Archive for the 'Taxes' Category
State Hoping To Lure First-Time Homebuyers, Veterans With Incentive
November 9th, 2009 categories: Chicago Info/News, Economic Recovery, For Buyers, Housing Market, Taxes
Chicago home buyers got the good news last week that the federal government was not only extending its first-time home buyer tax credit of $8,000, but was adding a $6,500 move-up home buyer tax credit, too. Combined, the two federal programs should make it easier for the majority of home buyers to afford condominiums or single-family homes in Chicago.
As if that wasn’t enough good news, Chicago Tribune writer Mary Ellen Podmolik in the Nov. 6 paper highlighted another new program, this one offered by the state of Illinois, to encourage both first-time buyers and military veterans to buy homes.
The state had already offered its HOME START program, a 30-year fixed-rate amortizing loan insured by the FHA. As of Oct. 30, the interest rate on this loan was just 5.25 percent. Now, though, the state has offered a companion piece to this program, the HOME START down payment assistance loan. This loan allows first-time home buyers to access additional funds to help them make their down payments. The loan is a 10-year, zero-percent, non-amortizing forgivable loan equal to 3 percent of the home’s purchase price. The loan does have a ceiling of $6,000.
To take advantage of the down payment assistance loan, buyers must first qualify for and obtain the Illinois Housing Development Authority’s 30-year HOME START mortgage. Military veterans do not have to be first-time buyers, but all other participants do. The program does require buyers to receive homeownership counseling.
The main benefit of this second down-payment loan is that it can easily become a forgivable loan. Buyers must simply stay in their homes for at least 10 years. Those who stay less will be required to pay back a certain portion of their loan depending on how long they stay in the house. In her story, Podmolik says that a homeowner who purchases a $100,000 house and only stays in it for five years will have to pay $1,500 of the $3,000 down-payment loan back to the state.
We already know, based on national statistics, that the first-time home buyer tax credit did its job, encouraging more buyers to enter the housing market. I’ll be eager to see what impact Illinois’ new housing incentive has. My guess? It’ll encourage even more locals, including those looking for homes in Chicago, to enter the residential real estate market.
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A Simple Explanation Of The Federal Reserve Statement (November 4, 2009 Edition)
November 4th, 2009 categories: Economic Recovery, Housing Market, Mortgage Info, Real Estate News, Taxes
The Federal Open Market Committee voted to leave the Fed Funds Rate within its target range of 0.000-0.250 percent.
In its press release, the FOMC noted that the U.S. economy “has continued to pick up” since the September FOMC meeting and that housing market activity has increased.
It’s the third consecutive post-FOMC statement in which the Fed speaks optimistically about the U.S. economy – a signal that the recession is likely over.
The economy isn’t without threats, however, and the Fed identified several in its announcement, including:
- Ongoing job losses for American workers
- Reduced fixed investment by businesses
- Ongoing challenges for the financial markets
The overall tone remained positive, however, as inflation appears to be held in check.
Also in its statement, the Fed confirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period” and to honor its $1.25 trillion commitment to the mortgage bond market.
The Fed plans to wind down its mortgage market support over the next 5 months, reaffirming its March 2010 exit date. For now, Fed support helps hold mortgage rates down.
Mortgage market reaction to the Fed’s press release is negative overall. Mortgage rates are rising.
The FOMC’s next scheduled meeting is December 15-16, 2009.
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Illinois Congresswoman Makes The Right Call: Pushes For Homebuyer Tax Credit Expansion
October 19th, 2009 categories: Economic Recovery, Housing Market, Mortgage Info, Real Estate News, Taxes
The first-time homebuyer tax credit has been one of the federal government’s more successful efforts to boost the nation’s economy. The $8,000 tax credit has inspired many first-time buyers to enter the housing market.
And across the country, including in Chicago, these first-time buyers have helped spur a steady rise in the sale of condominiums and single-family homes.
There’s a downside to the tax credit, though: It’s not permanent. It’s scheduled to expire on Nov. 30 at midnight. This means that buyers have to close on their mortgage loans by that time to qualify for the credit. In fact, because it can take so long to close a home sale, most buyers today are already excluded from the credit.
Members of the real estate community are lobbying politicians to make the tax credit permanent. This would help keep the nation’s housing recovery going strong, they argue. I agree: The tax credit has already had a tremendously positive influence on my market in Chicago and in many others across the country. Why not extend it?
