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) of more than $125,000 for single taxpayers and $225,000 for married taxpayers filing a joint return.  The phase-out 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.

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.

If you do exceed the income limits, a tax advisor can help you determine if you qualify for a partial tax credit.  To determine if you qualify for a loan, contact one of our Home Loan Specialist at 1-888-562-6200 or Apply Online on our website www.churchillmortgage.com.  We would be happy to help!

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.  

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.

What is the definition of a principal residence?

Generally, a principal residence is the home where an individual spends most of his/her time (generally defined as more than 50%).  The term includes single-family detached housing, condos or co-ops, townhouses or any similar type of new or existing dwelling.

If you are interested in purchasing a home and qualify for either the First Time Homebuyer or the Move Up/Repeat Buyer Tax Credit, feel free to contact one of our Home Loan Specialist for more information or to get prequalified for your loan.  Remember, to take advantage of the credit, a purchase agreement must be signed by April 30, 2010 and the closing documents signed by June 30, 2010. 

There is no doubt that time is running out for qualified homebuyers to benefit from the extended Home Buyer Tax Credit.  As most of you know, the extension not only includes an $8,000 tax credit for first time home buyers, but also a $6,500 tax credit for homebuyers who have owned and occupied a primary residence for a period of five consecutive years.  To take advantage of the credit, a purchase agreement must be signed by April 30, 2010 and the closing documents signed by June 30, 2010.  Below are a few questions to help you get started. 

What is the definition of a first-time home buyer?

The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase.  For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.

For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit.  However, IRS Notice 2009-12 allows unmarried joint purchasers to allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter.  Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.

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 home owner who has owned and resided in a 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.  Repeat home buyers do not have to purchase a home that is more expensive than their previous home to qualify for the tax credit.

Feel free to contact one of our Home Loan Specialists for further information or to get pre-qualified for a loan to get you on the road to homeownership!

Important Trend!

If you have been watching mortgage rates trying to figure out when they are going to get better, the below chart may tell you what you need to know.  As you can see, over the last 3 months the 30 year FNMA bond has hit a ceiling of resistance you see at the top of the chart as a red line.  It corresponds to 101.45 on the left or R2 on the right. 

This ceiling effect tells us the chances are slim the 30 year FNMA bond will improve past this level. 

When the bond price is up, rates go down. 

So in this chart, our best mortgage interest rates were seen on March 4^th (last Thursday/Friday), Feb 5^th, and Dec 18^th. 

Mortgage rates are at the present levels because the government has been buying bonds at a lower return than what investors were willing to take.  This buying has kept mortgage rates artificially low since this started in January of 2009. 

The Fed has made it clear they intend to stop purchasing these bonds in 21 days (March 31).  Consensus among the analysts is rates will go up .50% following the Fed's exit. 

What is your strategy for getting the best rate for your refinance or purchase? 

I strongly suggest you consider taking action now, as all indicators point to higher rates in April. 

 What do you think rates will do after March 31st?

Score one for the IRS!

Yes, I am referring to the Internal Revenue Service - the people that have all those confusing tax codes. 

They have produced a very helpful 1 ½ minute video about the homebuyer’s tax credit that delivers a great summary of the program in a short amount of time. 

Check it out and let us know your thoughts: http://www.youtube.com/IRSvideos#p/u/2/FEceiZW9e3w