The $8,000 tax credit cannot be used as down payment-

Out of these 3 buyers one was already pre-approved via an online lender at Quicken Home Loans but after our 20 minute phone consultation he was not told that his tax credit was not available as a down payment! I only hope the application taker “forgot” to ask where the down payment was coming from but this should have been apparent when his assets in the bank equaled less then 1% of his overall purchase price- so no 3.5% which is a red flag proving that we have no seasoned down.

So just to be clear- THE $8,000 TAX CREDIT IS NOT AVAILABLE FOR ANY PORTION OF THE 3.5% FHA REQUIRED DOWN PAYMENT.

What if I buy a duplex?

You can only get 10% of purchase price or $8,000 max. So a $70,000 house you would only earn $7,000 in credit. With a duplex you own half as an owner occupied and the other half as an investment so depending on the price makes all the difference- so a $160,000 duplex- half would be $80,000 and 10% of that is $8,000 so you get maximum credit. A duplex under $160,000 would only get 10% of half of the price.

Now to fully disclose I am not a CPA and certain things could affect this answer but if you ever have questions I refer all my accounting questions to the smartest CPA in the County- John Caughell CPA at 360-573-9800 or johnc@golden-cpas.com he is truly the best.

Timeline to qualify-

So as we go down one of the biggest unknowns to first time homebuyers we ask will the $8,000 be extended another six to 12 months? Could it be possible to have it increased? We have 14 weeks left for the $8,000 tax benefit with the buyers required to be fully closed by Nov. 30^th.^th and not just under contract. I have a feeling that short sale offers will see less activity as a result of this timeline and the fact that SO many of us have been burned by playing the hurry up & wait game while the servicing agents and banks fumble the ball and make up new rules as they go. That means funded and wired by Nov. 30

What is Happening Today-

The two biggest housing trade groups- the 1.2 million-member National Association of Realtors and the National Association of Home Builders- are spending the month mounting unusually intense grass-roots lobbying campaigns to make case for extending the credit, and maybe even expanding it. The effort is targeted first at the districts of members of the house of the two tax writing committees- House Ways and Means and Senate Finance- this is very strategic and could have been beneficial if we had that support for the HVCC issues we are now dealing with instead of a 1 page document that basically stated to suspend the HVCC until further review.

Economic “Ripple Effect”

According to Economists at National Association of Realtors 300,000-350,000 additional houses will be sold as a result of the tax credit. Each home is forecasted to contribute $63,000 in downstream “ripple effect” elsewhere in the economy, they say- sales of furnishings, appliances, lawnmowers, landscaping, renovation materials, plus moving expenses.

For those who know me understand that I always say “you always have to know where the information came from” so on this bullet point I realize the number seems high but having $8,000 of free money and buying a home at the bottom of the market seems to really make people feel better about spending. Accurate or not I feel it is a benefit that may be one of the only Obama plans that I have witnessed that worked without a flaw.

Path Forward

Bills are already pending in both houses to extend the credit for another year. Some have fantasized about the bill that Chris Dodd, D-Conn., and Chairman of the Senate Banking Committee is co-sponsoring with Georgia Republican Johnny Isakson that would raise the tax credit to $15,000! Meanwhile, both the Realtors and builders are pushing not only for extension but for the credit to cover ALL home purchases in 2010. I forecast some sort of an extension but I would caution spreading false hope and if we can capture the money for clients today that is soon-certain and positive they receive the $8,000 credit.

The MARKET

Pretty Good Day in the Market

Treasuries and mortgages rallied today; see-saw back and forth after the hammering treasuries and mortgages took on last Friday on the jump in existing home sales in July and the strong rally in equities. Today the stock market opened better following the 156 point jump in the DJIA Friday, but by mid-afternoon the equity markets rolled over and ended unchanged on the day.

Tomorrow Treasury will auction $49B of 2 yr notes, beginning three days of new issuances raising a total of $109B. Markets appear to be thinking demand for the new issuances will be strong as they have been for the past two months. Demand for US Treasury debt remains firm from indirect bidders (mainly foreign central banks). The 2 yr note usually does see good demand as it fits well with banks’ assets and liabilities. Banks are hoarding cash these days while telling the media there is little loan demand. Banks have the straight faced ability to paint the picture anyway they like. There is scant loan demand because banks will only lend to those borrowers that can get along without it.

We are currently 24 hours in UW

12 hours in Docs

12 hours in funding….. So let’s go have some fund!

Bill Black CMP

Branch Manager- Vancouver Branch

Loan Network LLC

Mortgage Banker

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