Why? Because now, as you calculate your tax bill or your refund, you can finally see in real terms just how beneficial a tax credit of up to $8,000 can be to your bottom line.

Here are the basics:

Qualified 2009 and 2010 first-time home buyers can get up to 10% of the home’s purchase price or a maximum of $8,000. In November 2009, legislation extended a tax credit of up to $6,500 (or up 10% of the home’s purchase price) to long-time residents of the same primary residence if they purchase a new main home. To qualify, eligible taxpayers must show that they lived in their previous homes for a five-consecutive-year period during the eight-year period ending on the closing date of the new home.

Important details to remember:

1) You don’t have to pay it back (as long as you stay in your qualified home for at least 36 months).

2) If you qualify for the credit, you can still apply it to this year’s taxes, even if you’ve already filed your returns, or save it for your 2010 returns.

3) This is a true tax credit, not a deduction. If you qualify for the full credit, there will be an actual dollar-for-dollar reduction of up to $8,000 (or up to $6,500 for qualified repeat buyers) on your tax bill now or in 2010.

4) New income qualification limits have been put in place that expanded the pool of qualified buyers.

5) If you purchased a qualified home or plan to after reading this article, you must have a contract in place by April 30, 2010 (with closing to take place by June 30, 2010), so don’t wait!

There are, of course, other details and qualification requirements and restrictions that you’ll need to consider. But don’t hesitate to give us a call if you have any questions. Also, if you happen to have your completed 2009 tax return handy, our lender friends can help you calculate how much money you can get if you purchase a home and qualify for the full credit.

As they say on TV, “DON’T DELAY – ACT NOW!” This time, really do it!

Montgomery County, MD
From: 01/01/2010 to 01/31/2010                Statistics generated on: 02/09/2010

Source: Metropolitan Regional Information Systems, Inc. – MLS Resale Data
Copyright 2010 – Information deemed reliable, but is not guaranteed.

Howard County, MD
From: 01/01/2010 to 01/31/2010                Statistics generated on: 02/09/2010

Source: Metropolitan Regional Information Systems, Inc. – MLS Resale Data
Copyright 2010 – Information deemed reliable, but is not guaranteed.

FHA mortgages have been very popular recently.  There are many reasons for this, including lower down payments, lots of options to obtain help from motivated sellers, and the ability for people with less than perfect credit to enjoy home ownership.

 Yesterday we received guidance from several lenders that FHA rules will be a-changing.  The guidelines will be tightened significantly in the coming weeks and months.  Here are some important changes that could affect your 2010 home purchase.

 *  The upfront Mortgage Insurance Premium (MIP) will be raised to 2.25% from 1.75%.  This will be effective in the Spring and the date is not known yet. 
Bottom line: you’ll pay an additional half a percent of your loan amount at settlement.

*  HUD has put in a minimum FICO of 580 for the 3.5% down payment.   This change will go into effect sometime in the summer.  Note, however, that most lenders have already raised the limit to a 620 minimum, so this is really not a big change, but there is a probability that we’ll see the minimimum FICO score with most lenders increase to 640.
Bottom line: It’s getting harder for anyone with less than pristine credit to qualify for a mortgage.

*  Seller concessions moving from 6% down to 3%.  This change will be posted sometime in February and will have an effective date in the early summer.
Bottom line note from Tom: as a buyer’s agent, this is HUGE!  I’ve had several cases over the past year of negotiating a 5-6% credit from the sellers.  If 3% is the new maximum, it’ll be harder to negotiate with the seller to lower the up-front cost of the home purchase.

 And don’t forget the TAX CREDITS that are set to expire in April!  So, to briefly recap why you need to MOVE NOW if you’re thinking of buying a new home in the coming year:

 Here’s what you can currently take advantage of:

 *  TAX CREDIT OF $6,500 to $8,000 for repeat *and* first time home buyers (if qualified).
*  The seller can pay up to 6% of the sales price of buyer’s closing costs. 
*  Upfront MIP is 1.75% (half a percent lower than it will be)
*  No minimum credit (FICO) score currently (with lenders usually requiring 620). 
*  FHA allows Non-Occupying co-signers for income only.  (FHA loans are the only loans that allow a relative to co-sign for the borrower and do not require the borrower to have any source of income.) 

I know this is a lot to digest, but I wanted to make sure all my friends have all the facts about the current market for real estate.

 Questions? Simply reply to this email or call us at 301.785.5889 today.  We’re here to help!

 (And thanks for making it all the way to the end of this important message!)

Sales volume is UP about 40% in Montgomery and Howard Counties.  So people *are* buying homes.  That’s the good news.

The question is: what are people buying?  It’s certainly NOT expensive homes.  There were a mere 247 sales in all of Montgomery County priced above $500,000 last month (26.2% of the total sales), compared with 695 sales under $500k.  In Howard, 53 sales topped the $500,000 mark (or 19.9%)., while 214 sold for under $500k.

While sales volume is up, prices remain flat.  The median sale price is down 10.8% in Montgomery to $330,000.  In Howard the median price fell 8.5% to 325,000.  (The median sale price is the price at which half the houses sold for more, and half sold for less.)

Days on market is down significantly from last year in both MoCo and HoCo, to right at 80 days on average in both counties.  This is about a 30% reduction in selling time in both counties.

Nationally, rehab and investor loan volume is up.  Given these statistics, it’s clear that distressed properties, sold at a discount, are being removed from inventory. 

Active listings are heading down in a seasonal pattern; however, even taking seasonality into account, the available inventory has decreased significantly.  Sales volume is up, again looking beyond the seasonal variations.  These two trends, decreased inventory and increased sales, bode well for market stabilization.  Barring any major shock to the system (shadow REO inventory being dumped on the market, prolonged economic woes, etc.), the trend appears to be one toward stabilization of prices.

Howard County, MD
From: 10/01/2009 to 10/31/2009                Statistics generated on: 11/09/2009

Source: Metropolitan Regional Information Systems, Inc. – MLS Resale Data
Copyright 2009 – Information deemed reliable, but is not guaranteed.

Montgomery County, MD
From: 10/01/2009 to 10/31/2009                Statistics generated on: 11/09/2009

Source: Metropolitan Regional Information Systems, Inc. – MLS Resale Data
Copyright 2009 – Information deemed reliable, but is not guaranteed.

Great news for homebuyers EVERYWHERE!  See prior two posts for the particulars of this new legislation. 

As always, you can call us directly at 301.785.5889 if you have any questions about the new law or your eligibility.

Some more GREAT NEWS we can all use!

NAR Homebuyer Tax Credit Summary (click link to open PDF in new window)

(A summary of the November 2009 Tax Credit)

NAR FAQs About New Homebuyer Tax Credit Changes

It’s important to note the income and home purchase price limitations. 

Purchase Price: The credit is available for the purchase of principal homes costing $800,000 or less, period. 

Income: The credit would be phased out for individuals with annual incomes above $125,000 and for joint filers with incomes above $225,000.

We’ll post again when the extension is officially signed by the President.

Stay tuned!