Archive for the 'Taxes' Category
For First-Time Buyers, Tax Credit Soon To Be History
August 18th, 2009 categories: Chicago Info/News, Economic Recovery, For Buyers, Housing Market, Mortgage Info, Taxes
The federal government’s first-time homebuyer tax credit has had a positive effect on the Chicago housing market. As you know, home sales in the city have been rising steadily for months now. Part of the reason is the large number of first-time homebuyers entering the market. This is especially true in Chicago, where first-time buyers know that condominiums and single-family homes in the city’s top neighborhoods, places like Lincoln Park, Lakeview, Roscoe Village, Ravenswood and Lincoln Square, are still solid investments.
Of course, first-time homebuyers have gotten a boost from the federal tax credit. The credit provides $8,000 to any first-time buyers purchasing a condominium or single-family home.
Problem is, the tax credit isn’t indefinite. As this story in the Chicago Tribune points out, housing transactions must close by midnight on Nov. 30 to qualify for the federal tax credit.
For first-time homebuyers, scraping up enough money for a down payment is no easy task. The Illinois Association of REALTORS® reports that the median housing price in the city of Chicago stood at $230,000 in the second quarter of 2009.
Now, say you’re a first-time homebuyer who needs to come up with 20 percent of that $230,000 for a down payment. That comes out to $46,000. Even if you’re fortunate enough to work with a mortgage lender that requires just a down payment of 5 percent, you’ll still looking at a total of $11,500. That’s not easy for first-time buyers, who are usually younger and not as well established financially, to come up with.
That $8,000 tax credit is a huge help, then, for buyers looking to purchase their first homes.
It’s why I hope to see the federal government extend the tax credit past the Nov. 30 date. The country is now experiencing a housing recovery, which is great news for the rest of the national economy. To keep this recovery going, though, we need to see new buyers enter the market. That’s more likely to happen if the government extends the $8,000 tax credit.
In the meantime, though, first-time buyers who are considering buying a condo or single-family home better act fast. The Nov. 30 deadline is for transactions to close, not simply for offers to be made. Time is, unfortunately, running out.
| Discussion: No Comments »
Some Homeowners Are Eligible For Mortgage Relief. Are You One Of Them?
March 5th, 2009 categories: For Homeowners, Foreclosures, Housing Market, Mortgage Info, Taxes
When the White House first introduced the Making Home Affordable program in February, it was positioned as a mortgage program with two goals:
- To help financially-needy homeowners get mortgage relief
- To help homeowners who’ve lose equity qualify for today’s low rates
Wednesday, in a much-anticipated announcement, the U.S. Treasury introduced new details about Making Home Affordable.
It also created an ”Am I Eligible For Making Home Affordable” form on its website.
In the press release, the Treasury detailed the President’s original blueprint. Namely, it provided explicit loan modification instructions that will assist up to 4 million delinquent homeowners and their respective mortgage servicers.
The modification guidelines are a thorough 17 pages long and leave little question about the loan modification process, and how it must be carried out.
But for as much ink committed to helping delinquent homeowners, the Treasury gave surprisingly little guidance to the estimated 5 million homeowners for whom deteriorating home equity has rendered refinancing impossible.
For these Americans, the Treasury instead offers a basic Q&A and directs homeowners to call Fannie Mae and/or Freddie Mac to confirm their eligibility. The “refinance plan”, in summary, says that a homeowner who has paid his mortgage as agreed and whose home value is “about the same or less” as the amount owed on his first mortgage may be eligible.
That’s about as much as the Treasury could say.
If after browsing the website, you still have questions about the Making Home Affordable program, call your mortgage lender with specific questions.
PLEASE CLICK HERE TO VIEW PROPERTIES NOT YET ON THE MARKET.
| Discussion: No Comments »
When Is A 5.000 Percent Mortgage Rate Really 3.600 Percent?
January 14th, 2009 categories: Chicago Real Estate News, For Buyers, For Homeowners, For Sellers, Mortgage Info, Taxes
An oft-touted benefit of homeownership is its tax benefits. However, like most IRS-related items, understanding how the benefits work is not always clear.
In general, homeowners are entitled to two home-related tax deductions — one for annual mortgage interest paid, and one for real estate tax bills paid.
Not everyone is eligible, though. Some of the exclusionary traits include total amount borrowed, and whether or not the home is a primary or secondary residence.
The official IRS publication is filled with notes and explanations but, in general, you can calculate your approximate mortgage interest tax deduction using the following math:
- Sum your annual mortgage interest and real estate taxes paid
- Find your tax rate on the IRS tax bracket schedule
- Multiple your tax rate by the sum from Step 1
This is grossly simplified, but fairly accurate.
As an example, a homeowner paying a combined $20,000 in 2008 mortgage interest and real estate taxes, and who is in the 28% tax bracket, may be due $5,600 in tax credits.
The availability of mortgage interest tax deductions is one reason why loan officers make reference to “after-tax mortgage rates”. An after-tax mortgage rate is effective interest rate, post-tax code, and can be calculated using the formula below:
(After-Tax Mortgage Rate) = (Mortgage Rate) * (1 – Marginal Tax Rate)
The same homeowner with a 5.000% mortgage rate, therefore, has an after-tax mortgage rate of 3.600%.
Because not every homeowner is eligible for home-related deductions, and because not every homeowner should claim them, talk with your personal accountant before making any tax-related decisions.
| Discussion: No Comments »
