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New DSHA Affordable Home Loans will Help 1,500 Families…

Delaware State Housing Authority (DSHA) today announced $250 million in bonds are available for affordable home loans, which includes a set aside of 10 % (up to $25 million) for new construction home purchases.    The initiative is a unique partnership with the U.S. Treasury and the Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac which allows DSHA to leverage its bond authority with a powerful federal resource that will assist an estimated 1,500 future Delaware home buyers.   Other traditional mortgage products continue to be available through DSHA for existing home purchase.  For first-time homebuyers choosing to purchase an existing home, DSHA offers 30-year fixed-rate mortgages as low as 4.75% with zero points and a deferred second mortgage up to $10,000 for down payment and/or closing cost assistance.In order to stimulate the local real estate market, DSHA is setting aside up to $25 million at reduced interest rates of 4.25% for first time homebuyers purchasing existing new construction, or building a new home.  This will assist homebuyers while also creating construction-related jobs, and therefore further energizing the local economy.   Governor Jack Markell stated, “We want to create jobs, help the housing market and help families.  This initiative creates both jobs and homes for first-time homebuyers. By making loans available to first-time homebuyers in a tight credit market, we stimulate the economy while providing homeownership to Delawareans who might not otherwise be able to afford it.”             DSHA Director Anas Ben Addi added, “Our goal is to continue to provide affordable housing opportunities and help support a strong, local economy.  The new set-aside also provides potential homebuyers with more choices when making the investment in their first home.”A 2009 study by the National Association of Home Builders estimated that the construction of 100 single-family homes generates $21.1 million in local income, $2.2 million in taxes and other revenue for local government, and 324 local jobs.   Mark Grahne, President of the Home Builders Association of Delaware, added, “This DSHA program truly supports the Governor’s goals for creating jobs and building a stronger economy because the funds are set aside exclusively for purchasers buying new construction homes.  New home construction stimulates job growth and drives a ripple effect into the economy which will last as long as the home does.  In addition, every new home built is substantially greener and more energy efficient as compared to existing homes.”   Low- and moderate-income Delawareans who have not owned a home within the past three years are eligible to apply for any of the loans affiliated with DSHA.  Eligible veterans may take advantage of the program even if they have previously owned a home. To qualify, eligible families can earn up to $89,470 and the maximum purchase price for a home is up to $366,990. Loans will be available on a first-come, first-served basis.    For more information, interested homebuyers should contact DSHA at (302) 577-5001 in Wilmington, (302) 739-4263 in Dover or toll free, 1-888-363-8808. Complete details are available on DSHA’s website at www.DeStateHousing.com.   Banks interested in partnering with DSHA’s bond program should contact Cynthia Karnai, Director of Housing Finance, at (302) 577-5001 or via e-mail at Cynthia@destatehousing.com.

Green homes growing red-hot; 17% of new houses built get the Energy Star seal, fuel new eco-’awakening’

The home building industry is struggling, but one sector is booming: green homes.

The number of homes winning the government’s Energy Star designation since the program began in 1995 has crossed the 1 million mark. Despite an overall housing slump, 75,000 have been added so far this year for a total of 1,024,200.

Last year, Energy Star homes accounted for nearly 17% of all single-family homes built, up from 12% in 2007.

The Energy Star label means a house is at least 20% more energy-efficient than other new homes.

“They are better homes,” with more efficient windows, lighting, appliances, insulation, heating and cooling, says Maria Vargas of the Environmental Protection Agency’s Energy Star program.

Private programs that certify homes as environmentally friendly also report growth, despite a 30% plunge in new homes started or completed in the year ending in October, the last month for which Census data are available.

“There’s an awakening going on,” says Nate Kredich of the U.S. Green Building Council, a non-profit group whose rating criteria are stricter than Energy Star. Kredich says its number of certified homes, which increased from 1,151 last year to 3,050 so far this year, is a small but growing share of all new homes.

“The interest in green building is driven by consumers. More people are doing it to save money on their heating bills,” says Kevin Morrow of the National Association of Home Builders, whose green certifications jumped from 99 homes last year to at least 564 this year.

Existing homes are going green, too: 68% of people surveyed by USA TODAY took steps this year to make their homes more energy-efficient. Of those who did, 71% said it was “mostly to save money” and 26% “mostly to save the environment.”