Fortunately, some politicians agree. One of them even happens to be from Illinois. U.S. Rep. Judy Biggert, R-Ill., recently introduced legislation that, if approved, will extend the first-time homebuyer tax credit for six months. She has also introduced a second bill that would extend the credit for a year. That bill would also open the credit up to buyers who have bought a home before and would boost the maximum amount of the credit to $15,000.
Raising the maximum amount to $15,000 would be a great benefit to Chicago. That’s because Chicago housing prices are fairly high when compared to other markets. Simply put, an $8,000 tax credit in Chicago doesn’t go as far as one in Omaha or Topeka. But a $15,000 tax credit is significant even in the city.
The only improvement that I’d make to Biggert’s bill is that the tax credit should be made permanent. This would provide a constant incentive to buyers who might be waffling on entering the housing market. And the more buyers the tax credit persuades to enter the market, the sooner home sales will again provide a boon to the country’s still struggling economy.
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You’ve Got 15 More Days To Use The First-Time Home Buyer Tax Credit
October 1st, 2009 categories: For Buyers, Housing Market, Mortgage Info, Taxes
The government’s First-Time Home Buyer Tax Credit program expires November 30, 2009 — a scant 60 days from today.
Considering it can take up to 60 days to close on a home, first-time buyers have 2 weeks at most to find a home.
Buyers not under contract by October 15 have little chance of meeting the November 30 deadline and, therefore, little chance of claiming the tax credit.
This is especially true for purchases involving short sales and foreclosures.
Congress passed the First-Time Homebuyer Tax Credit program as part of the 2009 economic stimulus plan. IRS Form 5405 outlines the program criteria which include the following stipulations:
- Buyer may not have owned a “main home” in the past 36 months
- The home may not be purchased from a parent, spouse, or child
- Adjusted gross income for the household must be below $95,000 for single tax filers and $170,000 for joint tax filers
The credit is capped at $8,000 or 10% of the purchase price, whichever is less. And don’t forget — the First-Time Home Buyer Tax Credit is a true tax credit. It’s not a deduction.
This means that a tax filer who claims the full $8,000 and whose “normal” tax liability is $5,000 would receive $3,000 cash from the US Treasury when their tax return is processed by the IRS.
If you can’t close by November 30, 2009, though, you can’t claim the credit.
The clock is ticking. If you’re planning to use the First-Time Home Buyer Tax Credit, the time to act is now.
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By Extending Homebuyers’ Tax Credit, Congress Can Keep Housing Momentum Going
September 16th, 2009 categories: Economic Recovery, For Buyers, For Homeowners, Taxes
Pres. Obama and Congress have passed a lot of legislation to help the national economy work its way out of its long recession. Few have been as successful as the first-time homebuyer tax credit.
As you probably know by now, this piece of legislation provides an $8,000 tax credit to first-time homebuyers. Personally, I believe that this credit has been a major factor in the housing recovery we are now seeing. First-time buyers are an important part of any housing market. And the $8,000 tax credit is spurring a greater number of these first-timers to get off the fence and make offers on condominiums and single-family homes.
Unfortunately, this tax credit comes with an expiration date. Any home sale that closes after Nov. 30 of this year will not qualify for the tax credit.
Chicago Tribune columnist Mary Ellen Podmolik addressed the first-time homebuyer tax credit this Sunday. In her column, she mentions that the housing industry can be expected to place pressure on Congress to extend the tax credit past the Nov. 30 cutoff point.
Not only do members of the real estate community – including REALTORS®, mortgage lenders and home builders – want Congress to extend the credit, they want legislators to expand it. They’d like to see them raise the credit to $15,000 and make it to available to all home buyers.
Personally, I’d love to see this. There’s no doubt in my mind that extending the tax credit will add even more fuel to the housing recovery we’re already seeing.
Podmolik does cite some concerns in her column. She wonders if there is still a need for any home-buying tax credit now that the housing market seems to be in recovery mode.
It’s important to remember, though, that this is still a relatively young recovery. Yes, home sales in Chicago have risen for six straight months. But there is still much room for improvement.
Extending or, even better, expanding the first-time homebuyer tax credit is one way to guarantee that the housing rally continues both here in Chicago and across the country.
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