Brand New Rules For Getting a FHA Loan on Condo’s and Townhomes is a post from: FHA,VA and Conventional Home Loans in all 50 States

FHA has gone back and forth for months on implementing new guidelines for lenders that are making FHA loans on condos and townhomes.  These rules have very powerful implications for the entire U.S. condo market, as FHA is becoming the #1 source of financing for home buyers in the U.S.

The latest rules from FHA are temporary for through the next year as a response to the current housing situation in the U.S.  Here is a summary of some of the changes they have made.  These changes will help more condo projects qualify for FHA loans:

1.  Condo “spot approvals” are still available through February 2010 

This is a very important extension.  Condo projects that are not already on the FHA approved condo list need to either get on the list or get a “spot approval” for the single unit a borrower is trying to buy.  This extension allows FHA buyers to get a condo they want to buy approved even if not on the FHA approved condo list.  Getting the project on the FHA approved condo list is a more involved process than just getting a “spot approval” Please call or email if you have questions about spot approvals.

2. FHA will now allow 50% of all the condo units to have FHA loans on them, in some cases 100% 

Previously FHA was only allowing 30% of all units to have FHA loans.

3.  New condo developments only 50% of *pre-sold* condo need to be owner-occupied or intended to be owner occupied 

FHA still has a rule where 50% or more of the units have to be owner occupied.  With new condo developments where the entire projects have not sold out yet, only 50% of the units sold so far have to be owner occupied or intended to be owner occupied.

4.  REO/Bank Owned properties that are vacant or tenant-occupied are not counted in the owner-occupancy figures 

This is important because as stated above, the #1 rule the prevents FHA from financing condo units is that less than 50% of the condo units in a project are owner occupied.  This exception will not count REO/bank owned units in these figures and will thus help condo projects with a lot of bank owned properties pass the occupancy % test.

So there you have it, so very recent changes from FHA regarding condo loans.   These changes will help more buyers get into condo’s using FHA loans.  There is a lot more to FHA condo approvals as they can be very complicated.

Give me a call (858-922-7899) or email (homeloan8@gmail.com) if you have any questions at all about getting approved for a FHA Loan.

Warmest Regards,

Rob Chomentowski

Sr. Loan Officer (and FHA specialist)

858-922-7899

homeloan8@gmail.com

Related posts:

1. You Don’t Have to Be a U.S. Citizen To Apply For a FHA Loan
2. Today’s Realities on Getting a FHA Loan on a Condo or Townhome

You Don’t Have to Be a U.S. Citizen To Apply For a FHA Loan is a post from: FHA,VA and Conventional Home Loans in all 50 States

What many people don’t realize is that you don’t have to be a U.S. citizen to apply for an FHA Loan and be approved.  The following resident aliens are eligible for FHA Loans:

1. Permanent Resident Alien – you will only have to document your permanent residency (front and back copy of card) and provide a copy of your social security card.
2. Non-Permanent Resident Alien – you will only need to provide copy of valid social security card evidence you are able to work in the United States

So if you are working in the United Stated legally, you can take advantage of the wonderful FHA financing program to buy a home.  Here are some highlights of the FHA Loan:

• Minimum down payment is 3.5% and that 3.5% can be a gift from a relative
• Non occupying co-borrowers allowed to asset in qualification
• You don’t need perfect credit, so if you think you have bad credit you may still be eligible for a FHA Loan
• 50 year low 30 year fixed interest rates
• FHA 203k Loan provides money to fix up the house you buy
• 3.5% down on owner-occupied duplex, triplex and fourplex
• Condo’s and manufactured homes OK
• FHA is NOT just for first time home buyers!  You can own other homes.

Give me a call at 858-922-7899 or email at homeloan8@gmail.com if you have any questions at all about getting approved for a FHA Loan.

Warmest Regards,

Rob Chomentowski

Sr. Loan Officer (and FHA specialist)

858-922-7899

homeloan8@gmail.com

Related posts:

1. Using Unemployment Income To Apply For a FHA Loan
2. FHA Loans Are For Everyone – Anyone Can Apply For An FHA Loan
3. Non-Permanent U.S. Resident OK for 3.5% Down FHA Loans

$8000 Tax Credit and FHA Financing is a post from: FHA,VA and Conventional Home Loans in all 50 States

PRESIDENTIAL TAX CREDIT

FOR FIRST-TIME HOME BUYERS IN 2009

Buyers using FHA financing are eligible for the TAX Credit!

