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First-Time Home Buyer Tax Credit at a Glance

• The tax credit is available for first-time home buyers only.
• The maximum credit amount is $7,500.
• The credit is available for homes purchased on or after April 9, 2008 and before July 1, 2009.
• Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.
• The tax credit works like an interest-free loan and must be repaid over a 15-year period. (i.e. $500 a year).

For frequently asked questions, click on the following link:

http://www.federalhousingtaxcredit.com/faq.php

It is important that you work with a mortgage professional that is familiar with these products and others to obtain the best financing and discounts for your individual circumstances. 

Every customer has a different combination of assets, limitations and dreams. Our job is to understand you unique needs so we can formulate the perfect solution for you.

The Sandon Mortgagage Group                        

Mortgage & Investment Consultants

(813) 319-6500

Five Tips for First-Time Home Buyers

by Danielle Babb

In today's turbulent market prices are up one month and down the next. Rates are down from the Fed, but high for individuals. Banks require different information and credit scores — not to mention down payments — than ever before.

So how do you know if you're ready to buy a home? Here's what you do:

1.) Know how much house you can afford. A mortgage professional can tell you this, or websites such as Bankrate.com or Military.com, have mortgage calculators to help you out, but don't rely on this information.  Talk to your mortgage professional. Try to stick to a home that doesn't, including payment and insurance, exceed 35 percent – 45 percent of your gross income.

2.) If you have a lot of revolving debt, then consider paying it off with your down payment money and re-save the down. It will boost your credit score to get you a better rate, and will save you interest. Banks may require you pay off your debts through escrow to close the loan if you don't.   Talk to your mortgage professional first.

3.) Prioritize your debts before you buy. If you need to, come up with a six-month or one-year plan that pays down the debts with the highest interest rates first. Go into your new home as debt free as you can. A good goal is to have little or no debt that isn't securitized by collateral. Cars are okay, because you can sell the car. Credit cards aren't. Chances are you're still paying off a dinner or impulse purchase from a few months ago.  Talk to your mortgage professional for their insight.

4.) If you can stick to the conforming limits (check with your bank on what number they use), this means your loan can be sold to the government agencies. Your rate will be much less. Generally try to find a house under $417,000. Be sure you take VA loan options when you can; this is a benefit you deserve and should take.

5.) Shop around. If you buy a new home, ask outright if they offer incentives. I haven't had one say "no" in the past year, and I've tested more than 15.

All in all, deals abound. Rates are historically low. If you can afford a home, you will get a great mortgage interest deduction. I say, go for it.

© 2008 Danielle Babb.

 Call Rick Sandon, for your free mortgage consultation (813)319-6500

We are frequently asked this question by home buyers who want to find the very best value in a home (rightfully so). We will make an important distinction up front. This article is directed primarily to military families looking to purchase a home as their primary residence which is a completely different animal from purchasing investment properties.  While they may consider keeping the home after a PCS and converting it to an investment property, the two require a totally different mindset and analysis. 

This article will address foreclosure, short sales, and pre-foreclosures. Each is defined below.

For our discussion, a foreclosure is a property that is owned by the lending bank following the legal process after payment default. 

Let’s examine how a bank or lending bank typically deals with a property that comes back to them as a result of a full foreclosure. Government regulations require the bank reserve an amount of money equal to the value of the loan against the property. This is money that cannot be freed up for further investment, thus costing the lending bank money.  The bank basically does what most homeowners do when they wish to sell a home. They call a Realtor (TM). Generally they have an arrangement with a broker who will list all of the bank’s foreclosures for a reduced rate. The Realtor (TM) then places the home in the local Multiple Listing Service and a sign goes up on the property. So, once a property has been through full foreclosure, generally it is marketed like any other property and there really is no “secret handshake” or list to find foreclosed properties.

Here are five important distinctions that make a foreclosed property different than a typical home sale.

1. You are negotiating with an unemotional bank, not an individual. Ultimately the bank will have a bottom line established by the officer or board.  Whether or not the home sells does not directly impact an individual or their personal finances. And that bottom line may or may not be below market value.

2. Banks rely heavily on processes and procedures … which take time. Do not expect the negotiations and decisions to move quickly. As opposed to the conventional negotiations with individual sellers, negotiations will not continue past normal working hours or into weekends. Likewise, expect the bank to impose additional contract requirements such as specific disclosures and addendums that will further encumber the process.

3. Most banks will list and sell the property “as is.” This term has specific legal meaning and may vary by state laws and traditions.  It may mean that the bank requires the purchaser to sign a disclosure or addendum that precludes negotiations based on a home inspection and / or the traditional pre-settlement walk through inspection. So, before you sign a contract on a foreclosure property, you may want to seek permission from the bank to complete the home inspection before making the contractual offer.  Work with your lender also as many programs require that the home is safe and fully habitable prior to closing.

