Tuesday, June 30, 2009
Sunday, June 28, 2009
Saturday, June 27, 2009
Wednesday, June 24, 2009
QuickBooks Investor Books Question
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MIke,
I e-mailed you last week but did not have my nephew's e-mail address. It is Ronn@ronnproperties.com under Ron Harris in Oklahoma City, Oklahoma.
My question is on personal cash brought into the company to pay for a property, ...
does it go into the cash from me or should it be in the investment under a personal draw account?
ANSWER #1: I do not understand "personal DRAW" account... (investors don't understand that language either) HOWEVER, investor do understand "Cash From Me"... let's try to clear this up..... if you take some money from your personal banking account and deposit into your real estate operating account to buy an investment property.... then in this situation, using your Investor Books file, and Make a Bank Deposit into your real estate checking account, and the money will be coming from "Cash from Me" account...
on another note: If you are using your Home Equity Line of Credit to fund a deal.... create a HELOC liability account under the proper lender... then make your bank deposit into your real estate checking account pulling money from the HELOC liability account...
Also if you paid cash for a property and refi it do you do a journal entry to zero out the for hud and enter the refi?
ANSWER: I recommend to investor to never do "journal" entry. ... I am really having a hard time trying to understand your question... If you paid cash for a property.. (GREAT) and then "Refinance" (i assume to get your cash back)....... the next part of your question does not make any sense.... "to zero out the hud?" You NEVER change your HUD 1 settlement statement.... If you change your HUD 1, it defeats the whole purpose of using this system.... you are simply entering the HUD EXACTLY as it appears, line for line, penny for penny.... NEVER alter the hud 1... if your CPA finds out you are changing them... you will have to produce HUDs to your CPA at tax time....
Just enter the closing statement as it appears... use the real numbers and not phantom numbers.
Monday, June 22, 2009
567 real estate sites to take YEARS off your learning curve
http://www.teamworkleadsystem.com/cmd.php?Clk=3084182
This guy from Hawaii, Andy Proper, just
made it available to real estate investors.
It only takes 45 seconds to install, it
gives you instant access to the TOP websites
for investors, and (BEST of all) it doesn't
cost you a penny.
Not one red cent.
Awesome. Download it now..
http://www.teamworkleadsystem.com/cmd.php?Clk=3084182
To your success,
Mike Butler
Sunday, June 21, 2009
Wednesday, June 17, 2009
Tuesday, June 16, 2009
Sunday, June 14, 2009
5mWAP Tenant Tracking QuickBooks Helps Investor!
Dear Mike,
My name is Logan Skidmore. I live in San Antonio, TX where you did a presentation at the SAREIA. That was my one and only time going to one of those meetings. My intention in writing is ... to inform you of the success I am having in managing my rentals.
I truly believe there must have been some divine intervention that was the one meeting I would attend. I had been a loan officer for 4 years and had been plagued by the fact I only owned 2 properties. I bought your 5mWAP systems that night. My wife and I at the time owned 2 properties. One was an investment we owned for apx. 3 years and the other was our primary. Since acquiring your 5mWAP systems, books, tapes, paperwork, etc. we gained the confidence to buy 8 more investment properties...most of which since becoming familiar with your systems and info. Your system gave me the confidence to move forward with more investing. It gave my wife the peace of mind I wasn't shooting from the hip anymore.
I love to tell everyone about to move into one of my houses I give a 1.5 to 2 hour "rent talk" before they move in so as to set them up for success. I love treating them like employees and not customers. I have read a lot of books and heard a lot of pitches about investing and I honestly pattern my investing after your book. Also, having the systems in place has increased my time efficiency. I have more confidence in the knowledge I've gained.
I'm guessing I used to collect about 90% of the rents on our 1st rental property.
Now I collect 108% on that property
and 106% on my other rentals.
That is a lot of info but I wanted to thank you for your guidance in my investing venture.
Logan Skidmore, REALTOR
RE/MAX North-San Antonio
210-298-7600 (office)
LoganSkidmore@remax.net (email)
http://www.5mWap.com
Thursday, June 11, 2009
Land Trust Question
Keith Asked Mike This Question:
Land trust is it possible to make Family Limited Partnership the trustee. How do you make the trust without the mortgage company calling your note due if you make a land trust.
Does the land trust have a checking account if it dose not have a tax ide # and if not who pays the property tax.
Land trust is it possible to make Family Limited Partnership the trustee. How do you make the trust without the mortgage company calling your note due if you make a land trust. Does the land trust have a checking account if it dose not have a tax ide # and if not who pays the property tax.
Land trust is it possible to make Family Limited Partnership the trustee. How do you make the trust without the mortgage company calling your note due if you make a land trust. Does the land trust have a checking account if it dose not have a tax ide # and if not who pays the property tax.,
providing there is no transfer of ownership or beneficial interest... (think of it this way.... if it is an investment property...is it still showing up on your Tax Return?... if so, there is no transfer of ownership.... remember the land trust is a "privacy instrument"... it is used to simply hide the beneficial interest (true owner in our language) and keep their name off of public record...
to make it simple...
if Keith Youngs owns it today.... you could have your attorney prepare a deed with the new "owner of record" to be your "123 Land Trust" with ____ as Trustee..... this would go on your deed...Also have your attorney cite the proper language in your state noting this is not a TAXABLE event and no transfer tax is due.
Land trust are allow for estate planning purpose with garn st. garmaine act(i might be spelling it wrong)...
Your Land Trust Agreement STAYS in your filing cabinet. It does NOT go to your attorney or title company... it does NOT get recorded... this would defeat the whole purpose of using it.
NO Checking Account needed for the land trust... it is NOT an Entity... just a privacy instrument.
Most of the time, the Trustee is an individual.. i would NOT recommend your family limited partnership as trustee because it will be become public record...the Owner of Record is the name of the trust and the Trustee.
your local government does not care where the property tax money comes from...
I appreciate your questions... most investors just make it too complicated and many real estate attorneys have never been taught anything about land trusts...(they get them mixed up with those cumbersome, complicated trusts such as revocable and irrevocable with tax id numbers and tax returns...) this is so much more simple.
this might help... imagine a Re/Max or Century 21 property management company... they collect rents and pay bills for all of the owners and give them a report monthly or annually.... why can't you do the same for your own properties?
Great Question Keith...
Now You Can Get All Those Questions You Forgot to Ask About Using Land Trusts at www.5mLandTrust.com
Saturday Night Office Tour and Party
In older homes, 9" floor tiles are almost always a sign of "ASBESTOS"
Bank Street House - Listed for $10,000 SOLD for $6,500
Was on the Bus Tour
Great Brick Ranch in great neighborhood...
