In the case of an individual (and, if married, such individual's spouse) who has owned and used the same residence as such individual's principal residence for any 5-consecutive-year period during the 8-year period ending on the date of the purchase of a subsequent principal residence, such individual shall be [eligible for the credit] with respect to the purchase of such subsequent residence.

Does that mean people who lived in their homes for the past five years and want to move on? People who lived in their homes for at least five years after late 2001, have since been renting it out and now want a new primary residence? People who lived in their homes for at least five years after late 2001, sold the place and now want to buy again?

I posed this to a Senate Finance Committee aide, and he said yes. Yes to all three.

I wondered that to begin with, but the "ending on the date of the purchase of a subsequent principal residence" part made me second-guess myself.

I urge you all not to spend that $6,500 before it's a sure thing that you can get it -- let's see what the IRS has to say, eh? But Wonk reader SSK, it does look like you can take advantage of the credit. (SSK posed this question: "I lived in my Baltimore house for 12 years. Just sold it in July. I re-located to Ohio and am renting. I'm about to bid on a new home. So, I lived in my home for more than 5 years, but I'm temporarily renting now. Do I qualify?")

Continue reading "Who's eligible for the repeat-buyer tax credit?" »

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (10)
Categories: First-time buyer tax credit, Repeat buyer tax credit
        

The National Association of Realtors says the new provisions -- a longer time frame for the $8,000 first-time buyer credit, higher income limits and a $6,500 credit for certain repeat buyers -- will go into effect as soon as pen hits paper. The trade group has a handy "compare the tax credits" chart that you can find here.

You can also read more about the details on yesterday's tax-credit blog post.

The first-time buyer tax credit, hailed by the real estate industry as a stabilizing force for the battered housing market, has its critics. They say it's a lot of money, much of it going to people who probably would have bought anyway and some of it going to tax cheats (including 19,000 who didn't actually purchase a home). Some of you have said you think it's a stimulus that won't help in the long run.

In this running Wonk poll, I asked you a simple question about the bill: Thumbs up, down or sideways? The voting was overwhelmingly thumbs up at first. But as of last night, the results were split: 49 percent down, 47 percent up and 4 percent sideways. 

I chatted yesterday with Heather Fernandez, vice president of marketing with real estate search engine Trulia. She's enthusiastic about the soon-to-be-law, though not without reservations. One reason to cheer, she said, is that consumers pump money into the economy after buying a home ($30,000 within the first six months on items ranging from furniture to hot water heaters, Trulia found in a study last year). She also thinks the credits will help move more foreclosures and cushion prices in the short term.

There's a significant "but," though: "What happens to real estate demand on May 1?" Fernandez asks. April 30 is the last day you can sign a contract and still qualify for the first-time or repeat-buyer tax credits.

"While this may spur tremendous activity in the short term, what's going to stop demand from dropping off a cliff?" she said.

Continue reading "Expanded home buyer tax credits to become law" »

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (17)
Categories: First-time buyer tax credit, Repeat buyer tax credit
        

Almost 80 percent of voters offered a thumbs up. Five percent don't love it or hate it and gave it a sideways thumb. The rest say no thanks.

Some commenters wondered what personal situations were influencing these choices. Sounds like a poll:

Need a refresher? The tentative Senate deal would extend the $8,000 first-time home buyer tax credit -- you could sign a contract through April 30 as long as you closed by June 30. It would also create a new tax credit of up to $6,500 -- starting Dec. 1 -- for repeat buyers who have been in their current homes for at least five years and are getting a new primary residence.

For more details (income limits, price limits, etc.), read this home buyer tax credit post.

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (7)
Categories: First-time buyer tax credit
        

--As you probably already heard, the credit would be available to buyers signing contracts through April 30 and closing by June 30. First-timers would continue to be eligible for up to $8,000. Other buyers could get up to $6,500, starting Dec. 1, if they've lived in their current home for at least five years.

--Income limits would be increased to $125,000 for individuals and $225,000 for couples, with the credits phasing out above those amounts.

--Repeat buyers must be getting a primary residence, not a vacation or investment property. But you're allowed to keep your current home.

--Eyeing a home priced above $800,000? You can't get this credit, the senators say.

--Read their lips: No more credits for 4-year-olds. First-time buyer tax credit fraud, including money funneled to preschoolers and to people who didn't actually buy anything, prompted senators to require that buyers be at least 18 and submit copies of their HUD-1 settlement statements when applying for the credit.

News of this extension and expansion touched off a firestorm of discussion here, and emotions of all sorts. Hope among some homeowners who could use $6,500. Frustration among those who would miss out under the proposed restrictions. Aggravation among renters who think credits are artificially propping up the market at taxpayers' expense.

Continue reading "Home buyer tax credit: More details and a lot of angst" »

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (43)
Categories: First-time buyer tax credit
        

Senators have cut a deal to extend and expand the popular first-time home buyer tax credit, though -- as The Wall Street Journal notes -- don't count on it just yet.