This Credit runs out Dec 1, unless the credit is extended!

WASHINGTON — In 2008, Congress enacted a $7500 tax credit designed to be an incentive for first-time homebuyers to purchase a home. The credit was designed as a mechanism to decrease the over-supply of homes for sale. For 2009, Congress has increased the credit to $8000 and made several additional improvements. This revised $8000 tax credit applies to purchases on or after January 1, 2009 and before December 1, 2009.

1. What’s this new homebuyer tax incentive for 2009? Any home that is purchased for $80,000 or more qualifies for the full $8000 amount. If the house costs less than $80,000, the credit will be 10% of the cost. Thus, if an individual purchased a home for $75,000, the credit would be $7500. It is available for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009.

2. Who is eligible? Only first-time homebuyers are eligible. A person is considered a first-time buyer if he/she has not had any ownership interest in a home in the three years previous to the day of the 2009 purchase. This is based on the exact day of sale of the prior home and not the calendar year.

You are not eligible if any of the following: 1. Your income exceeds the phase-out range. This means joint filers with Modified Adjusted Gross Income (MAGI) of $170,000 and above and other taxpayers (such as single) with MAGI of $95,000 and above. 2. You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild and corporations or partnerships in which you own either directly or indirectly more than 50% interest. 3. You stop using your home as your main home.4. You sell your home before the end of three years. 5. You are a nonresident alien. 6. Your home is outside the United States 8.You acquire the home by gift or inheritance.

3. How does a tax credit work? Tax credits are better than Tax deductions. Every dollar of a tax credit reduces income taxes by a dollar. A tax deduction reduces the amount of taxable income that is subject to taxation. Credits and deductions are both claimed on an individual’s income tax return. To be clear, this incentive is a tax credit and not tax deduction. Thus, a qualified purchaser would figure out all the income items and exemptions and make all the calculations required to figure out his/her total tax due. Then, once the total tax owed has been computed, tax credits are applied to reduce the total tax bill. So, if before taking any credits on a tax return a person has total tax liability of $9500, an $8000 credit would wipe out all but $1500 of the tax due. ($9,500 – $8000 = $1500)

4. So what happens if the purchaser is eligible for an $8000 credit but their entire income tax liability for the year is only $6000? This tax credit is what’s called “refundable” credit. Thus, if the eligible purchaser’s total tax liability was $6000, the IRS would send the purchaser a check for $2000. The refundable amount is the difference between $8000 credit amount and the amount of tax liability. ($8000 – $6000 = $2000) Most taxpayers determine their tax liability by referring to tables that the IRS prepares each year. So even if you owe no tax whatsoever, the IRS would send the home buyer a check.

5. How does withholding affect my tax credit and my refund? There are several steps in this calculation, but most income tax software programs are equipped to make that determination.

6. Is there an income restriction? Yes. The income restriction is based on the tax filing status the purchaser claims when filing his/her income tax return. Individuals filing Form 1040 as Single (or Head of Household) are eligible for the credit if their income is no more than $75,000. Married couples who file a Joint return may have income of no more than $150,000.

7. How is my “income” determined? For most individuals, income is defined and calculated in the same manner as their Adjusted Gross Income (AGI) on their 1040 income tax return. AGI includes items like wages, salaries, interest and dividends, pension and retirement earnings, rental income and a host of other elements. AGI is the final number that appears on the bottom line of the front page of an IRS Form 1040.

8. What if I worked abroad for part of the year? Some individuals have earned income and/or receive housing allowances while working outside the US. Their income will be adjusted to reflect those items to measure Modified Adjusted Gross Income (MAGI). Their eligibility for the credit will be based on their MAGI.

9. Do individuals with incomes higher than the $75,000 or $150,000 limits lose all the benefit of the credit? Not always. The credit phases-out between $75,000 – $95,000 for singles and $150,000 – $170,000 for married filing joint. The closer a buyer comes to the maximum phase-out amount, the smaller the credit will be. The law provides a formula to gradually withdraw the credit. Thus, the credit will disappear after an individual’s income reaches $95,000 (single return) or $170,000 (joint return).