Listed $131,000.... a steal at 70k
older home, all wood siding.. listed 18k
maybe 5k
Wednesday, June 10, 2009
MUST READ -- Urgent - Senate Bill to Crush Our Business
MUST READ -- Urgent - Senate Bill to Crush Our Business
Please read the information below regarding an urgent Bill that has been passed by the House and is being considered in the Senate. You must take action NOW as this will impact all of us!
I don't know if you've heard about HR 1728, but it's a heinous infringement on private property rights that is likely to shut down the creative selling market. IT HAS ALREADY PASSED THE HOUSE AND IS UNDER CONSIDERATION BY THE SENATE NOW.
House Bill 1728 - Why it's Death to Your Business and What to Do About it.
The U.S. Senate is considering a bill that would severely limit the way you do business as a creative investor and, more importantly, is an inexcusable infringement of the property rights of all Americans.
HR 1728, which you can view in its entirety here: www.govtrack.
It covers a lot of different topics but here's the important part. You will NOT be able to sell more than 1 property with owner financing every 3 years!
Their definition of Seller financing includesland contract, owner-held mortgage or wrap-around mortgage-and who knows if they'll define lease/options as owner financing, too?
So what does it mean to be "subject to the law"? Well, at the very least, it means that you will have to comply with a long, confusing, and penalty-filled piece of national legislation. Here are the types of transactions that you would be restricted from doing more than once every 36 months:
o Selling YOUR OWN HOME using a land contract or owner-held mortgage so that you can get a quicker sale, higher sale price, or better rate of interest than is available in other investments
o Carrying back owner-held second mortgages on investment properties that you sell
o Doing any kind of installment sale on residential properties including homes, condos, mobile homes, and even raw land that is zoned residential
Yes, there will undoubtedly by ways to "get around it"-some have suggested that getting a mortgage broker's license and then learning and following the vast new set of regulations would circumvent the "problem". But bottom line is, this law has to be stopped and it has to be stopped NOW. Here's why:
1. Congress is trying to regulate the wrong thing. The deals we make are not "loans"-they don't involve the transfer of money, or points or closing costs or adjustable rates or any of the other things that caused the mortgage crisis to begin with. They are INSTALLMENT SALES. We don't give money to the "borrower" and wait for it to be paid back: we give a property to the borrower and wait for it to be paid off. Regulating this will have no effect on the foreclosure crisis
2. It is a completely unacceptable infringement on private property rights. When I own a piece of property and find a ready, willing, and able purchaser, I should be able to control the sale of that property within the existing laws of my state, which already regulate the interest rate that I am able to charge and some of the terms of the sale. The government does not have the right to tell us that we need special licensing to sell our own properties; nor do they have the right to further regulate the terms under which we can sell or burden small investors with a new set of rules that we can't comply with.
Not only will this new law, if passed as written, effectively choke off owner financing as an exit strategy for you, it will also take away housing choice for your buyers. The millions of Americans who've been through foreclosure in the last 3 years can't buy a house in any way OTHER THAN to negotiate owner financing with a seller-and HR 1728 would greatly reduce the number of properties available in this way. Millions of potential home owners who would otherwise be able to re-start the process of paying off a home, and get the tax advantages of ownership, will be reduced to renting until they are able to qualify for bank financing.
Please Do This Right Now
This bill has already passed the House and is waiting for Senate approval. Please contact your senator via email and snail mail to let him know that this law MUST NOT PASS in its current form. You can get your senator's contact information here: www.senate.gov/
As always in cases like this, you have an automatic handicap to overcome-the fact that you are a real estate investor and are therefore viewed as part of the problem. So when you write, don't emphasize the nature of your business, just that you and your buyers would be greatly adversely affected by the new law.
We need THOUSANDS of these communications to go out in the next few days to have a CHANCE of stopping this in its tracks. So whether you're a new or experienced investor, PLEASE take the time right now to write your elected representative!
Here are some sample letters or emails.
IF YOU HAVE A REAL ESTATE LICENSE
Dear Senator [name]
My name is (insert name here) and I am a life-long resident of (insert city name here).
I am writing you to encourage you to vote NO on HR 1728, the "Mortgage Reform and Anti-Predatory Lending Act".
While many of the provisions of the act are positive steps toward mortgage reform, the inclusion of private owners in the act (see section 101(3)(e)) will enormously reduce the housing choice of Ohioans and the ability of home owners to sell properties in this already-slow market.
As a real estate broker, I have seen several dozen cases in the past year of home sellers and buyers coming to an agreement for an installment sale on a property that the owner desperately needed to sell (often to avoid foreclosure) and the buyer desperately wanted to buy, but could not raise the downpayment needed for conventional financing.
In all cases, these sales turned out to be win-win deals for the buyer and seller; the seller was able to get rid of an unwanted property to a buyer who loved it, and the buyer was able to get his new home at an affordable payment and interest rates with none of the usual costs (points, application fees etc) inherent in more conventional mortgage transactions.
In (your state), these transactions are already regulated by state law: a low maximum interest rate is already in place, and both the buyer and seller are protected by other regulations at the state level.
In defense of private property rights, owners should be exempted from the burdensome and unnecessary rules that this law foists upon them. In its current form, it would all but shut off the "owner financing" market that is the only way that many sellers can sell and many buyers can buy right now.
PLEASE DO NOT LET THIS RESTRICTION ON PRIVATE PROPERTY RIGHTS PASS THE SENATE. It is unnecessary to stop private buyers and sellers from transacting business that is beneficial to both of them-they are not the problem that the bill seeks to solve. HR 1728 would be extremely harmful to thousands of your constituents.
It will exacerbate the problem OF foreclosure, as fewer sellers will be able to sell their homes to avoid it, and CAUSED BY foreclosure, as fewer buyers who have recently experienced foreclosure will be able to re-start the process of home ownership inexpensively and easily by negotiating owner financing.
Thank you for your consideration;
Insert Name
Licensed Real Estate Broker license #
Phone #
email
IF YOU SELL HOUSES WITH OWNER FINANCING
Dear Senator [name]
My name is (insert name here) and I am a life-long resident of (insert city name here).
I am writing you to encourage you to vote NO on HR 1728, the "Mortgage Reform and Anti-Predatory Lending Act".
While many of the provisions of the act are positive steps toward mortgage reform, the inclusion of private owners in the act (see section 101(3)(e)) will enormously reduce the housing choice of Ohioans and the ability of home owners to sell properties in this already-slow market.