The poll of 1,017 adults Nov. 20-22 has a margin of error of +/-4 percentage points.

Green features that sell best are those that pay for themselves quickest as consumers focus on price, says Kermit Baker, chief economist of the American Institute of Architects. Baker expects energy costs to help fuel green home building.

“Consumer acceptance has been outstanding,” says Walter Cuculic of Pulte Homes, which has built 120,000 Energy Star homes. He says people are starting to look at “the miles per gallon for their home.”

In Las Vegas, Pulte is building 185 homes that each will have solar-paneled roofs and certification by the U.S. Green Building Council.

Curtis Jones, who bought one in May, says other similar homes cost less, but he expects to save money long-term on lower utility bills.

Jones, 55, a literacy educator, says he feels good about helping the environment.

“I’m not a purist,” he says, “but I think we all need to do our part.”

By:  Wendy Koch

Rock-bottom mortgage rates tempt hesitant home shoppers

By John Spence, MarketWatch

BOSTON _ The U.S. government’s efforts to revive the housing market have pushed mortgage rates down to record levels and helped stoke demand, but the prospect of further home-price declines could keep more reluctant buyers on the fence.

The average rate on a 30-year fixed mortgage is below 5 percent and last week dropped to a fresh all-time low. The previous nadir was set in April.

Mortgage rates jumped last spring but have declined relatively steadily since then, with investors hoping the economy is on the mend after the credit crunch. Rates fell sharply in November.

Greg McBride, senior financial analyst at Bankrate.com, said in an interview that two main catalysts are driving rates lower. First, the Federal Reserve has indicated it plans to keep short-term interest rates low for an extended period to help the economy along. The second factor is continued strong demand for government-issued debt despite fears that unprecedented spending to combat the financial crisis will eventually spark a bout of inflation.

“The demand is not just from other central banks buying Treasury bonds,” the analyst said. “Institutional investors and hedge funds are looking to protect their year-to-date profits.”

The S&P 500 Index has rallied about 60 percent from the March lows, with speculative sectors like banks and real estate posting the strongest gains. To safeguard these gains, some big investors have moved cash into Treasury bonds, pushing prices up and yields down. Mortgage rates are closely linked to the yield on the 10-year Treasury note.

The Fed’s program to buy up to $1.25 trillion of mortgage-backed securities, which has been extended through the first quarter, has also contributed to easing rates. McBride estimated the Fed is buying about 80 percent of newly issued agency mortgage-backed securities.

“The Fed is not just a big fish in the pond_it’s the only fish in the pond,” he said.

Meanwhile, more than 90 percent of all home loans this year have been purchased by government entities such as Fannie Mae, Freddie Mac and the Federal Housing Administration.

This support has been keeping mortgage rates artificially low, but rates could jump when it is finally removed, some economists worry.

However, McBride thinks the Fed will extend its program to buy mortgage-backed securities to nurture the nascent recovery in the housing market.

“The Fed can’t go from full speed to a dead stop in four months without a spike in interest rates,” he said. “The economy is too fragile for the Fed to risk a rate spike.”

Other signs that rates may head higher are if institutional investors start unloading government debt for riskier assets, or a general cooling to Treasury bonds.

Even with mortgage rates at record lows, some buyers are hesitant to buy a house because they believe they might get a better deal by waiting for even lower home prices.

During the housing bust, many areas of the U.S. saw peak-to-trough home-price declines in the range of 20 percent to 30 percent.

Residential real estate values have been falling for more than three years in the aftermath of the subprime mortgage crisis, which burst the housing bubble. A global credit crunch, recession, job losses and rising foreclosures have put the housing market into a deep freeze.

Yet there have been some signs of life in recent months, with many attributing the positive momentum to the federal tax credit for first-time buyers. The program has been extended to the spring, and a new credit includes some move-up buyers.

The home’s purchase price and the loan’s mortgage rate are the primary factors driving borrowers’ monthly payments. Low rates are enticing, but some buyers are holding out for lower prices.

Those buyers could be beaten to the punch by investors scooping up properties, McBride said. A spike in mortgage rates is another risk.

Buyers could “win the battle” by waiting for better prices, but “lose the war” with a much higher rate on the loan, which increases the monthly mortgage payment, McBride added.

Economists are closely watching housing data for signs that the worst is over for the housing market.

On Tuesday, a real-estate industry group reported that pending home sales rose nearly 4 percent in October, the ninth straight month of gains.

