuyer credit after entering into a contract for the purchase of a residence but before closing on the purchase?

A. No. Taxpayers cannot claim the credit before there is a completed sale and purchase of the residence. The sale and purchase are generally completed at the time of closing on the purchase. (7/2/09)

Q. Can a taxpayer claim the first-time homebuyer credit if the purchase is pursuant to a seller financing arrangement (for example, a contract for deed, installment land sale contract, or long-term land contract), and the seller retains legal title to secure the taxpayer's payment obligations?

A. If the taxpayer obtains the "benefits and burdens" of ownership of a residence in a seller financing arrangement, then the taxpayer can claim the credit even though the seller retains legal title. Factors that indicate that a taxpayer has the benefits and burdens of ownership include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property. (7/2/09)

Q. I purchased a home that qualifies for the first-time homebuyer credit. I will be renting two of the bedrooms and reporting the rental income on Schedule E. Will I still qualify for the credit if I use the home as my principal residence?

A. Yes, if you meet all first-time homebuyer eligibility requirements. See Form 5405, First-Time Homebuyer Credit, for more details.

Q. I purchased a duplex home with two separate dwelling units. I will live in one dwelling and will rent out the other dwelling unit and report the rental income on Schedule E. May I qualify for the first-time homebuyer credit, and what amount do I use for the purchase price to determine the amount of the credit?

A. Yes, you may qualify for the credit for the dwelling unit that you use as your principal residence. To determine the amount of your credit, you must allocate the purchase price of the duplex between the two separate dwelling units. You may not use the entire purchase price of the duplex to determine the amount of your credit.

Q. If two unmarried people buy a house together, how do they determine how much each may take of the credit?

A. IRS Notice 2009-12 provides guidance for allocating the first-time homebuyer credit between taxpayers who are not married.

Q. I am a single co-owner of a home. How do I get this credit?

A. Depending on the year of purchase, you will claim the credit on your 2008, 2009 or 2010 federal income tax return. (11/19/09)

Q. I don’t owe taxes and/or my income is exempt from tax and I do not have a filing requirement. Do I qualify for the credit?

A. The credit is fully refundable and, if you qualify as a first-time homebuyer, having tax-exempt income will not preclude eligibility. Although there are maximum income limits for qualifying first-time homebuyers, there are no minimum income criteria. Thus, someone with no taxable income who qualifies as a first-time homebuyer may file for the sole purpose of claiming the credit for a refund.

Q. Does the first-time homebuyer credit apply to homes located in the U.S. Territories?

A. No.

Q. Would I be considered a first time homebuyer if I owned a principal residence outside of the United States within the previous three years?

A. Yes. A taxpayer who owned a principal residence outside of the United States within the last three years is not disqualified from taking the credit for a purchase within the United States.

Q. If qualified, are homebuyers required to claim the first-time homebuyer credit?

A. No.

Q. Who cannot take the credit?

A. If any of the following describe you, you cannot take the credit, even if you buy a new home:

* Your income exceeds the phase-out range.
* You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild.
* You do not use the home as your principal residence.You are a nonresident alien.

Also, if the home is purchased after November 6, 2009, and you are a minor, you are generally barred from claiming the credit. To qualify for the credit, a purchaser must be at least 18 years of age on the date of purchase. For a married couple, only one spouse must meet this age requirement. A dependent is not eligible for the credit, regardless of age. For more information on this, please see the Q and A "Can a minor buy a home and claim the credit?" (1/27/10)

Q. Does previously inheriting a home and living in it automatically disqualify me as a first-time homebuyer if I buy a different home on or before Nov. 6, 2009?

A. Yes, an ownership interest in a prior principal residence would bar you from being considered a first-time homebuyer. As long as you owned and used the prior home as your principal residence, you are not a first-time homebuyer. There is no exception for taxpayers who did not buy their prior residences. (11/19/09)

Q. If I claim the first-time homebuyer credit in 2009 and stop using the property as my main home before the 36 month period expires after I purchase, how is the credit repaid and how long would I have to repay it?