As a professional housing provider, I sell several houses each year to home buyers on installment sale [or, if you have not purchased a property, add here: "I had planned to sell several houses this year on installment sale]-a practice that would become impossible under this law in its current form.
I find that in today's slow market, the best way for me to help buyers who desperately want to become homeowners, but who cannot raise the downpayment or meet the other terms needed for conventional financing, is to allow them to make payments directly to me.
These sales are win-win deals for both the buyer and myself; I am able to turn over homes that I've bought and rehabbed (often from foreclosures) to buyers who love and can afford them, and the buyer can get his new home at an affordable payment and interest rates with none of the usual costs (points, application fees etc) inherent in more conventional mortgage transactions.
In Ohio, these transactions are already regulated by state law: a low maximum interest rate is already in place, and both the buyer and seller are protected by other regulations at the state level.
Without the ability to sell homes in this way, I will no longer be able to invest in and renovate any of the tens of thousands of vacant, ugly houses placed on the market by the foreclosure crisis, and my small-but-beneficia
In defense of private property rights, owners should be exempted from the burdensome and unnecessary rules that this law foists upon them. In its current form, it would all but shut off the "owner financing" market that is the only way that many sellers can sell and many buyers can buy right now.
PLEASE DO NOT LET THIS RESTRICTION ON PRIVATE PROPERTY RIGHTS PASS THE SENATE. It is unnecessary to stop private buyers and sellers from transacting business that is beneficial to both of them-they are not the problem that the bill seeks to solve. HR 1728 would be extremely harmful to thousands of your constituents.
It will exacerbate the problem OF foreclosure, as fewer sellers will be able to sell their homes to avoid it, and CAUSED BY foreclosure, as fewer buyers who have recently experienced foreclosure will be able to re-start the process of home ownership inexpensively and easily by negotiating owner financing.
Thank you for your consideration;
Insert Name
Perfect Properties, inc.
Phone number
email
IF YOU BUY HOUSES WITH OWNER FINANCING
Dear Senator [name]
My name is (insert name here) and I am a life-long resident of (insert city name here).
I am writing you to encourage you to vote NO on HR 1728, the "Mortgage Reform and Anti-Predatory Lending Act".
While many of the provisions of the act are positive steps toward mortgage reform, the inclusion of private owners in the act (see section 101(3)(e)) will enormously reduce the housing choice of Ohioans and the ability of home owners to sell properties in this already-slow market.
In the past year, I have purchased and renovated several homes-made possible only because the sellers of these homes were able to sell to me using owner financing in an unrestricted way.
For many of these property owners, seller financing was the only way to unburden themselves of an unwanted property that, in some cases, was headed toward foreclosure before I purchased it.
Without this ability, I can not continue to buy and renovate properties in the neighborhoods that so need me and my colleagues to invest our time, energy, and money in rehabbing properties. Bank financing is not an option for these properties because of the condition; only financing carried by the sellers will suffice.
Section 101(3)(e) would keep my sellers from utilizing this method of getting rid of unwanted properties in today's market, should they have more than 1 to sell.
In defense of private property rights, owners should be exempted from the burdensome and unnecessary rules that this law foists upon them. In its current form, it would all but shut off the "owner financing" market that is the only way that many sellers can sell and many buyers can buy right now.
PLEASE DO NOT LET THIS RESTRICTION ON PRIVATE PROPERTY RIGHTS PASS THE SENATE. It is unnecessary to stop private buyers and sellers from transacting business that is beneficial to both of them-they are not the problem that the bill seeks to solve. HR 1728 would be extremely harmful to thousands of your constituents.
It will exacerbate the problem OF foreclosure, as fewer sellers will be able to sell their homes to avoid it, and CAUSED BY foreclosure, as fewer buyers who have recently experienced foreclosure will be able to re-start the process of home ownership inexpensively and easily by negotiating owner financing.
Thank you for your consideration;
Insert Your Name
Your Company
Phone number
email
Senate Renews Push to Expand Homebuyer Tax Credit to $15,000
Senate Renews Push to Expand Homebuyer Tax Credit to $15,000
By Dawn Kopecki
June 10 (Bloomberg) -- Lawmakers are pushing to revive legislation in the Senate that would almost double an $8,000 tax credit for first-time homebuyers and expand the program to all borrowers.
Senator Johnny Isakson, a Georgia Republican, plans to introduce a bill today that increases the tax credit to $15,000 and removes income and other restrictions on who can qualify for the credit, according to his spokesman, Sheridan Watson.
The legislation, which is co-sponsored by Senate Banking Committee Chairman Christopher Dodd of Connecticut and other Democrats, would extend the homebuyer credit to multi-family properties that are used as the borrower's primary residence. It would also eliminate income caps of $75,000 and $150,000 on individuals and couples seeking to claim the credit.
"The housing market continues to be a drag on the economy, said John Castellani, president of the Washington-based Business Roundtable, which represents the interests of more than 100 CEOs including General Electric Co.'s Jeffrey Immelt and Exxon Mobil Corp.'s Rex Tillerson. "We believe that if we don't stabilize this vital sector, we can't turn the tide on the recession."
The Business Roundtable and the National Association of Realtors are both pushing to expand the tax credit and to lower mortgage rates to revive the U.S. housing market.
Isakson's bill would extend the credit, which expires at the end of 2009, to one year after it's signed into law, according to Watson. It would also allow borrowers to divide the credit over two years. The bill is co-sponsored by Republican Senators Lamar Alexander of Tennessee, Saxby Chambliss of Georgia, David Vitter of Louisiana and James Risch of Idaho.
Senators Patty Murray, a Washington Democrat, and Joseph Lieberman, a Connecticut independent, have also signed on to the bill, according to Watson.
Mortgage Rates
The roundtable and Realtors groups also recommended the Federal Reserve continue its plans to purchase mortgage securities guaranteed by Fannie Mae, Freddie Mac and the Federal Home Loan Banks to drive down mortgage rates below 5 percent.
The Fed is about a third of the way through its $1.25 trillion commitment, holding $427.6 billion of mortgage debt backed by the government-sponsored enterprises as of June 3, according to the New York Federal Reserve.
The average rate on a 30-year fixed-rate U.S. mortgage jumped last week to the highest level since November, rising to 5.57 percent from 5.25 percent the prior week, according to data released today by the Mortgage Bankers Association.
To contact the reporter on this story: Dawn Kopecki in Washington at dkopecki@bloomberg.net.
Last Updated: June 10, 2009 12:24 EDT
Thought you might want to see this.
