Greenspan's Mortgage Blog

For immediate release March 9, 2010

A Qualified Mortgage Consultant Can Outline Your Options

Renters Have Much to Gain by Pursuing Home Ownership

By Joseph Greenspan, President
First Fidelity Home Mortgage of WI, LLC

Waukesha, WI – Buying a home vs. renting is a big decision that takes careful consideration, as most mortgage consultants will agree. But the rewards of home ownership are great. For many years, purchasing real estate has been considered an extremely profitable investment. It is an achievement that offers a sense of pride, financial stability and potential tax advantages.

Yes, there are certain responsibilities associated with owning a home. Landlords will often argue the benefits of renting, and for obvious reason. If you are renting, you’re helping them make their mortgage payment.

The numbers are staggering if you look at it this way. If you are paying $1,000 per month for an apartment, and you know your rent will increase 5% every year, then over the next five years you will pay your landlord $66,309. If you are currently renting a house, you may be paying much more than that each month. Either way, you gain no equity by shelling out this monthly housing expense and you certainly won’t benefit when the property value goes up!

However, if you were to purchase your own home or condominium, you would be well on your way toward building equity within that same five-year period. By choosing a fixed-rate loan program, you can have the comfort of knowing that your monthly mortgage payment will never go up. In fact, you would have the option of refinancing to a lower interest rate at some point in the future should interest rates drop, and this would cause your monthly mortgage commitment to go down.

In addition to building equity, there are tax advantages that come into play with home ownership. Depending on your tax bracket, owning a home is often less expensive than renting after taxes. Interest payments on a mortgage below $1 million are tax-deductible, and your mortgage consultant should help you evaluate the tax advantages of various loan scenarios, and share this information with your tax consultant to glean feedback on your behalf.

To find the loan program that is right for you, your mortgage consultant will need to evaluate your monthly household income, current assets and savings, as well as any monthly obligations you may have for credit card payments, car payments, child support, etc. These prequalification factors, along with the report of your credit score, will determine how much house you can afford and what interest rate you will pay for financing. It is also important to let your mortgage consultant know what your future goals are, because this will help narrow down which loan option is the best fit for your long-term needs.

There are many different types of loan programs available, including “low” and “no” down payment mortgage programs. These types of programs require the borrower to provide less than 3 percent of the loan amount as down payment. FHA lenders rule that the mortgage payment, including principal, interest, taxes and insurance (PITI) should not exceed 31 percent of your gross income, and the PITI plus other long-term debt (car payments, etc.) should not exceed 43 percent of your gross income.

Housing is an expense that takes a big bite out of the monthly budget. If you are a renter and feel that “home” is more than just someplace to hang your hat, think about the advantages of purchasing real estate. It may be time to take the step into building your personal net worth as a home owner.

Joseph Greenspan is affiliated with First Fidelity Home Mortgage of WI, LLC Licensed with the Wisconsin Department of Financial Institutions.

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PHONE 262-650-9890

FAX 262-650-9894

EMAIL JGreenspan@WeSayOk.com

It's official. President Obama has signed a bill that extends the tax credit for first-time homebuyers (FTHBs) into the first half of 2010. This program had been scheduled to expire on November 30, 2009.

In addition to extending the tax credit of up to $8,000 through June 30, 2010, the extension measure also opens up opportunities for others who are not buying a home for the first time.

So Who Gets What?
The program that has existed for FTHBs remains intact with the one exception that more people are now eligible based on an increase in the amount of income someone may now earn.

Additionally, the program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Deadlines
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

Higher Income Caps in Effect
The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible.

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

Maximum Purchase Price
Qualifying buyers may purchase a property with a maximum sales price of $800,000.

First-Time Homebuyer Tax Credit – Frequently Asked Questions
Here are answers to some commonly asked questions about the tax credit.

What is a tax credit?
A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual's primary residence.

What is the tax credit for first-time homebuyers (FTHBs)?
An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.

Who is eligible for the FTHB tax credit?
Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible. This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.

As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.

How do I claim the credit?
For those taking advantage of the tax credit in 2009, you may choose to either apply for the credit with your 2009 tax return or you may apply for the credit sooner by filing an amended 2008 tax return with Form 5405 (http://www.irs.gov/pub/irs-pdf/f5405.pdf).

Can you claim the tax credit in advance of purchasing a property?
No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.

Can a taxpayer claim a credit if the property is purchased from a seller with seller financing and the seller retains title to the property?
Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Examples of this would include a land contract, contract for deed, etc. According to the IRS, factors that would demonstrate the ownership of the property would include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property.

Are there other restrictions to taking the credit?
Yes. According to the IRS, if any of the following describe your situation, a credit would not be due.

• You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild.
• You do not use the home as your principal residence.
• You sell your home before the end of the year.
• You are a nonresident alien.
• You are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)
• Your home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
• You owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2009, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2006, through July 1, 2009.