A. If, within 36 months of the date of purchase, the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full amount of the credit is due at the time the income tax return for the year the home ceased to be your principal residence is due. The full amount of the credit is reflected as additional tax on that year's tax return. See Form 5405 and its instructions about repayment of the credit. (5/6/09, 1/27/10)

Q. If a person does not actually make the payments on a home that’s their principal residence, but the deed and mortgage documents are in their name, can they be considered a first-time homebuyer?

A. Yes. If a taxpayer purchases a home to be used as a principal residence from an unrelated person and has not owned a home within the previous 36 months, the taxpayer is eligible for the first-time homebuyer credit regardless of who makes the mortgage payment. (5/6/09)

Q. Do taxpayers affected by Hurricane Katrina or other disasters qualify as first-time homebuyers if their principal residence (i.e. main home) became uninhabitable more than three years ago and they have not formally disposed of the uninhabitable home or purchased or built a new home in the interim?

A. Yes. They may be eligible for

We hope you found this information useful. Please let us know what you think.

Thank you for reading!!!

Christian L. Draheim
Vice President of Government Lending
Gold Star Mortgage Financial Group

cdraheim@goldstarfinancial.com

http://www.facebook.com/cdraheim1
http://www.twitter.com/cdraheim
http://www.linkedin.com/in/cdraheim

http://www.christiandraheim.com

800-506-3076

Please subscribe to my "Mortgage Corner" blog http://www.christiandraheim.blogspot.com

Big FHA Changes WILL impact Buyers and Sellers

2010-03-25T15:05:00.000-04:00

HUD has announced Big Changes for the FHA Program and if you're not
careful you could get burned. Not all of these changes have an effective
date as of now, so we've listed these by order of, what we feel would be of
greatest impact to you and your clients!

1.) BAD CHANGE - Seller Concessions are to be reduced from the current
maximum allowable of 6% to a maximum allowable of 3%. This change will
greatly reduce the amount of potential home buyers...most of our mortgage
clients need 6% from the seller, especially those purchasing a home that
currently has non-homestead taxes. HUD has not released the effective date
for this change.

2.) BAD CHANGE - No more Spot Loan Approvals for Condominiums. This means
an entire condominium project must be approved by HUD in order for any one
unit to be eligible for FHA financing. This process, provided the project
is eligible, could take several months to complete.This change will affect
all case numbers assigned on or after February 1st, 2010. This does not
mean your transaction must close on or before February 1st, 2010. Case
number assignments take anywhere from 24 to 72 to hours to process...If
your offer or even potential offer is within days of any of the HUD
deadlines we recommend asking the loan officer to order a case number
assignment right away. If the loan officer can not accommodate please give
us a call - we would love to take care of your client!

3.) GOOD CHANGE - Site Condos are treated the same as single family homes.
This means no Spot Loan or Project Approvals required. This change has
already taken place...we just wanted to make sure you were aware of this!

4.) BAD CHANGE - Up Front Mortgage Insurance Premiums will be increased
from 1.75% to 2.25%. This will affect all loans with case numbers assigned
on or after April 5th, 2010. This does not mean your transaction must close
on or before April 5th, 2010.

5.) GOOD CHANGE - To help provide for sales of foreclosed homes, HUD
announced on January 15, 2010 a one-year waiver of a resale restriction
under rules applicable FHA loans. The waiver becomes effective on February
1, 2010. ***All transactions must be arms-length with no identity of
interest between the buyer and seller or other parties participating in the
sales transaction.

6.) BAD CHANGE - FHA will now require a minimum FICO score of 580 for all
buyers putting less than 10% down. Based on the current lending
environment, we do not see this having too much of an impact. ***For quite
some time lenders have required anywhere from a 620 FICO score to a 640
FICO score. HUD has not released the effective date for this change.

We hope you find this information useful. As HUD provide us with
additional details we will be sure to pass them along to you too!

Best Regards,

Christian L. Draheim & Denise Huettner

Vice President of Government Lending & Executive Assistant

Gold Star Mortgage Financial Group

cdraheim@goldstarfinancial.com
dhuettner@goldstarfinancial.com
www.facebook.com/cdraheim1
www.twitter.com/cdraheim
www.linkedin.com/in/cdraheim

800.506.3076
www.christiandraheim.com

Please be sure to ask us about FHA 203K financing for your Buyers and
Sellers!