Monday, June 8, 2009
Friday, June 5, 2009
How To Address The Cost Of Loan Modification
June 5th, 2009 | 
Author:Marty SchulingOne question that keeps coming up has to do with the homeowner paying for the loan modificaiton. “How do I know if the homeowner will actually pay for it?” is a common question that we get in support.
Here’s the deal. There are no series of questions that you can ask the client to determine if they will actually pay for the mod. All you can do is address the issue of the cost of the loan modification, and do your best to “read” the homeowner. Of course there is a way to address the cost of the mod and there is a way to NOT address the cost of the mod. Let me give you an example or two.
1. The homeowner calls, you pick up the phone and you say, “Sure, we can help you get a loan modification done and it costs $2995 to do it.” What’s the homeowner going to say? Are they going to feel good about spending almost three grand on the loan mod? Probably not. Now try this approach.
2. The homeoowner calls, and you have a conversation with the homeowner about their situation, about what happened, about how they got behind (if they are behind), what they want (stay or sell), what they can afford… try to find some common ground with the homeowner, have some sympathy for them and yes, maybe even have a little fun! They’re just another human being, and they are in need of some assistance, that’s why they are calling. Ok, so after you have a very good feel for their situation, for what they need, for what has happened for them, then you can discuss that you have alligned yourself with an organization that helps homeowners keep their home. You can tell the homeowner that you have spent a lot of time and energy finding the best organization in the nation that helps homeowners just like the one you’re speaking with. You tell the homeowner that the organization you are alligned with does attorney backed loan modifications, and of course the attorneys are going to require a retainer fee. You tell the homeowner that they will NOT be paying you, that they pay the attorneys directly. Then walk the homeowner through the cost of NOT doing the loan modification. If they’re behind on their payments and it’s looking like they might end up in foreclosure, then walk them through the cost of a foreclosure… the cost of trashed credit for the next 10 years (tens of thousands of dollars), the cost of moving (a few grand), the cost of a moving truck and moving men (a few grand), the cost of a storage unit if they’re moving from a house to an appartment ($50-$100/month or more), the cost of 1, 2, or 3 months security deposit. All of this adds up to $10,000, $20,000, $30,000 or more! This doesn’t include the emotional cost of moving, of moving their kids to a new school, etc. If the homeowner wants to retain an attorney backed loan modification, if they really want to stay in their home, we can get their file reviewed for free, and after it is accepted, they can actually retain the organization for a mere $2995 and they can keep their home.
Do you see the difference? Which situation is the homeowner more likely to go through with the loan modification?
If you do something different that works for you, let me know by posting a comment.
To your success!!!
Marty Schulting
Accelerated Loan Mods
Guidance Package From My CPA for Stimulus Package 1st Time Buyer Tax Credit
June 4, 2009
Principal residence purchased after April 8, 2008 and before December 1, 2009.
Credit is 10% of the purchase price up to $8,000 in 2009.
The phase out is modified AGI between $150,000 and $170,000 for married couples filing jointly and $75,000 and $95,000 for single taxpayers.
Renters who also own a vacation home may qualify for the credit since the three-year look back period for owning a home applies only to a principal residence.
Two or more unmarried individuals may purchase a residence and qualify for the credit.
They must allocate the amount of the credit between them as the IRS prescribes. Which is any reasonable basis according to recently issued guidance (Notice 2009-12). However, the total amount of the credit allowed to the individuals jointly may not exceed $8,000.
Married filing separately splits the credit to $4,000 each. Must keep the house as principal residence for three years or pay back the credit.
Exceptions apply for death, involuntary conversion and for a residence transferred in a divorce. IRS will disallow credit for nonresident alien or the taxpayer's financing is from tax-exempt mortgage revenue bonds. Repayments under the $7,500 credit start 2 years after the year in which the residence is purchased (2010). Recapture of credit is limited to the gain from the sale of the residence, but the credit reduces your basis in the property for figuring the gain. "Purchase" as used in the new law occurs when title closes and is "nearly any acquisition by the taxpayer". "A home constructed by the taxpayer is treated as purchased by the taxpayer on the date the taxpayer first occupies it. Residence cannot be acquired from certain related persons. An individual's family is limited to spouse, ancestors and lineal descendants, and does not include siblings. FHA lenders can apply the tax credit to their down payment in excess of 3.5% of appraised value or their closing costs. Borrowers must still make a minimum 3.5% down payment without using the tax credit. McCauley, Nicolas & Company LLC Certified Public Accountants OMB No. 1545-0074
First-Time Homebuyer CreditForm 5405 (Rev. February 2009) 2008 . Attach to Form 1040 Department of the Treasury Attachment Internal Revenue Service Sequence No. 163 Name(s) shown on return
Your social security number
General Information A Address of home qualifying for the credit (if different from the address shown on return) B Date acquired (see instructions) C If you are choosing to claim the credit on your 2008 return for a main home bought after December 31, 2008, and before December 1, 2009, check here (see instructions) .
Credit 1 Enter the smaller of: . $7,500 ($8,000 if you purchased your home in 2009), but only half of that amount if marriedfiling separately, or
. 10% of the purchase price of the home.If someone other than a spouse also held an interest in the home, enter only your share of thisamount (see instructions)
1 2 Enter your modified adjusted gross income (see instructions) 2 3 Is line 2 more than $75,000 ($150,000 if married filing jointly)? No. Skip lines 3 through 5 and enter the amount from line 1 on line 6. Yes. Subtract $75,000 ($150,000 if married filing jointly) from the amount on line 2 and enter the result 3 4 Divide line 3 by $20,000 and enter the result as a decimal (rounded to at least three places). Do not enter more than 1.000 4 5 Multiply line 1 by line 4 5 6 Subtract line 5 from line 1. This is your credit. Enter here and on Form 1040, line 69 6 X
.
General Instructions Section references are to the Internal Revenue Code. Purpose of Form Use Form 5405 to claim the first-time homebuyer credit. The credit may give you a refund even if you do not owe any tax. For homes purchased in 2008, the credit operates much like an interest-free loan. You generally must repay it over a 15-year period. For homes purchased in 2009, you must repay the credit only if the home ceases to be your main home within the 36-month period beginning on the purchase date. See Repayment of Credit on page 2.
Who Can Claim the Credit In general, you can claim the credit if you are a first-time homebuyer. You are considered a first-time homebuyer if: . You purchased your main home located in the United States after April 8, 2008, and before December 1, 2009.
. You (and your spouse if married) did not own any other main home during the 3-year period ending on the date of purchase.
If you constructed your main home, you are treated as having purchased it on the date you first occupied it. Main home. Your main home is the one you live in most of the time. It can be a house, houseboat, housetrailer, cooperative apartment, condominium, or other type of residence.