Later this week, luxury builder Toll Brothers Inc. is scheduled to report full quarterly results.

Sales are typically slow during the winter months, so many analysts are waiting for the spring selling season to truly gauge the market’s health.

In the home-building industry, there is little consensus on the outlook for housing.

“It’s been a tough four years,” said Larry Nicholson, chief executive of Ryland Group Inc., at the recent UBS Building & Building Products CEO Conference. “Hopefully, I believe we are at the bottom of this thing, and I think that business will start to pick up sometime next year.”

However, others are less sanguine on the market’s health.

“There is a lot of talk right now about the fact that the housing market has stabilized and is in recovery,” said Lennar Corp. CEO Stuart Miller.

Yet the builder hasn’t seen “clear evidence” of that, with the unemployment rate around 10 percent. “In fact, our experience would indicate that there’s much, much more of a rocky bottom than we’re hearing about in the press,” Miller said.

“For the time being, we’re certainly not facing the notions of Armageddon that we were feeling six months ago, but at the same time we have to be aware that the ‘stabilization’ that we’ve seen so far is tenuous at best,” he said.

Obama promotes home energy efficiency program

The Associated Press
Tuesday, December 15, 2009; 11:38 AM

Frequently Asked Questions About the Move-Up/Repeat Home Buyer Tax Credit

The Worker, Homeownership, and Business Assistance Act of 2009 has established a tax credit of up to $6,500 for qualified move-up/repeat home buyers (existing home owners) purchasing a principal residence after November 6, 2009 and on or before April 30, 2010 (or purchased by June 30, 2010 with a binding sales contract signed by April 30, 2010).

The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.

1.  Who is eligible to claim the $6,500 tax credit?
Qualified move-up or repeat home buyers purchasing any kind of home are eligible to claim this credit.

2.  What is the definition of a move-up or repeat home buyer?
The law defines a tax credit qualified move-up home buyer (“long-time resident”) as a person who has owned and resided in the same home for at least five consecutive years of the eight years prior to the purchase date. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. That is, both spouses must qualify as long-time residents, with at least five years of principal residency for each. Repeat home buyers do not have to purchase a home that is more expensive than their previous home to qualify for the tax credit.

3.  How is the amount of the tax credit determined?
The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $6,500. Purchases of homes priced above $800,000 are not eligible for the tax credit.

4.  Are there any income limits for claiming the tax credit?
Yes. The income limit for single taxpayers is $125,000; the limit is $225,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) above those limits. The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $145,000 (single) or $245,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.

5.  What is “modified adjusted gross income”?
Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine “adjusted gross income” or AGI. AGI is total income for a year minus certain deductions (known as “adjustments” or “above-the-line deductions”), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and the first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.

To determine modified adjusted gross income (MAGI), add to AGI certain amounts of foreign-earned income. See IRS Form 5405 for more details.

6.  If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
Possibly. It depends on your income. Partial credits of less than $6,500 are available for some taxpayers whose MAGI exceeds the phaseout limits.

7.  Can you give me an example of how the partial tax credit is determined?
Just as an example, assume that a married couple has a modified adjusted gross income of $235,000. The applicable phaseout to qualify for the tax credit is $225,000, and the couple is $10,000 over this amount. Dividing $10,000 by the phaseout range of $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $6,500 by 0.5. The result is $3,250.

Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $138,000. The buyer’s income exceeds $125,000 by $13,000. Dividing $13,000 by the phaseout range of $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $6,500 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,275.

Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.

8.  How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008?   How is this different than the rules established in early 2009?
The previous tax credits applied only to first-time home buyers and were for different amounts of money.

9.  How do I claim the tax credit?   Do I need to complete a form or application?   Are there documentation requirements?
You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on line 67 of the 1040 income tax form for 2009 returns (line 69 of the 1040 income tax form for 2008 returns).

No other applications are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and repeat home buyer tests. Note that you cannot claim the credit on Form 5405 for an intended purchase for some future date; it must be a completed purchase. Home buyers must attach a copy of their HUD-1 settlement form (closing statement) to Form 5405 as proof of the completed home purchase.

10.  What types of homes will qualify for the tax credit?
Any home that will be used as a principal residence will qualify for the credit, provided the home is purchased for a price less than or equal to $800,000. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.

