Mortgage News in the Carolinas
Posts tagged Tax Credit
Why You Shouldn’t Schedule Your Closing For May 28, 2010
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The federal home buyer tax credit expires April 30 and the deadline is sparking a home sale surge. It figures to burden real estate, mortgage and title offices nationwide over the next 60 days so plan your closing date accordingly.
Especially because the last Friday in May is the Friday before Memorial Day.
Now, if the connection between the tax credit and Memorial Day is not immediately clear, think of your own office on a 3-day weekend’s Friday. Some of your colleagues take a half-day at work, others take the entire day off.
Office-wide, productivity drops.
The same is true in the real estate space. Offices are short-handed ahead of a holiday so, if you’re under contract for a home and plan to close in May, consider a closing date other than Friday May 28, 2010.
And meanwhile, with 6 weeks until Memorial Day, here’s some steps you can take today prepare for other people’s time off later.
- Notify your lender of your planned vacation time between now and your scheduled closing
- Have Power of Attorney forms lender-approved and signed by all parties in advance, if applicable
- Deposit gift monies and/or retirement fund withdrawals into an acceptable bank account, if applicable
- Schedule your final walk-through as far in advance as is realistic so there’s time to make “fixes”, if needed
- Have your closing funds ready at least 1 day in advance
The tax credit’s expiration is around the corner and as it gets closer, real estate-related businesses are taking on more work. Basic title and mortgage tasks are taking longer to complete and that should persist for a while.
Get ahead of the curve and beat your contract dates handily. Use the checklist above and be responsive to your lender’s requests.
And, if at all possible, avoid closing on the Friday before Memorial Day and even the Tuesday after — it’s when office staffs are at their smallest.
It’s Time To Re-Approve Your Pre-Approval
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As the federal home buyer tax credit nears its April 30 end-date, there’s a lot of would-be home buyers in Charlotte still working to get under contract.
A piece of advice for all of them : If your pre-qualification and/or pre-approval letter is more than 8 weeks old, it would be prudent to have your lender “re-pre-approve” you. Mortgage guidelines have been in flux and your original lender letter may now be invalid.
For example, over the past half-dozen months, the majority of mortgage lenders have reduced their risk tolerance with respect to:
- Maximum debt-to-income ratios
- Minimum allowable credit scores
- Calculation of “assets in reserve”
For buyers of condominiums and co-ops, even the subject property itself is coming under tougher scrutiny.
Today’s mortgage applicants need to be a complete package. It takes more than just good income and credit to get approved anymore and today’s buyers should revisit their qualifications. What passed underwriting in January may not pass in May.
Being pro-active brings other advantages, too. If a mortgage re-pre-approval does unearth an issue, it’ll be easier for every party to the transaction to address and correct it up-front versus trying to clean up a mess once a home’s already under contract.
Talk to your agent and me about your pre-qualification/pre-approval letter before you bid on a home.
The Federal Home Buyer Tax Credit Enters Its Home Stretch — 30 Days Left
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There’s just 30 days remaining to use the federal home buyer tax credit.
The credit ranges up to $8,000 for first-time homebuyers, and up to $6,500 for existing homeowners who have lived in their main home for 5 of the last 8 years.
Claiming the federal tax credit is a two-step process. First, you must be under contract for a new home on or before April 30, 2010. Then, you must close on said home on or before June 30, 2010.
There are no exceptions on the dates (except for certain members of the military).
Timeline aside, homebuyers and the subject property must also meet minimum requirements in order to be tax credit-eligible:
- You can’t purchase the home from a parent, spouse, or child
- You can’t purchase the home from an entity in which the seller is a majority owner
- Each buyer in the purchase must meet eligibility requirements
- The home sale price may not exceed $800,000
- Buyers may not earn more than $125,000 as single-filers; $225,000 as joint-filers
The complete eligibility checklist is published on the IRS website. Or, if you find IRS-speak too difficult, make a phone call to your accountant. Asking a tax professional’s advice on a tax-related matter is never a time-waster.
And lastly, don’t forget that if you’re claiming to federal tax credit for home buyers, it’s a tax credit and not a deduction. This means that a tax filer who qualifies for the full $8,000 and for whom the “normal” federal tax liability is $8,000, will owe no federal taxes in 2010 to the IRS.
If you’re an active buyer in Charlotte, or anywhere else in the country , mark your calendar for April 30, 2010. It’s 30 days from now and, as the date gets closer, buyer traffic will increase. The likely result is higher home prices and more difficult negotiations. The best time to act may be today. Call me to get prequalified immediately at 704.926.2521 and let’s get you the 8K !
Mortgage Approvals Are Getting More And More Scarce
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The economy’s improving but lending standards are not. Nationally, banks are making mortgage approvals harder to come by.
Underwriting guidelines are tightening.
The data comes from the Federal Reserve’s quarterly survey to its member banks. The Fed asks senior bank loan officers around the country to report on “prime” residential mortgage guidelines over the most recent 3 months and whether they’ve tightened.
For the period October-December 2009:
- Roughly 1 in 4 banks said guidelines tightened
- Roughly 3 in 4 banks said guidelines were “basically unchanged”
Just 2 of 53 banks said its guidelines had loosened.
Combine the Fed’s survey with recent underwriting updates from the FHA and generally tougher standards for conventional loans and it’s clear that lenders are much more cautious about their loans than they were, say, in 2007.
Today’s Charlotte home buyers and would-be refinancers face a bevy of new borrowing hurdles including:
- Higher minimum FICO scores
- Larger downpayment requirements for purchases
- Larger equity positions for refinances
- Lower debt-to-income ratios
So, if you’re on the fence about whether now is a good time to buy a home, or make that refi, consider acting sooner rather than later. It doesn’t necessarily matter that mortgage rates are low, or that there’s an up-to-$8,000 home purchase tax credit for households that qualify. With each passing quarter, fewer and fewer applicants are eligible to take advantage.