Who Cannot Claim the Credit You cannot claim the credit if any of the following apply. 1. Your modified adjusted gross income is $95,000 ormore ($170,000 or more if married filing jointly). See the instructions for line 2.
2. You are, or were, eligible to claim the District ofColumbia first-time homebuyer credit for any tax year. This rule does not apply for a home purchased in 2009.
3. Your home financing comes from tax-exemptmortgage revenue bonds. This rule does not apply for a home purchased in 2009.
4. You are a nonresident alien.
5. Your home is located outside the United States.
6. You sell the home, or it ceases to be your mainhome, before the end of 2008.
7. You acquired your home by gift or inheritance.
8. You acquired your home from a related person.A related person includes:
a. Your spouse, ancestors (parents, grandparents, etc.), or lineal descendants (children, grandchildren, etc.).
b. A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock of the corporation.
c. A partnership in which you directly or indirectly own more than 50% of the capital interest or profits interest.
For Paperwork Reduction Act Notice, see page 3. Cat. No. 11880I Form 5405 (2008) (Rev. 2-2009) Form 5405 (2008) (Rev. 2-2009) Page 2 For more information about related persons, see Nondeductible Loss in Chapter 2 of Pub. 544, Sales and Other Dispositions of Assets. When determining whether you acquired your main home from a related person, family members in that discussion (except item 7) include only the people mentioned in 8a above.
Amount of the Credit Generally, the credit is the smaller of: . $7,500 ($8,000 if you purchased your home in 2009), but only half of that amount if married filing separately, or
. 10% of the purchase price of the home. You are allowed the full amount of the credit if your modified adjusted gross income (MAGI) is $75,000 or less ($150,000 or less if married filing jointly). The phase-out of the credit begins when your MAGI exceeds $75,000 ($150,000 if married filing jointly). The credit is eliminated
completely when your MAGI reaches $95,000 ($170,000 if married filing jointly).
Repayment of Credit Homes purchased in 2008. You generally must repay the credit over a 15-year period in 15 equal installments. The repayment period begins in 2010 and you must include the first installment as additional tax on your 2010 tax return. If your home ceases to be your main home before the 15-year period is up, you must include all remaining annual installments as additional tax on the return for the tax year that happens. This includes situations where you sell the home, you convert it to business or rental property, or the home is destroyed, condemned, or disposed of under threat of condemnation. If you and your spouse claim the credit on a joint return, each spouse is treated as having been allowed half of the credit for purposes of repaying the credit. Example 1. You claimed a $7,500 credit on your 2008 tax return. You must include $500 ($7,500 . 15) as additional tax on your 2010 tax return and on each tax return for the next 14 years. Example 2. You claimed a $7,500 credit on your 2008 tax return. In 2009, you sold the home to your son. You must include $7,500 as additional tax on your 2009 tax return. Exceptions. The following are exceptions to the repayment rule. . If you sell the home to someone who is not related to you, the repayment in the year of sale is limited to the amount of gain on the sale. (See item 8 under Who Cannot Claim the Credit for the definition of a related person.) When figuring the gain, reduce the adjusted basis of the home by the amount of the credit you did not repay.
. If the home is destroyed, condemned, or disposed of under threat of condemnation, and you acquire a new main home within 2 years of the event, you continue to pay the installments over the remainder of the 15-year repayment period.
. If, as part of a divorce settlement, the home is transferred to a spouse or former spouse, the spouse who receives the home is responsible for making all subsequent installment payments.
. If you die, any remaining annual installments are not due. If you filed a joint return and then you die, your surviving spouse would be required to repay his or her half of the remaining repayment amount. Homes purchased in 2009. You must repay the credit only if the home ceases to be your main home within the 36-month period beginning on the purchase date. This includes situations where you sell the home, you convert it to business or rental property, or the home is destroyed, condemned, or disposed of under threat of condemnation. You repay the credit by including it as additional tax on the return for the year the home ceases to be your main home. If the home continues to be your main home for at least 36 months beginning on the purchase date, you do not have to repay any of the credit. If you and your spouse claim the credit on a joint return, each spouse is treated as having been allowed half of the credit for purposes of repaying the credit. Exceptions. The following are exceptions to the repayment rule. . If you sell the home to someone who is not related to you, the repayment in the year of sale is limited to the amount of gain on the sale. (See item 8 under Who Cannot Claim the Credit for the definition of a related person.) When figuring the gain, reduce the adjusted basis of the home by the amount of the credit.
. If the home is destroyed, condemned, or disposed of under threat of condemnation, and you acquire a new main home within 2 years of the event, you do not have to repay the credit.
. If, as part of a divorce settlement, the home is transferred to a spouse or former spouse, the spouse who receives the home is responsible for repaying the credit.
. If you die, repayment of the credit is not required. If you filed a joint return and then you die, your surviving spouse would be required to repay his or her half of the credit.
Specific Instructions Part I General Information Line B. Enter the date you acquired the home. This is the date you purchased it (or the date you first occupied it if you constructed your main home). Line C. You can choose to claim the credit on your 2008 Form 1040 for a main home purchased after December 31, 2008, and before December 1, 2009. If you make this choice, check the box. Part II Credit Line 1. If two or more unmarried individuals buy a main home, they can allocate the credit among the individual owners using any reasonable method. The total amount allocated cannot exceed the smaller of $7,500 ($8,000 if you purchased your home in 2009) or 10% of the purchase price. See Purchase price on page 3. Note. A reasonable method is any method that does not allocate all or a part of the credit to a co-owner who is not eligible to claim that part of the credit. Form 5405 (2008) (Rev. 2-2009) Page 3 Purchase price. The purchase price is the adjusted basis of your home on the date you purchased it. This includes certain settlement or closing costs (such as legal fees and recording fees) and your down payment and debt (such as a first or second mortgage or notes you gave the seller in payment for the home). If you build, or contract to build, a new home, your purchase price can include costs of construction. For more information about adjusted basis, see Pub. 551, Basis of Assets. Line 2. Your modified adjusted gross income is the amount from Form 1040, line 38, increased by the total of any: . Exclusion of income from Puerto Rico, and
. Amount from Form 2555, lines 45 and 50; Form 2555-EZ, line 18; and Form 4563, line 15.
Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the United States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax. You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential, as required by section 6103. The average time and expenses required to complete and file this form will vary depending on individual circumstances. For the estimated averages, see the instructions for your income tax return. If you have suggestions for making this form simpler, we would be happy to hear from you. See the instructions for your income tax return. CCH-EXP, 2009FED ¶810.011, Tax Planning: Advantages for Homeowners: First-Time Homebuyer Credit © 2009, CCH INCORPORATED. All Rights Reserved. A WoltersKluwer Company Who is a "first-time homebuyer"? A first-time homebuyer is an individual (and, if married, the individual's spouse) who had no present ownership interest in a principal residence during the three-year period ending on the date of the home purchase that qualifies for a credit (Code Sec. 36(c)(1), as added by the Housing Assistance Tax Act of 2008 (P.L. 110-289)). Who may claim the credit? A first-time homebuyer who bought a principal residence in the District of Columbia after August 4, 1997, and before January 1, 2010, was entitled to a tax credit of up to $5,000 (or $2,500 if the taxpayer was married and filed a separate return). The allowable credit was allocated among unmarried taxpayers who purchased a home together. The amount of the credit was phased out for taxpayers with incomes above set thresholds. The taxpayer's basis in the home was reduced by the amount of the credit allowed (Code Sec. 1400C, as amended by the Emergency Economic Stabilization Act of 2008 (P.L. 110-343)). Purchases made after April 8, 2008, and before January 1, 2009. --Individuals who have not owned a home in the last three years can qualify for a refundable income tax credit of up to $7,500 ($3,750 for married persons filing separately) when they purchase a principal residence in the United States (Code Sec. 36, as added by P.L. 110-289 and amended by the American Recovery and Reinvestment Tax Act of 2009 (P.L. 111-5)). The credit applies to purchases made after April 8, 2008, and before July 1, 2009 even if the taxpayer entered into a binding contract to purchase the home before April 9, 2008. Recapture. The homebuyer credit is recaptured ratably over 15 years, with no interest charge. The recapture operates by increasing the taxpayer's federal tax liability by 6 2/3percent of the credit amount (equal to 1/15th of the credit amount) for each year during the recapture period (Code Sec. 36(f)(1), as added by P.L. 110-289). The recapture period is the 15-year period beginning with the second tax year following the tax year of purchase. Purchases after 2008 and before December 1, 2009. --The first-time homebuyer credit increases to $8,000 ($4,000 for a married taxpayer filing a separate return) ( Code Sec. 36(b) and (h), as amended by the American Recovery and Reinvestment Tax Act of 2009 (P.L. 111-5)). The recapture requirement is generally waived for such purchases unless the taxpayer sells the home within 36 months (Code Sec. 36(f)(4)(D), as added by P.L. 111-5). The credit can now be applied to homes that are financed by exempt mortgage revenue bonds or that are located in the District of Columbia (Code Sec. 36(d), as amended by P.L. 111-5). Phaseout. --The credit is phased out for taxpayers with modified adjusted gross income (AGI) in excess of $75,000 (or $150,000 for joint filers). The phaseout is complete and no credit is available when a taxpayer's modified AGI reaches $95,000 (or $170,000 for joint filers).
© 2009, CCH INCORPORATED. All Rights Reserved. A WoltersKluwer Company MISC-DOC, 2009ARD 072-10, First-Time Homebuyer Credit Questions and Answers: Homes Purchased in 2009, IRS : First-time homebuyer credit : 2009 home purchases ., (April 14, 2009) © 2009, CCH INCORPORATED. All Rights Reserved. A WoltersKluwer Company First-Time Homebuyer Credit Questions and Answers: Homes Purchased in 2009 April 14, 2009 IRS : First-time homebuyer credit : 2009 home purchases . First-Time Homebuyer Credit Questions and Answers: Homes Purchased in 2009 Q. Is the IRS currently accepting e-filed returns that claim the new $8,000 homebuyer credit in/for the 2008 tax year? A. Yes. Taxpayers can file Form 5405 , First Time Homebuyer Credit, electronically for home purchases in 2008 to claim the first-time homebuyer credit. IRS began processing these returns electronically on March 30, 2009. Q.I bought my home in 2009 (early) and filed my 2008 tax return claiming the $7,500 first-time homebuyer credit that has to be repaid. Now the expanded law provides for an $8,000 credit that doesn't have to be repaid. What do I need to do to get the $8,000 credit that doesn't have to be paid back?
A. You can file an amended return.
Q. If I purchase a home in June 2009, and have already filed my 2008 tax return, can I amend my 2008 return or will I have to claim it on my 2009 return?
A. You can either file an amended return to claim it on your 2008 return or claim it on your 2009 return.
Q. I am in the process of buying a home. I expect to close the deal before December 1, 2009. Can I claim the first-time homebuyer credit now? That would allow me to use the refund for a down payment.
A. No. You may not claim the credit in anticipation of a purchase that has yet to happen. Until you have finalized the purchase of your home, which for most purchasers occurs at the time of the closing, you do not qualify for the credit. IRS news release 2009-27 , First-Time Homebuyers Have Several Options to Maximize New Tax Credit, contains details for filing options if the home is purchased after April 15, 2009.
Q: When must I pay back the credit for the home I purchased in 2009? A: Generally, there is no requirement to pay back the credit for a principal residence purchased in 2009. The obligation to repay the credit on a home purchased in 2009 arises only if the home ceases to be your principal residence within 36 months from the date of purchase. The full amount of the credit received becomes due on the return for the year the home ceased being your principal residence.
Q. If I claim the first-time homebuyer credit for a purchase in 2009 and stop using the property as my principal residence 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 that 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. Form 5405 and its instructions will be revised for tax year 2009 to include information about repayment of the credit.