It is important to note that you cannot purchase a home from, among other family members, your ancestors (parents, grandparents, etc.), your lineal descendants (children, grandchildren, etc.) or your spouse or your spouse’s family members. Please consult with your tax advisor for more information. Also see IRS Form 5405.

11.  I read that the tax credit is “refundable.” What does that mean?
The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.

For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $6,500 home buyer tax credit. As a result, the taxpayer would receive a check for $5,500 ($6,500 minus the $1,000 owed).

12.  Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own.  Do I still qualify for the tax credit?
Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been “purchased” on the date the owner first occupies the house. In this situation, the date of first occupancy must be after November 6, 2009 and on or before April 30, 2010 (or by June 30, 2010, provided a binding sales contract was in force by April 30, 2010).

In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date. Be sure to check with a tax advisor in cases where a HUD-1 form is not used at settlement to be sure you have sufficient documentation to attach to IRS Form 5405.

13.  Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
Yes. The tax credit can be combined with an MRB home buyer program.

14.  I am not a U.S. citizen. Can I claim the tax credit?
Perhaps. Anyone who is not a nonresident alien (as defined by the IRS) and who has owned and resided in a principal residence in the United States for at least five consecutive years of the eight years prior to the purchase date can claim the tax credit if they meet the income limits. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. The IRS provides a definition of “nonresident alien” in IRS Publication 519.

15.  Is a tax credit the same as a tax deduction?
No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $6,500 in income taxes and who receives an $6,500 tax credit would owe nothing to the IRS.

A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $6,500 in income taxes. If the taxpayer receives a $6,500 deduction, the taxpayer’s tax liability would be reduced by $975 (15 percent of $6,500), or lowered from $6,500 to $5,525.

16.  Is there a way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 or 2010 tax return?
Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment.

Buyers should adjust the withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.

In addition, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. As a result, some state housing finance agencies have introduced programs that provide short-term second mortgage loans that may be used to fund a downpayment. Prospective home buyers should check with their state housing finance agency to see if such a program is available in their community. To date, 18 state agencies have announced tax credit assistance programs, and more are expected to follow suit. The National Council of State Housing Agencies (NCSHA) has compiled a list of such programs, which can be found here.

17.  HUD allows “monetization” of the tax credit.  What does that mean?
It means that HUD will allow buyers using FHA-insured mortgages to apply their anticipated tax credit toward their home purchase immediately rather than waiting until they file their 2009 or 2010 income taxes to receive a refund. These funds may be used for certain downpayment and closing cost expenses.

Under the guidelines announced by HUD, non-profits and FHA-approved lenders are allowed to give home buyers short-term loans. The guidelines also allow government agencies, such as state housing finance agencies, to facilitate home sales by providing longer term loans secured by second mortgages.

Housing finance agencies and other government entities may also issue tax credit loans, which home buyers may use to satisfy the FHA 3.5 percent downpayment requirement.

In addition, approved FHA lenders can purchase a home buyer’s anticipated tax credit to pay closing costs and downpayment costs above the 3.5 percent downpayment that is required for FHA-insured homes.

More information about the guidelines is available on the NAHB web site. Read the HUD mortgagee letter (pdf) and an explanation of the FHA Mortgagee Letter on Tax Credit Monetization (pdf). An FAQ about monetization (pdf) is available at the NAHB web site.

18.  If I’m qualified for the tax credit and buy a home in 2009 (or 2010), can I apply the tax credit against my 2008 (or 2009) tax return?
Yes. The law allows taxpayers to choose (“elect”) to treat qualified home purchases in 2009 (or 2010) as if the purchase occurred on December 31, 2008 (or if in 2010, December 31, 2009). This means that the previous year’s income limit (MAGI) applies and the election accelerates when the credit can be claimed. A benefit of this election is that a home buyer in 2009 or 2010 will know their prior year MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.

Taxpayers buying a home who wish to claim it on their prior year tax return, but who have already submitted their tax return to the IRS, may file an amended return claiming the tax credit using Form 1040X. You should consult with a tax professional to determine how to arrange this.

19.  For a home purchase in 2009 or 2010, can I choose whether to treat the purchase as occurring in the prior or present year, depending on in which year my credit amount is the largest?
Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in the present year and a larger credit would be available using the prior year MAGI amounts, then you can choose the year that yields the largest credit amount.

Brought to you by the National Association of Home Builders

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