4. Foreclosures are truly a sad event and it is likely that the previous owner would not maintain the property in excellent condition during the process. Some angry owners may in fact inflict intentional damage to the property upon departure. You should also consider that some or all of the utilities may be disconnected. It is even possible that utility meters have been removed, which can be quite expensive to reinstate. This can obviously present additional concerns and expenses as water seals in plumbing may dry out, the home may have been without heat or air conditioning for a period of time. All of these circumstances can increase your costs.

5. Although it is hard to believe, some states have a “Redemption” law. This law allows previous owners to “Redeem” their home … even after the sale by paying off their debt. Each Redemption State may have different laws. You should do very careful research on this aspect of buying foreclosures, and consult an attorney, before you write the contract.

Because of the soft market in many parts of the country, foreclosures are getting considerable press. We should acknowledge the human cost of a foreclosures as they cause good people a great deal of pain…including some our military families. 

The continued degradation of our veterans’ job opportunities and personal finances after their service to the military, has spurred members of Congress to take action and pass the Heroes Earning Assistance and Relief Tax (HEART) Act.

The HEART Act, sponsored by the House Ways and Means Committee Chairman Rep. Charles Rangel, D-N.Y., was approved by the House of Representatives on Tuesday, May 20 in a unanimous 403 - 0 vote.

This Act provides $1.3 million dollars in tax relief to the military community, as well as expanded home ownership opportunities, and the ability for military personnel to secure employment before and after their service.

Some of the more notable permanent provisions of the HEART Act allows active-duty reservists to make penalty-free withdrawals from retirement plans, and makes the Earned Income Tax Credit a permanent inclusion into Soldiers’ combat pay. Additionally, the bill ensures that reservists called up to active duty do not suffer a pay cut; and provides a small tax credit to small businesses who continue to pay reservists and guardsmen who are deployed.

Other provisions will attempt to ease the financial burden on military families by doing the following:

• Permitting an employer to make contributions to a qualified retirement plan on behalf of an employee killed or disabled during combat.
• Counting extra pay for active-duty military personnel from their previous civilian employer for retirement purposes.
• Making thousands of veterans eligible for low-interest loans by changing the qualified mortgage bond programs used to help veterans achieve homeownership.
• Permitting recipients of military death benefit gratuities to roll over the amounts received tax free, to a Roth IRA or Education Saving Account.
• Revising tax rules relating to U.S. citizens and permanent residents (expatriates) who relinquish citizenship or residency to avoid U.S. taxation.

What’s more, the HEART Act will be paid for by Congress going after expatriates and federal contractors who go offshore to avoid paying U.S. Taxes.

“This tax relief for military families is the least Congress can do for our troops who put their lives on the line every day,” said, Nancy Pelosi, Speaker of the House, in a written statement.

“I look forward to the Senate passing the HEART Act and the President signing this critical legislation into law,” Pelosi added.

Congress hopes to have President Bush sign this new legislation into law by this Memorial Day.

Many home owners have found it difficult recently to pay their mortgages, but quick intervention by loan counselors at the Department of Veterans Affairs (VA) has actually reduced the number of veterans defaulting on their home loans.

"VA is reaching out to veterans -- both those who use our home-loan guaranty program and those who don't take advantage of our guaranties -- to keep people in their homes," said Secretary of Veterans Affairs Dr. James B. Peake. "I'm proud of our solid record of success in helping veterans and active-duty personnel deal with financial crises."

Accounting for much of this success are VA counselors at nine regional loan centers who assist people with VA-guaranteed loans avoid foreclosure through counseling and special financing arrangements. The counselors also can assist other veterans with financial problems. VA counselors have helped about 74,000 veterans, active-duty members and survivors keep their homes since 2000, a savings to the government of nearly $1.5 billion.

Depending on a veteran's circumstances, VA can intercede with the borrower on the veteran's behalf to pursue options -- such as repayment plans, forbearance, and loan modifications -- that would allow a veteran to keep a home.

To obtain help from a VA financial counselor, veterans can call VA toll-free at 1-877-827-3702. Information about VA's home loan guaranty program can be obtained at http://www.homeloans.va.gov.

Since 1944, when home-loan guaranties were offered with the original GI Bill, VA has guarantied more than 18 million home loans worth $911 billion. Last year, about 135,000 veterans, active-duty servicemembers and survivors received loans valued at nearly $24 billion.

About 2.3 million home loans still in effect were purchased through VA's home-loan guaranty program, which makes home loans more affordable for veterans, active-duty members and some surviving spouses by protecting lenders from loss if the borrower fails to repay the loan. More than 90 percent of VA-backed home loans were given without a downpayment.

April data shows that foreclosures are down more than 50 percent fromthe same months in 2003. VA attributes this to prudent credit underwritingstandards, its robust supplemental loan servicing program and VA financial loan counselors.

For more information about your VA Loan visit Military.com's Finance or Benefits channels.