MISC-DOC, 2009ARD 072-11, First-Time Homebuyer Credit: Scenarios, IRS : First-time homebuyer credit : Scenarios ., (April 14, 2009) © 2009, CCH INCORPORATED. All Rights Reserved. A WoltersKluwer Company First-Time Homebuyer Credit: Scenarios April 14, 2009 IRS : First-time homebuyer credit : Scenarios . First-Time Homebuyer Credit: Scenarios S1. If a single person (Taxpayer A) qualifies as a first-time homebuyer at the time he/she purchases a home with someone (Taxpayer B) that is not a first-time homebuyer and then later that year they marry each other, is the credit still allowed? A. Eligibility for the first-time homebuyer credit is determined on the date of purchase. If Taxpayer A, a first-time homebuyer, buys a house and then later that year marries Taxpayer B, not a first-time homebuyer, the credit is allowable to Taxpayer A. Taxpayer A may take the maximum credit. S2. Taxpayer A is a single first-time home buyer. Taxpayer B (parent) cosigns for A and does not qualify. Both names are on the mortgage. Can Taxpayer A claim the credit and, if so, how much? A. Yes. Taxpayer B is not a first-time homebuyer and cannot claim any portion of the credit, but A may claim the entire credit ($7,500 for purchase in 2008; $8,000 for purchase in 2009), if the home was purchased as Taxpayer A's primary residence. S3. A taxpayer owned her principal residence. Several years ago, she decided to relocate to a rented apartment, but did not sell the former residence. Instead, she rented it out to tenants. Now the taxpayer plans to buy another house and make it her new principal residence. Does she qualify for the first-time homebuyer credit? A: A taxpayer who owned rental property within the past three years is still eligible for the credit. The taxpayer cannot have owned and used a home as his or her principal residence within the last three years. S4. If husband and wife wanted to sell the home that the wife owned when they got married, and the husband had not owned a home within the past three years, could he qualify as a first-time homebuyer for the credit even though the wife would not qualify? A. No. The purchase date determines whether a taxpayer is a first-time homebuyer. Since the wife had ownership interest in a principal residence within the prior three years, neither taxpayer may take the first-time homebuyer credit. Section 36(c)(1) of the Internal Revenue Code requires that the taxpayer and the taxpayer's spouse not have an ownership interest in a principal residence within the prior three years from the date of purchase. The husband may not take the credit even if he filed on a separate return. Related Items: Ÿ First-Time Homebuyer Credit Questions and Answers: Basic Information Ÿ First-Time Homebuyer Credit Questions and Answers: Homes Purchased in 2008 IRS-NEWS, 2009FED ¶46,299 First-time homebuyer credit: 2009 purchases: Claiming the credit. --, IRS News Release IR-2009-27 (March 18, 2009) © 2009, CCH INCORPORATED. All Rights Reserved. A WoltersKluwer Company IRS News Release IR-2009-27 , March 18, 2009. [ Code Sec. 36] First-time homebuyer credit: 2009 purchases: Claiming the credit. -There are several different ways that taxpayers may claim the new $8,000 first-time homebuyer credit for 2009 home purchases, even if they have already filed their 2008 tax return. Taxpayers who are buying a home in the near future and who have already filed their 2008 tax return should consider filing an amended 2008 tax return. Filing an amended 2008 tax return would allow them to claim the first-time homebuyer credit without waiting until next year. Alternatively, taxpayers can wait and claim the homebuyer credit when they file their 2009 tax return. Waiting to claim the credit could benefit taxpayers who might qualify for a higher credit on their 2009 return, such as those with a job loss or a drop in investment income. Taxpayers who are buying a home soon but have not yet filed their 2008 returns can request a six-month extension of time to file. Alternatively, these taxpayers (especially those due a sizeable refund) could file their return now and follow up with an amended 2008 return to claim the homebuyer credit. Or, they could simply wait and claim the homebuyer credit when they file the 2009 tax return. Back reference: 4190K.11. As part of the Treasury Department's consumer outreach effort and with the April 15 individual tax filing deadline approaching, the Internal Revenue Service began a concerted effort to educate taxpayers about additional options at their disposal to claim the new $8,000 first-time homebuyer credit for 2009 home purchases. For people who recently purchased a home or are considering buying in the next few months, there are several different ways that they can get this tax credit even if they've already filed their tax return. The Treasury Department encourages taxpayers to explore these options to maximize their credit and get their money back as fast as possible. "The new credit can get money in the pockets of first-time homebuyers quickly," said IRS Commissioner Doug Shulman. "For people who recently purchased a home or are considering buying in the next few months, there are several different ways that they can get this tax credit even if they've already filed their tax return." First-time homebuyers represent a significant portion of existing single-family home sales. The expansion in the first-time homebuyer credit will make it easier for first-time homebuyers to enter the housing market this year. Under the American Recovery and Reinvestment Act of 2009, qualifying taxpayers who purchase a home before Dec. 1 receive up to $8,000 or $4,000 for married individuals filing separately. People can claim the credit either on their 2008 tax returns due April 15 or on their 2009 tax returns next year. The filing options to consider are: Ÿ File an extension. Taxpayers who haven't yet filed their 2008 returns but are buying a home soon can request a six-month extension to October 15. This step would be faster than waiting until next year to claim it on the 2009 tax return. Even with an extension, taxpayers could still file electronically, receiving their refund in as few as 10 days with direct deposit. Ÿ File now, amend later. Taxpayers due a sizable refund for their 2008 tax return but who also are considering buying a house in the next few months can file their return now and claim the credit later. Taxpayers would file their 2008 tax forms as usual, then follow up with an amended return later this year to claim the homebuyer credit. Ÿ Amend the 2008 tax return. Taxpayers buying a home in the near future who have already filed their 2008 tax return can consider filing an amended tax return. The amended tax return will allow them to claim the homebuyer credit on the 2008 return without waiting until next year to claim it on the 2009 return. Ÿ Claim the credit in 2009 rather than 2008. For some taxpayers, it may make more financial sense to wait and claim the homebuyer credit next year when they file the 2009 tax return rather than claiming it now on the 2008 tax return. This could benefit taxpayers who might qualify for a higher credit on the 2009 tax return. This could include people who have less income in 2009 than 2008 because of factors such as a job loss or drop in investment income. The IRS reminds taxpayers the amount of the credit begins to phase out for taxpayers whose modified adjusted gross income is more than $75,000, or $150,000 for joint filers. Taxpayers can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately. For more information, including guidance for people who bought their first homes in 2008, visit IRS.gov. To learn more about the overall implementation of the Recovery Act, visit http://www.recovery.gov/.