The tentative agreement worked out by Senate negotiators would allow buyers to sign contracts through April 30 as long as they close by June 30. First-timers would continue to be eligible for up to $8,000, while some repeat buyers could get up to $6,500.

Which repeat buyers? "The reduced credit would be available to all home buyers who have been in their current residence for a consecutive five-year period in the past eight years," the WSJ reports.

This hasn't yet passed the Senate, which is trying to decide which other economic measures to tack on to a bill, and it faces skepticism in the House. (As you'll recall, a number of people have allegedly claimed the credit despite not qualifying as first-time buyers, not being old enough to buy a house, not actually buying a house, etc.)

What do you think? Weigh in:

Posted by Jamie Smith Hopkins at 9:32 AM | Permalink | Comments (32)
Categories: First-time buyer tax credit, Polls
        

Three things about the first-time home buyer tax credit:

1. Despite the credit's name, you don't actually have to be a first-time buyer to get it, merely someone who hasn't owned a home in three years. But you are supposed to -- you know -- actually buy a home.

The Treasury Inspector General for Tax Administration says more than 19,000 people have claimed the credit despite not purchasing anything. Just over 70,000 claimed it though they apparently didn't meet the definition of a first-time buyer. And 582 individuals under 18 claimed it, including some 4-year-olds. (I can just picture the parents: "What? He's a first-time buyer, isn't he?")

The agency says it "recommended that the IRS require taxpayers to provide documentation to verify a home purchase, such as a U.S. Department of Housing and Urban Development Settlement Statement (HUD-1) issued to homebuyers at closing," but the IRS said "nah." (OK, not exactly "nah," but that's the general idea.)

2. The Government Accountability Office issued a report that -- among other things -- breaks out the tax-credit usage by state as of Aug. 22. Maryland ranks 34th, with about 24,000 taxpayers claiming $166 million in credits. Report here, in PDF form. (Thanks to Jay Hancock for noticing this.)

Total nationwide: 1.4 million taxpayers claiming nearly $10 billion. Both the current version of the credit and the less-generous 2008 credit are included in the tally.

3. If you haven't already signed a contract on a home, you're going to be hard-pressed to get the credit -- assuming it expires Nov. 30 as planned. To close by that date, "you basically would have to sign a contract to buy a house today to qualify," Lawrence Yun, chief economist for the National Association of Realtors, told the Los Angeles Times ... yesterday.

Several local real estate agents, noting that most first-time buyers use slower-to-close FHA-insured loans, have told me they recommend allowing 45 to 60 days.

UPDATE: Looking for news about the Senate proposal on first-time and repeat-buyer tax credits? Go here.

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (31)
Categories: First-time buyer tax credit
        

The $8,000 tax credit for first-time buyers (or more precisely, people who haven't owned a home in three years and meet the income limitations -- try saying THAT five times fast) is due to expire the end of next month. I'm curious how many of you are doing some serious house-hunting to try to beat the deadline, and how many of you have been affected one way or another by the credit so far.

The numbers suggest an impact. Buyers in the Baltimore metro area signed 19 percent fewer contracts in February than a year earlier. The drop in March -- the first full month after the program was altered so the money doesn't have to be paid back -- was a much more modest 4 percent. Signed contracts began rising in April.

In August, the most recent numbers from Metropolitan Regional Information Systems, the number of new contracts was up 25 percent from a year earlier.

So it certainly looks like there's buying going on that wouldn't have happened this year if not for the thought of $8,000 in the bank. But who knows -- it could be a huge coincidence. Help sort it out by noting how (if at all) the credit has affected you:

But wait -- there's more!

Continue reading "The first-time buyer tax credit and you" »

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (7)
Categories: First-time buyer tax credit, Polls
        

The IRS will be answering them on the Baltimore Sun's Consuming Interests blog today at noon.

If you'd like to submit a question early, email it to eileen.ambrose@baltsun.com.

Posted by Jamie Smith Hopkins at 9:43 AM | Permalink | Comments (0)
Categories: First-time buyer tax credit
        

Consumer finance columnist Eileen Ambrose, in a piece today about the impending deadline for the first-time buyer tax credit, notes that some folks are really trying to push the envelope to get the $8,000.

One homeowner considered filing taxes separately from her husband or even divorcing him if that would help him get the credit.

Parents ask if a child can claim the credit if they refinance their mortgage and put the child's name on the new loan. And one parent acknowledges that she and her husband don't qualify for the credit but asked if they could get the money by buying a house under their 3-year-old's name.

Nice try, but no dice, the Internal Revenue Service says.

Posted by Jamie Smith Hopkins at 4:44 PM | Permalink | Comments (0)
Categories: First-time buyer tax credit
        

Determined to get the $8,000 tax credit for first-time buyers? Keep in mind that the Nov. 30 deadline isn't about signing a contract -- you need to get to closing no later than that day.

So says the IRS, which specifically uses the word "close." This matters because you'll want to allow at least 30 days -- and probably more like 60 -- for a normal transaction to go from contract to closing. Even if there's nothing unusual about the home you're buying, you could find yourself delayed by issues relating to the loan, the appraisal, the home inspection -- you name it.