For example, if a married couple had income of $165,000, their credit would be reduced by 75% as shown:

Couple’s income $165,000

Income limit 150,000

Excess income $15,000

The excess income amount ($15,000 in this example) is used to form a fraction. The numerator of the fraction is the excess income amount ($15,000). The denominator is $20,000 (specified by the statute.

In this example, the disallowed portion of the credit is 75% of $8000, or $6000

($15,000/$20,000 = 75% x $8000 = $6000)

Stated another way, only 25% of the credit amount would be allowed.

In this example, the allowable credit would be $2000 (25% x $8000 = $2000)

10. What’s the definition of “principal residence?” Generally, a principal residence is the home where an individual spends most of his/her time (generally defined as more than 50%). It is also defined as “owner-occupied” housing. The term includes single-family detached housing, condos or co-ops, townhouses, house trailer, cooperative apartment or any similar type of new or existing dwelling. Even some houseboats or manufactured homes count as principal residences.

11. Are there restrictions on the location of the property? Yes. The home must be located in the United States. Property located outside the US is not eligible for the credit.

12. Are there restrictions related to the financing for the mortgage on the property? In 2009, most financing arrangements are acceptable and will not affect eligibility for the credit. Congress eliminated the financing restriction that applied in 2008. (In 2008, purchasers were ineligible for the $7500 credit if the financing was obtained by means of mortgage revenue bonds.) Now, mortgage-revenue bond financing will not disqualify an otherwise-eligible purchaser. (Mortgage revenue bonds are tax-exempt bonds issued by a state housing agency. Proceeds from the bonds must be used for below market loans to qualified buyers.)

13. Do I have to repay the 2009 tax credit? NO. There is no repayment for 2009 tax credits.

14. Do 2008 purchasers still have to repay their tax credit? YES. The $7500 credit in 2008 was more like an interest-free loan. All eligible purchasers who claimed the 2008 credit will still be required to repay it over 15 years, starting with their 2010 tax return.

15. How do I apply for the credit? There is no pre-purchase authorization, application or similar approval process. All eligible purchasers simply claim the credit on their IRS Form 1040 tax return. The credit will be reflected on a new Form 5405 that will be attached to the 1040. Form 5405 and instructions can be found at the IRS site at:

http://www.irs.gov/pub/irs-pdf/f5405.pdf

16. So I can’t use the credit amount as part of my down payment? No. Congress tried hard to devise a mechanism that would make the funds available for closing costs, but found that pre-funding would require cumbersome processes that would, in effect, bring the IRS into the purchase and settlement phase of the transaction.

17. So there’s no way to get any cash flow benefits before I file my tax return? Yes, there is. Any first-time homebuyers who believe they are eligible for all or part of the credit can modify their income tax withholding (through their employers) or adjust their quarterly estimated tax payments. Individuals subject to income tax withholding would get an IRS Form W-4 from their employer, follow the instructions on the schedules provided and give the completed Form W-4 back to the employer. In many cases their withholding would decrease and their take-home pay would increase. Those who make estimated tax payments would make similar adjustments.

18. What if I purchase later this year but can’t get to settlement before December 1? The credit is available for purchases before December 1, 2009. A home is considered as “purchased” when all events have occurred that transfer the title from the seller to the new purchaser. Thus, closings must occur before December 1, 2009 for purchases to be eligible for the credit.

19. I haven’t even filed my 2008 tax return yet. If I buy in 2009, do I have to wait until next year to get the benefit of the credit? You’ll have a helpful choice that might speed up the process. Eligible homebuyers who make their purchase between January 1, 2009 and December 1, 2009 can treat the purchase as if it had occurred on December 31, 2008. Thus, they can claim the credit on their 2008 tax return that is due on April 15, 2009. They actually have three filing options.

(1) If they purchase between January 1, 2009 and April 15, 2009, they can claim the $8000 credit on the 2008 return due on April 15.

(2) They can extend their 2008 income-tax filing until as late as October 15, 2009.

(The IRS grants automatic extensions, but the taxpayer must file for the extension.

See www.irs.gov for instructions on how to obtain an extension.)