Rick Sandon

Residential Mortgage Specialist

813/319-6500 

 www.sandongroup.com

U.S. Tax Requirements

1. Capital Gains Tax on Sales
Non-resident aliens and foreign corporations are taxed on income resulting from the sale of U.S. real property. A buyer who is aware of that at the time of purchase can plan accordingly, and may even consider an exchange (investing in like kind of property). The time to divest can become the time to reinvest.

2. FIRPTA (Foreign Investment in Real Property Tax Act)
Under FIRPTA, a buyer must withhold 10% of purchase price if the seller is a foreign person. No withholding is required if the seller is a U.S. citizen; green cardholder (lawful resident); or resident alien (meets either the physical presence test—present in the U.S. for at least 183 days in the current calendar year; or the substantial presence test—present in the U.S. for a weighted average of 183 days over three years).

At the time of purchase, foreign buyers should a acquire a U.S. taxpayer identification number (TIN). Waiting until the time of sale to obtain a TIN may cause difficulty recovering money withheld pursuant to FIRPTA.

3. Income Tax (on income producing property)
Generally, non-resident aliens are taxed at a flat 30% federal tax rate on gross rental income, unless they make a certain income election on their returns. This election, which allows for deductions for regular expenses before income tax is calculated is commonly know as the “net election.” If you are interested in income properties consult your tax advisor (lawyer or accountant) and verify that the advisor knows about, and knows how to exercise, the “net election.” If you would like a referral to a good advisor, please contact the Sandon Group at (813) 319-6500.  Further, anyone who collects income for a non-resident alien and then pays that income to a client is generally required to withhold 30% of gross U.S. source income (such as rent). No withholding is required if the foreign person has a green card, meets the physical or substantial presence test, or if there is a treaty addressing this issue between the U.S. and that person’s home country.

4. Property Taxes
Property tax payments are required as an additional cost of real property ownership. These payments can be added to a loan or paid directly to the taxing agency. Failure to pay property taxes can lead to financial penalties and even loss of the property. Just as a taxing agency (usually a county) has remedies against a property owner for failure to pay property taxes, so may a lender, since the failure to pay usually is also deemed a breach of the loan agreement. It is important to know that change in ownership, such as altering title among family members and differing entities may cause the property value to be reassessed, and the property tax payments to increase.

5. Title decisions
The way a foreign buyer clients take title (individual, foreign corporation, U.S. corporation, or trust, for example) is a serious decision that could affect their ability to transfer the property and the financial and tax implications both during the property’s ownership, and upon sale. In states like California, which taxes worldwide income, the decision can affect more than the property itself. Since the method of holding title can affect the tax consequences during life and after death, it is advisable to to seek out a competent lawyer or an accountant with an international practice. Please contact the Sandon Group at 813-319-6500 if you would like a referral to a good international attorney.

U.S. Reporting Regulations for Foreign Owners
There are very few restrictions on ownership of U.S. property by foreign persons, but you should be aware of certain reporting regulations.

1. Agricultural
The Agricultural Foreign Investment Disclosure Act requires the reporting to the Farm Service Agency of the Secretary of Agriculture within 90 days of a transfer to or from a foreign person if the land has been used for agriculture, forestry, timber, farming, or ranching, within the last five years, is 10 acres or more, and generates $1,000 or more in gross receipts. Failure to make a timely report can generate hefty penalties.

2. Statistical
The Bureau of Economic Analysis of the Commerce Department requires reporting of foreign ownership of all real property for analytical and statistical purposes only. There are exceptions for a personal use primary residence (or rental if intent to return) and partial exemption from reporting for real estate which is both valued at less than $3 million and is less than 200 acres.

Rick and Lori Sandon, Trusted Mortgage Professionals

Foreign real estate buyers are coming from around the world to purchase property in Florida - lured by the favorable exchange rates and the excellent market conditions for buyers.

It was a bargain last year, and it’s even much more of a bargain this year. For a European buyer, Florida is a steal!

In 2000, a Euro would only buy 85 cents per US dollar. Now, it’s US$ 1.43 for each Euro. An increase of over 65%. If one factors in the decline of Florida real estate prices during the last couple of years, it makes sense for a European investor to look at our side of the ocean.

A new 3 bedroom Condominium costing less that $250,000 is appealing to any European sun lover.  And now with easier financing available for foreign buyers that does not require U.S. credit, employment or visa's it's hard to find a reason not to take advantage of the investment opportunity available to foreign buyers in Florida.

For free information and counseling, contact Mortgage & Investment Consultant's Florida office at 813-319-6500.  If you have nothing to lose and a whole lot to gain.

Foreign Investors Have A Significant Advantage in U.S. Housing Market with the dollar at historic lows against the Euro and other currencies.

Many buyers from overseas are stepping up their purchases in the U.S. and are buying vacation homes in popular places such as Florida, California and Colorado.  Homes that may have been previously out of reach may be very savvy investments now.  Others are may also be speculating for when the housing market and dollar undoubtedly rebound.

Either way, now is the time to aggressively research this huge opportunity.

For a full report on the importance of the exchange rate on the U.S. Housing Market, please email rsandon@minnmortgage.com