That goes double if you want something more complicated, such as a foreclosure.

Continue reading "The clock is ticking on the $8,000 tax credit" »

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (7)
Categories: First-time buyer tax credit
        

Eileen Ambrose, the Sun's personal finance columnist, offers some details about putting the $8,000 first-time homebuyer tax credit toward down-payment or closing costs. Who qualifies, how big the mortgage can be, where you can call for more information, etc. Her column is here.

And remember, this doesn't reduce the minimum down-payment requirement:

The advance can't be used for the 3.5 percent down payment required under FHA-insured loans. But it can be applied to other purchase costs or to make a bigger down payment, thereby reducing your monthly mortgage payments.

Anyone out there planning to use the credit this way?

Posted by Jamie Smith Hopkins at 10:27 AM | Permalink | Comments (6)
Categories: First-time buyer tax credit
        

But not exactly the way you might have envisioned it.

FHA borrowers are required to put at least 3.5 percent down. Well, that won't change. Instead, the "monetized" tax credit -- money upfront rather than a break on your taxes later -- can be added to that downpayment so your monthly costs are lower. Or you can use it on other closing costs or to buy down your interest rate.

As The Wall Street Journal puts it, "the industry could be disappointed by the plan ... because they wanted to allow buyers to use the credit to fund the initial 3.5% down-payment." But it probably comes as a pleasant surprise to the critics who feared the plan would create a new wave of no-money-down buyers.

If you do go for this option, remember that you're getting a short-term loan for your tax credit and you'll probably pay upfront for the convenience. HUD warns buyers to "beware of mortgage scams and carefully compare benefits and costs when seeking out tax credit monetization services."

Here's what the agency says in its letter to lenders:

FHA-approved mortgagees and FHA-approved nonprofit organizations as well as Federal, state, and local governmental agencies and instrumentalities thereof may purchase the tax credit anticipated by the homebuyer.  

Conditions:
•    The proceeds of the sale of the tax credit may not exceed the anticipated tax credit due the homebuyer ...
•    Any costs attendant to the purchase of the tax credit ... must be reasonable and disclosed to the homebuyer.  In FHA’s view, fees and costs that total more than 2.5% of the anticipated credit are considered excessive.  (Example:  $6000 to be refunded, with all fees and costs discounted, borrower should receive not less than $5850.00 for sale of tax credit.)

So, folks: What do you think?

Posted by Jamie Smith Hopkins at 1:03 PM | Permalink | Comments (4)
Categories: First-time buyer tax credit
        

Realtors and homebuilders are all abuzz over the federal government's newest plan to help the housing market: let first-time homebuyers use the $8,000 tax credit toward their downpayment if they're getting an FHA-insured mortgage.

The head of the U.S. Department of Housing and Urban Development announced it at a National Association of Realtors summit last week. Here's what Secretary Shaun Donovan said:

We, like you, believe that this new tax credit is not only a tremendous opportunity for first-time homebuyers, but also an enormous benefit for communities struggling to deal with an oversupply of housing. ...

We all want to enable FHA consumers to access the tax credit funds when they close on their home loans so that the cash can be used as a downpayment. So FHA will permit trusted FHA-approved lenders and HUD-approved nonprofits, as well as state and local governmental entities to "monetize" the tax credit through short-term bridge loans.

Specifics, he said, will come shortly. (I was hoping "shortly" meant "by the end of the week," which is why I held off blogging on the subject.) But the brief announcement was plenty long enough for Realtors and builders to cheer -- "the biggest obstacle for first-time buyers is coming up with a downpayment," the chairman of the National Association of Home Builders said -- and for some economists to groan.

From Dow Jones Newswires:

"Much like the lax lending standards of the housing bubble, all it succeeds in doing in our view is pulling sales forward and encouraging speculative buyers into the market," noted Michael Widner, an analyst with Stifel Nicolaus Equity Research.

What do you all think? Good idea or bad? If you're contemplating buying, would it make a difference?

In other feds-involved-in-housing news, officials announced new aspects of the Making Home Affordable foreclosure-prevention program. HUD says it will offer incentives to loan services and borrowers to opt for short sales or "deeds in lieu" (in which the borrower voluntarily gives up the house) rather than foreclosures. Those alternatives aren't quite as bad for the borrower's credit score and, the government argues, are less costly for lenders and neighborhoods.

The feds are also offering extra incentive payments to lenders for making loan modifications "where home price declines have been most severe and lenders fear these declines may persist."

Posted by Jamie Smith Hopkins at 9:16 AM | Permalink | Comments (7)
Categories: First-time buyer tax credit, Foreclosure help
        

"Now is the time to buy," Cardin said, while standing in the garage of the home whose buyers took advantage of the credit.

I'm interested in hearing from people who are planning to buy soon, and those who want a house but intend to wait. If you're about to buy, what made you decide to take the plunge? If you're not, what market signal (or life change) are you waiting for before you make your move?

Posted by Jamie Smith Hopkins at 9:41 AM | Permalink | Comments (3)
Categories: First-time buyer tax credit