(3) If they have filed their 2008 return before they purchase the home, they may file an amended 2008 tax return on Form 1040X. (Form 1040X is available at www.irs.gov)

Of course, 2009 purchasers will always have the option of claiming the credit for the 2009 purchase on their 2009 return. Their 2009 tax return is due on April 15, 2010.

20. I purchased my home in early 2009 before the stimulus bill was enacted. I claimed a $7500 tax credit on my 2008 return as prior law had permitted. Am I restricted to just a $7500 credit? No, you would qualify for the $8000 credit. Eligible purchasers who have already claimed the $7500 credit on a 2008 return for a 2009 purchase may file an amended return (IRS Form 1040X) for the 2008 tax year. This amended return will enable them to obtain the additional $500 credit amount.

21. If I claim my 2009 $8000 credit on my 2008 tax return, will I have to repay the credit just as the 2008 credits are repaid? No. Congress anticipated this confusion and has made specific provision so that there would be no repayment of 2009 credits that are claimed on 2008 returns.

22. I made an eligible purchase of a principal residence in May 2008 and claimed the $7500 credit on my 2008 tax return. My brother, who has never owned a home, wishes to purchase a partial interest in the home this spring and move in. Will he qualify for the $8000 credit, as well? No. Any purchase of a principal residence (or interest in a principal residence) from a related party such as a sibling, parent, grandparent, aunt or uncle is ineligible for the tax credit. Since you and your brother are related in this way, he cannot qualify for the credit on any portion of the home that he purchases from you, even if he is a first-time homebuyer.

23. I live in the District of Columbia. If I qualify as a first-time homebuyer, can I use both the $5000 DC credit and the $8000 credit? No, double dipping is not allowed. You would be eligible for only the $8000 credit. This will be an advantage because of the higher credit amount, plus the eligibility requirements for the $8000 credit are somewhat more easily satisfied than the DC credit.

24. I know there is no repayment requirement for the $8000 credit. Will I ever have to repay any of the credit back to the government? One situation does require a recapture payment back to the government. If you claim the credit but then sell the property within 3 years of the date of purchase, you are required to pay back the full amount of any credit, including any refund you received from it. A few exceptions apply. Note that this same 3-year recapture rule applies, as well, to the $7500 credit available for 2008. This provision is designed as an anti-flipping rule.

25. What if I die or get divorced or my property is ruined in a natural disaster within the 3 years? The repayment rules are eased for many circumstances. If the homeowner who used the credit dies within the first three years of ownership, there is no recapture. Special rules make adjustments for people who sell homes as part of a divorce settlement, as well. Similarly, adjustments are made in the case of a home that is part of an involuntary conversion (property is destroyed in a natural disaster or subject to condemnation by eminent domain by an authorized agency) within the first three years

26. I have a home under construction. Am I eligible for the credit? Yes, so long as you actually occupy the home before December 1, 2009.

27. For the purpose of calculating the credit amount, what is considered the 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 to 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.

WITHHOLDING EXAMPLES:

Situation 1: Phyllis plans her withholding so that her withholding is as close as possible to what she anticipates as her income tax liability for the year. When she fills out her 1040, her liability is $6000. She has had $6000 withheld from her paycheck. She also qualifies for the $8000 homebuyer credit.

Result: Phyllis’ withholding satisfies her tax liability and reduces it to zero. She will receive a refund of the full $8000.

Situation 2: Nick and Nora file a joint return. Nick is self-employed and makes estimated payments; Nora has taxes withheld from her salary. When they compute their taxes, their combined withholding and estimated tax payments are $11,000. Their income tax liability is $9800. They also qualified as first-time homebuyers and are eligible for the $8000 refundable tax credit.

Result: Ordinarily, their combined estimated tax payments and withholding would make them eligible for a refund of $1200 ($11,000 – $9800 = $1200). Because they are eligible for the refundable tax credit as well, they will receive a refund of $9200 ($1200 income tax refund + $8000 refundable tax credit = $9200).

Situation 3: Cesar and Maria both have income taxes withheld from their salaries and file a joint return. When they file their income tax return, their combined withholding is $5000. However, their total tax liability is $7200, generating an additional income tax liability of $2200 ($7200 – $5000). They also qualify for the $8000 first-time homebuyer tax credit.

