The tax credit expires November 30, 2009. Don’t wait until that last day though…and here is why!

1. November 30 is the Monday after Thanksgiving Weekend.
2. November 28-29 is a weekend. No closings on weekends.
3. November 27 is the Friday after Thanksgiving – most people won’t be working
4. November 26 is Thanksgiving – national holiday. No closings.
5. November 25 is the day before Thanksgiving – half-day for many people

So, that backs up the November 30, 2009 first-time home buyer tax credit deadline by 6 days to November 24, a Tuesday.

Don’t close on November 24th! Schedule your closing for the week of November 16 instead. Things go wrong and the last thing you want is a client missing the tax credit deadline.

Get those offers in and accepted by October 16th or there is going to be some seriously sad buyers out there at the end of November.

First Time Home Buyer Calendar

There is plenty of talk about the first time home buyer credit and whether it will be continued, expanded or cut off. One of the options out there is the (creatively named) Home Ownership Moves the Economy(HOME) Act of 2009.  HR 2801 was introduced by Howard Coble (R-NC).

This bill would continue the current tax credit for first time home buyer currently set to expire December 1, 2009. However, there will be a couple changes:

1. No more income restrictions
2. Buyers do not need to be first time buyers

For buyers who couldn’t qualify for the tax credit because of income or having already owned a house, this is a huge difference. Get ready for an even larger chunk of the population to enter the home buying fray if this bill passes.

With more disposable income, home ownership experience and potential equity in their current property, there will be an increase in buyers AND sellers. So if HR 2801 passes, get ready!

Portland First Time Home Buyers, get excited – there is another tax credit available to you called the Mortgage Credit Certificate (MCC). Not many lenders are offering it, so make sure you are working with someone who can help you out with it. I’m happy to explain and get you started on the process if you give me a call.

What Is It?

• Recurring Annual Tax Credit of 20% of Annual Mortgage Interest
• On Top of Federal Tax Credit
• Deducted from the Homeowner’s Total Tax Liability
• First Time Home Buyers Only
• Owner-Occupied Only

Example:

1. Sample Home Loan Amount                      $300,000

2. Sample Annual Interest Rate                      5.5%

3. Total Annual Interest Paid                           $16,500

4. Mortgage Credit Certificate Rate                20%

5. Annual MCC Amount (Line 3×4)                 $3,300

6. Monthly Credit Amount (Line 5÷12)            $275

*Many other scenarios exist—contact Dakota for additional details.

Eligible Homebuyer

First-time homebuyer, defined as not having owned a home in the past three years; this requirement is waived if the property is located in a “Target Area”

• Annual household income limit is based on family size as follows:1-2 Persons – $70,000; 3 or more persons – $80,500
• Must meet mortgage criteria for underwriting, credit and down payment requirements
• Must occupy property as “principal residence” within 60 days of the purchasing the home

Eligible Property

• Must be located within the Portland city limits
• Must be owner-occupied during the life of the loan
• Single-family units only, including condos and town homes
• Maximum purchase price – $361,125

There is a recapture tax that can apply in certain situations, but the large majority of people will not need to worry about this.

For more details, visit the PDC’s Mortgage Credit Certificate site or give me a call at 503-546-8480.

The National Association of Realtors recently produced TV ads to educate potential first time home buyers on the available $8,000 tax credit. With all the health care talk going on, who knows when or if Congress will get around to renewing or expanding the credit. Buyers, get it while it lasts!

If you haven’t seen those ads yet, they can be downloaded from the NAR’s website.

Along with the current tax credit in place for first time home buyers, many parents are gifting money to their children to help them purchase a new home. However, there are tax consequences for doing this, and here are a few pointers to help avoid paying Uncle Sam the next year.

• Give a cash gift A person is allowed to gift up to $13,000 per person in a given year without incurring gift tax. That means that in one year, a couple could give their son and daughter $13,000 each, for a total of $26,000, to go toward a down payment.
• Lend the money In order to avoid the government seeing the loan as a gift, you need to charge at least the minimum market interest rate. Consult your accountant on this.
• Set up a trust One way to go is to use a qualified personal residence trust, or QPRT. for a QPRT, parents put the home they want to give their children into a trust. At the end of the defined term, the home passes to the children with no taxes due. You’ll need an attorney to set this up, but it can be a great option.