Tax Credit Passes and FHA Rules become clearer
November 9, 2009
First-time homebuyers (useful IRS Link - http://www.irs.gov/newsroom/article/0,,id=204671,00.html )
Most details for first-time homebuyers mirror the rules currently in existence. The maximum tax credit remains $8,000 ($4,000 for married individuals filing separately), and anyone who has not owned a home within three years is considered a “first-time buyer.”
• A purchase must be under contract by April 30, 2010.
• A purchase under contract by April 30 must close no later than June 30, 2010.
• After Dec. 1, 2009, income limits rise to $125,000 for singles and $225,000 for married couples; up from limits effective through Nov. 30 of $75,000 for singles and $150,000 for married couples. The tax credit phases out incrementally at each $20,000 increase in income.
• Effective immediately: The maximum home value purchased cannot exceed $800,000. Prior to the law being signed, first-time homebuyers had no limitation on a home’s cost.
Current homeowner tax credit
An existing homeowner who purchases a home may now claim a tax credit of up to $6,500. To qualify, that owner must have owned and used the same residence as a principal residence for any consecutive five-year period in the previous eight years.
• This new tax credit is effective immediately. Eligible homebuyers do not have to wait until Dec. 1 to close in order to qualify.
• Personal income limits, maximum home value, and contract/closing deadlines are the same as those for first-time homebuyers.
FHA Operational Issues
Condominium changes – We expect FHA will be publishing the new mortgagee letter in the next week. The FHA Commissioner is speaking at the NAR Convention next week-end and NAR is very interested in this change. The letter will be effective on December 7th. We expect the provisions will remain the same as we previously outlined.
- FHA concentration will go to 100 percent in existing projects; 50 percent in new projects.
- Pre-sale will be lowered to 30 percent
- Owner occupancy remains at 50 percent
- Commercial space will remain 25 percent but FHA will do waivers as requested
- Spot loan program will be eliminated.
FHA Mortgagee Approval Changes (You may no longer get a broker to do FHA it may have to be a Mortgage Banker for Bank) – The proposed rule eliminating FHA approval of mortgage brokers has cleared OMB and now will be sent to Congress for the formal 15 day review prior to publication. The rule may become public while in the Congressional review process since documents are frequently leaked during this review process. The rule could be published in the Federal Register by the end of November. The rule will likely have a 30-60 day comment period which means it could not be finalized until February 2010 at the earliest. We do believe that FHA will consider comments before making a final decision. It appears that FHA may be willing to reconsider their position at least to some extent (meaning they could establish standards lenders would implement).
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