Result: Cesar and Maria have been under-withheld by $2200. Ordinarily, they would be required to pay the additional $2200 they owe (plus any applicable interest and penalties). Because they are eligible for the refundable homebuyer tax credit, the credit will cover the $2200 additional liability. In addition, they will receive an income tax refund of $5800 ($8000 – $2200 = $5800). If they owed penalties and/or interest, that amount would reduce the refund.

(This is information is accurate to the best of our research and interpretation based on information available as of February 25, 2009. As with any tax law change, check with a tax advisor if there are any questions regarding using this provision)

Success Strategies To Maximize the Benefit With the First-Time Homebuyers Credit

Success Strategy #1: Modify Withholding at Work. Any first-time homebuyers who believe they are eligible for all or part of the credit can modify their income tax withholding (through their employers) or adjust their quarterly estimated tax payments. Individuals subject to income tax withholding would get an IRS Form W-4 from their employer, follow the instructions on the schedules provided and give the completed Form W-4 back to the employer. In many cases their withholding would decrease and their take-home pay would increase.

Those who make estimated tax payments would make similar adjustments.

Success Strategy #2: File An Amended 2008 Tax Return. Eligible homebuyers who make their purchase between January 1, 2009 and December 1, 2009 can treat the purchase as if it had occurred on December 31, 2008. Thus, they can claim the credit on their 2008 tax return that is due on April 15, 2009 or file an amended 2008 Tax Return.

Success Strategy #3: Create a Short Term Note When Buying. When negotiating the purchase, ask the seller to create a short term seller financed note to be repaid when the refund from the tax credit is paid to the new homebuyer. Or just borrow the anticipated Tax Credit amount from a third party or loan company.

Download from IRS FORM 5404 Site http://www.irs.gov/pub/irs-pdf/f5405.pdf

Related posts:

1. $7,500 Tax Credit to First Time Home Buyers if purchase by 6/2009
2. California Offers Own $10,000 Home Buyer Tax Credit On Top Of Federal Credit
3. Update On the Brand New Home Buyer Tax Credit

Common Fixes Required With FHA Purchase Loan Appraisals is a post from: FHA,VA and Conventional Home Loans in all 50 States

When you purchase a house with a FHA Loan as your financing, you will of course need to have the house appraised by an FHA roster appraiser prior to having the loan funded and closing.  Of course the primary reason for the appraisal is so the lender can be sure the value of the property.   But in additional to the home’s value, the FHA appraiser may note small items that will need to be fixed prior to the lender funding your loan.   If items are noted, these items will need to be fixed and the appraiser will go out to re-inspect to verify the items have been fixed before the lender funds the FHA loan.

Generally FHA appraisers are looking for “health & safety” issues.  FHA wants the home be free of health and safety issues before the FHA borrower moves in.  Below is a list of some of the more common items the appraiser could ask for to be fixed:

• All utilities (power, gas, water) will need to be on at the time of inspection and it working order
• If there is chipping or pealing paints on houses built prior to 1978, the appraiser will ask just those spots to be re-painted.  This is usually a really small and easy thing to fix.
• Crawl space free of debris and moisture
• The house must have a working heat source
• Strapped and raised hot water heater and the house must have hot water
• Working plumbing (bathrooms, etc…)
• Safety of the property (broken windows need to be fixed, if property has security bars they must have quick releases, etc…)
• Working smoke detectors
• Photo’s will be taken of the front, back, sides and at least 3 interior photo’s

So those are some of the more common items needed to be fixed that could pop up in a FHA appraisal.  When you are out looking at properties to buy, keep an eye out for these items and realize that the appraiser may ask for them to be fixed.

Remember, to complete your FHA Loan, you will not need a termite clearance report unless you asked for a termite report in your initial purchase contract.

If you have any questions or would like to be pre-approved for a FHA home loan, please don’t hesitate to call me at 858-922-7899 or email me at homeloan8@gmail.com

Warm Regards,

Rob Chomentowski

Sr. Loan Officer (and FHA specialist)

858-922-7899

homeloan8@gmail.com

Related posts:

1. Recent Changes to Appraisals and Effects on FHA Loans
2. Using a FHA Loan To Purchase and Profitably Fix-Up Your New Home
3. Typical Lender Required Repairs For FHA Loans