© 2009, CCH INCORPORATED. All Rights Reserved. A WoltersKluwer Company CCH-EXP, 2009FED ¶4190.03, First-time Homebuyer Credit: Requirements for claiming the homebuyer credit © 2009, CCH INCORPORATED. All Rights Reserved. A WoltersKluwer Company First-time Homebuyer Credit: Requirements for claiming the homebuyer credit Individuals who purchase a principal residence in the United States after April 8, 2008, and before December 1, 2009, may be eligible for a first-time homebuyer credit ( Code Sec. 36, as added by the Housing Assistance Tax Act of 2008 ( P.L. 110-289) and amended by the American Recovery and Reinvestment Tax Act of 2009 ( P.L. 111-5)). The amount of the credit is 10 percent of the purchase price of the residence up to a maximum of $8,000 (or $7,500 depending on the date of purchase) (see ¶4190.035). The refundable income tax credit is only available to individuals who have not owned a home in the last three years. The credit is available even if the taxpayer entered into a binding contract to purchase the home before April 9, 2008 (Joint Committee on Taxation, Technical Explanation of the Housing Assistance Tax Act of 2008 ( JCX-63-08), July 23, 2008). In determining the availability of the first-time homebuyer credit, the following rules and definitions apply. l A first-time homebuyer is an individual (and, if married, the individual's spouse) who had no present ownership interest in a principal residence during the three-year period ending on the date of the home purchase that qualifies for the credit ( Code Sec. 36(c)(1), as added by P.L. 110-289). l A principal residence is defined as it is for purposes of the exclusion of gain on the sale of a principal residence ( Code Sec. 36(c)(2), as added by P.L. 110-289). See ¶7266.022. l A purchase is nearly any acquisition by the taxpayer. However, purchases do not include acquisitions (i) if the transferor and the taxpayer are related persons, (ii) if the taxpayer's basis in the property is determined in whole or in part by reference to the transferor's adjusted basis, or (iii) if the transferor was a decedent, the taxpayer's basis in the property is stepped up to the fair market value (or special use value) on the date of death (or the alternate valuation date) ( Code Sec. 36(c)(3)(A), as added by P.L. 110-289). A taxpayer is related to a transferor if his or her relationship would result in the disallowance of losses under the related party rules, except that an individual's family is limited to a spouse, ancestors and lineal descendants, and does not include siblings ( Code Sec. 36(c)(5), as added by P.L. 110-289). A home constructed by the taxpayer is treated as purchased by the taxpayer on the date the taxpayer first occupies it ( Code Sec. 36(c)(3)(B), as added by P.L. 110-289). Election to treat 2009 purchase as made in 2008. A taxpayer who purchases a home during the eligible period in 2009 can elect to treat the purchase as having been made on December 31, 2008 ( Code Sec. 36(g), as amended by P.L. 111-5). Taxpayers can file amended returns for this purpose (Joint Committee on Taxation, Technical Explanation of the Housing Assistance Tax Act of 2008 ( JCX-63-08), July 23, 2008).
© 2009, CCH INCORPORATED. All Rights Reserved. A WoltersKluwer Company Printer-friendly page from www.hud.gov Page 1 of 2 This page is located on the U.S. Department of Housing and Urban Development's Homes and Communities Web site at http://www.hud.gov/news/release.cfm?CONTENT=pr09-072.cfm.
News Release
HUD No. 09-072 For Release Lemar Wooley Friday (202) 708-0685 May 29, 2009 www.hud.gov/news/index.cfm
DONOVAN ANNOUNCES RECOVERY ACT'S HOMEBUYER TAX CREDIT CAN IMMEDIATELY HELP THOUSANDS OF FIRST-TIME HOMEBUYERS TO BUY A HOME FHA plan will stimulate new home sales and help stabilize housing market WASHINGTON - Speaking to the National Association of Home Builders Spring Board of Directors Meeting, U.S. Housing and Urban Development Secretary Shaun Donovan today announced that the Federal Housing Administration (FHA) will allow homebuyers to apply the Obama Administration's new $8,000 first-time homebuyer tax credit toward the purchase costs of a FHA-insured home. Donovan said that today's action will help stabilize the nation's housing market by stimulating home sales across the country. The American Recovery and Reinvestment Act of 2009 offers homebuyers a tax credit of up to $8,000 for purchasing their first home. Families can only access this credit after filing their tax returns with the IRS. Today's announcement details FHA's rules allowing state Housing Finance Agencies and certain non-profits to "monetize" up to the full amount of the tax credit (depending on the amount of the mortgage) so that borrowers can immediately apply the funds toward their down payments. Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5 percent of appraised value or their closing costs, which can help achieve a lower interest rate. To read the FHA's new mortgagee letter, visit HUD's website. "We believe this is a real win for everyone," said Donovan. "Today, the Obama Administration is taking another important step toward accelerating the recovery of the nation's housing market. Families will now be able to apply their anticipated tax credit toward their home purchase right away. At the same time we are putting safeguards in place to ensure that consumers will be protected from unscrupulous lenders. What we're doing today will not only help these families to purchase their first home but will present an enormous benefit for communities struggling to deal with an oversupply of housing." Currently, borrowers applying for an FHA-insured mortgage are required to make a minimum 3.5 percent downpayment on the purchase of their home. Current law does not permit approved lenders to monetize the tax credit to meet the required 3.5 percent minimum down payment, but, under the terms of today's announcement, lenders can now monetize the tax credit for use as additional down payment, or for other closing costs, which can help achieve a lower interest rate. Buyers financing through state Housing Finance Agencies and certain non-profits will be able to use the tax credit for their downpayments via secondary financing provided by the HFA or non-profit. In addition to the borrower's own cash investment, FHA allows parents, employers and other governmental entities http://www.hud.gov/utilities/print/print2.cfm?page=80$^@http%3A%2F%2Fwww%2Ehud... 6/5/2009 Printer-friendly page from www.hud.gov Page 2 of 2 to contribute towards the downpayment. Today's action permits the first-time homebuyer's anticipated tax credit under the Recovery Act to be applied toward the family's home purchase right away. Unlike seller-funded down-payment assistance, which was a vehicle for abuse, this program will allow homebuyers to shop for the best home price and services using their anticipated tax credit. According to estimates by the National Association of Home Builders, the Administration's homebuyer tax credit will stimulate 160,000 home sales across the nation - 101,000 of which will be first-time buyers who will receive the credit. Another 59,000 existing homeowners will be able to buy another home because a first-time buyer purchased their home. Given FHA's current market share, it's estimated that thousands of families will be able to purchase a home by allowing the anticipated tax credit to be applied toward their purchase together with an FHA-insured mortgage. Homebuyers should beware of mortgage scams and carefully compare benefits and costs when seeking out tax credit monetization services. Programs will vary from organization to organization and borrowers should consider whether the services make sense for them, as well as what company offers the most suitable and affordable option. For every FHA borrower who is assisted through the tax credit program, FHA will collect the name and employer identification number of the organization providing the service as well as associated fees and charges. FHA will use this information to track the business closely and will refer any questionable practices to the appropriate regulatory agencies, as necessary. ### HUD is the nation's housing agency committed to sustaining homeownership; creating affordable housing opportunities for low-income Americans; and supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development and enforces the nation's fair housing laws. More information about HUD and its programs is available on the Internet at www.hud.gov and espanol.hud.gov. U.S. Department of Housing and Urban Development 451 7th Street, S.W., Washington, DC 20410 Telephone: (202) 708-1112 Find the address of a HUD office near you http://www.hud.gov/utilities/print/print2.cfm?page=80$^@http%3A%2F%2Fwww%2Ehud... 6/5/2009
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