Can you buy a home from a step-relative and be eligible for the credit?
Yes. Provided the person you are buying a home from is not a direct blood relative, the purchase would be allowed.

Can parent(s) who will not live in the property cosign for a mortgage for their child and the child that is a qualifying FTHB still be eligible for the credit?
Yes.

Can a separated spouse who has not owned a home for four years qualify for the FTHB tax credit if the spouse has owned a property anytime in the last three years?
No. However, the spouse may be eligible for the repeat buyer credit. The best path to take in any situation regarding income taxes is to speak with a professional tax preparer or CPA.

If you have any questions that fall outside the situations here, give me a call and if you do not have an accountant to speak with, I can refer you to one.

Call Me at

Joseph Greenspan President

262-650-9890

The answer is a definite maybe. With Interest rates moving lower is like a double edged sword. The lower the rates create more Purchases and Refinances business, but can overwhelm the system. So you have to be very particular about the lender you chose to work with. Many companies are over worked and under staffed. What we have done at First Fidelity has set up a Swat Team for purchase loan business. We have made a commitment that if the staff has to bring in a cot and sleep at their desk they we will! What ever it takes to get the Purchase loan closed on time. Also having a staff with the newest member having 10 years experience helps. We can navigate through the storm and know what lies ahead. The job must get done, no excuses! We will do what it takes for you to get your Tax Credit.

Call us at 262-650-9890

Joseph Greenspan

President

The Federal Reserve has said it will slow down the purchases of Mortgage Backed Securities. What this means to you is likely higher rates. Don’t look to play the market with these historically low rates take action now and avoid the (Should-a would-a could-a). If you are buying remember you have to close by the end of November to get up to the 8K tax credit.

We make Buying a home of Refinancing your home SIMPLE!

We would love to earn your business. Call us today.

262-650-9890 of 800-WeSayOk (937-2965)

Joseph Greenspan President

Stocks and bonds compete for the same investment dollar on a daily basis. There is literally only so much money to be invested. When the Federal Reserve feels that interest rates need to be decreased in an effort to stimulate the economy, this reduction in rates can often cause a stock market rally. When the market becomes bullish, the money to invest in stocks comes from the selling of mortgage-backed securities.

Unfortunately, selling mortgage-backed securities to fuel stock market rallies causes interest rates to go up, not down.

Historically, there have been many times when the Federal Reserve has increased interest rates. Stocks then sell off in fear that the increase will affect corporate profit margins, and the liquidated stock assets need a place to park until the next rally comes along. The safe haven is found in mortgage-backed securities which cause mortgage rates to drop.

"A lot of hype on Wall Street is pushing Mortgage Bonds lower for the third consecutive day, during which time prices lost over 100 basis points before reaching a dual layer of support.

In the news, the Consumer Price Index--which measures inflation--came in slightly higher than expected for July. Bond prices have moved lower on the headlines. Also pressuring Bond prices this morning are the rising Stock prices after Intel's stronger-than-expected earnings as well as the New York State Manufacturing Index, which came in at its best level in a year.

Short term not good for mortgage rates, but deflation is still the bigger concern than inflation.  Speculators trying to grab on to anything to rally the market. 

Now is a great time to buy the house of your dreams with low prices and historicaly low rates wikth up to $8,000 tax credit.

Currently, Mortgage Bonds are hovering above a dual layer of support at both the 25- and 200-Day Moving Averages."

Dont miss this once in a lifetime opportunity

Joseph Greenspan

First Fidelity Home Mortgage of Wisconsin, LLC

Call Now 262-650-9890 

There are a lot of mortgage products for people to choose from.  The problem is your bank might not have the one that is best for you!  In my over 20 years of lending experience it has never been better for consumers to use a Mortgage Broker.  They will shop for the best program out there. 

Did you know you can still buy a home for No Money Down?

Did you know you can still get a conventional loan with only 5% down?

Did you know you can refinance your loan even if you dont have any equity?

Did you know you can get approved in less than 12 housr?

Did you know you can close on your loan in less than 2 weeks?

Not if you are dealing with the Bank!

The sooner you you call the sooner you can buy a home or start your saving from refinancing to a lower rate!

Questions? Call me!

Joseph Greenspan

President

First Fidelity Home Mortgage of WI, LLC

262-650-9890 or 800 WeSayOk (937-2965)

Mortgage Bonds finally mustered up some nice gains yesterday, but those gains were erased in early trading this morning.

In the news, US exports fell to the lowest level in almost 3 years, as the US Balance of Trade widened in April for the second month. However, US exports should improve a bit in May after the US Dollar recently sank against foreign currencies, which makes US goods cheaper and more attractive to buy.

In a recent development, investors are moving money into Oil and commodities, which is forcing Mortgage Backed Securities down even further.

Rates could go higher.

I will keep you posted so check back daily.

Joseph Greenspan

First Fidelity Home Mortgage of Wi, LLC

262-650-9890 email questions to JGreenspan@WeSayOk.com