Your Chicago Mortgage Guy

Tax Credit as Down Payment and Illinois Home Start

Well, the State of Illinois has finally stepped forward with a reasonable option for borrowing against your future First Time Home Buyer Tax Credit with a program called "Home Start".  This is similar to the old Illinois Assist Bond and the City of Chicago, "City Mortgage" programs of days gone by.  Essentially, you have to apply for the Illinois Home Start Bond program, which is a 30 Year Fixed Rate mortgage, at a set interest rate.  It does not fluctuate with market rates and currently I am told that the rate is 6.00%.  They then allow you to borrow up to $6000 of your future tax credit to be used towards your down payment and/or closing costs.

Illinois Home Start Program Overview

That's the good news.  Bad news?  I don't have access to it.  So, take a look at the site.  There is a PDF that shows you the current approved lenders.  Give them a call.  If you are not interested in the program after you hear the details, give Your Chicago Mortgage Guy a call and we'll talk about a plan B.

Joe Burke

Your Chicago Mortgage Guy

773-742-6707

joe@yourchicagomortgageguy.com

$8,000 Tax Credit For Down Payment? Be careful, we don't know yet...

On Monday morning I walked into ten emails regarding  Shaun Donovan's, The Secretary of the US Department of Housing and Urban Development, assertion that FHA would soon allow the $8000 First Time Home Buyer Tax Credit to be used as part of a down payment on a house.  What they didn't tell us is how or what would be an acceptable source of these funds.  Well, now it's Friday and I am still getting questions on this and frankly, we don't have any answers.  Attached is the announcement that came directly from HUD.

Download First Time Buyer Credit For Down Payment

The money will have to come from somewhere and FHA and/or Fannie and Freddie, will have to tell us where or what are acceptable sources for these funds.  As soon as we find out, I promise, you will find out from Your Chicago Mortgage Guy.  In the mean time, I would hold off on taking 100% financing buyers out looking at properties this weekend.  There has been a lot of back tracking this week and we haven't been handed anything that would allow us to approve something like this from an underwriting stand point.

More news as I get it....

Your Chicago Mortgage Guy

Joe Burke

773-742-6707

joe@yourchicagomortgageguy.com

FinancialStability.gov

Good Morning,

I've been getting a lot of questions from past and present clients, friends, relatives, you name it, regarding whether the Obama Administrations plans for foreclosures can help them.  Well, it looks like there are finally some answers to pass along.  This was posted at www.financialstability.gov this morning.

"On Tuesday, February 10th, Treasury Secretary Timothy Geithner outlined a comprehensive plan to restore stability to our financial system. In the address, Secretary Geithner discussed the Obama Administration’s strategy to strengthen our economy by getting credit flowing again to families and businesses, while imposing new measures and conditions to strengthen accountability, oversight and transparency in how taxpayer dollars are spent. And Secretary Geithner explained how the financial stability plan will be critical in supporting an effective and lasting economic recovery."

I'm just starting to play with the site, but it actually looks pretty well put together, although not entirely complete.  The site asks you a series of questioins about your current situation and points you towards your options.  Take your time and do this at home where you have your documentation handy.  You will most likely need to have your mortgage statement handy and be prepared to make a couple of phone calls.  This is a great step in the right direction if you are looking for help with your mortgage.

More to come as I get it.

Joe Burke

Your Chicago Mortgage Guy

joe@yourchicagomortgageguy.com

773-742-6707

American Recovery and Reinvestment Act of 2009

Really rolls off the tongue, huh?  I can picture some poor little 5th grader about twenty years from now trying to remember this for a history test.  ARRA.  Not going to be easy to come up with a rhyme for that one.

So, what does this mean for the home owner?  Or the future home owner?  Believe it or not, we're still sorting through it all.

The first and most widely publicized aspect of the ARRA is the $8000.00 Tax Credit available to First Time Home Buyers.  Here's the basic's.

• The Tax Credit is available to all "First Time Buyer's".  The current definition of a "First Time Buyer" is anyone who has not owned a primary residence in the past three years.
• The Tax Credit is for 10% of the purchase price or a maximum of $8000.00.
• The Tax Credit is available for those who purchase between January 1st of 2009 until December 1st of 2009.
• You must be a U.S. Citizen to qualify
• Single taxpayers with an income up to $75,000.00 and married taxpayers with incomes of up to $150,000.00 qualify for the full tax credit.  Partial credit is available to taxpayers with incomes up to $95,000.00 or married couples with incomes up to $175,000.00.
• The Tax Credit does not need to be paid back unless the property is sold within the first three years.  In that event the credit is taken back out of the proceeds at sale.

The second has not been as widely publicized yet, but could pertain to a significant number of local borrowers if the Government acts on the verbiage in the ARRA. 

They changed verbiage particular to "High Cost" areas and how that definition is used.  Currently Chicago is lumped together with Joliet and Naperville to make up a "Metropolitan Statistical Area".  This is where our current Conforming Loan Limit of $417,000.00 comes from.  The new verbiage in the ARRA leaves open the possibility that they can break down our area into "sub-groups".  For instance, the average home price in Lincoln Park or Lake Forest is much higher than that of Garfield Park or Joliet.  If you break out the areas with higher median prices, it is possible that they would qualify for the "High Cost" loan limits set up by Fannie Mae and Freddie Mac that are currently in place in other areas of the country.  That could make the Conventional limit in these area's go up to $729,750.00.  This would be a huge relief to those trying to sell there properties to people who cannot currently find financing above $417,000.00.  It would also allow thousands of homeowners to refinance into more favorable mortgages.

Let's keep our fingers crossed.

Joe Burke

Your Chicago Mortgage Guy

joe@yourchicagomortgageguy.com

773-742-6707

Stimulus Update - Home Buyer Tax Credit

The Home Buyer Tax Credit in the new economic stimulus plan, the version agreed upon by the House and Senate, appears to be not as good as hoped, and not as bad as feared.  That's the best I can make of it at this point.  While there was speculation last week that it could be as high as $15,000.00 for Home Buyers, they could have left last years credit in place, which was really a loan anyway, and we wouldn't have gotten anything.

It looks like the Credit will be $8000.00 and there will be no requirement for repayment, as long as the Home Buyer stays in the property for at least three years.  The expiration date has also been moved from July 1st, 2009, until December 1st, 2009.  So anyone purchasing a property between January 1st, 2009 and December 1st, 2009, will qualify.

Now for the bad news.  They added income limits.  The full credit is only available to singles making less than $75,000.00 per year and couples making less than $150,000.00 per year.

So, my take?  It's definitely better than what was currently in place.  It's also better than no credit at all. 

Joe Burke

Your Chicago Mortgage Guy

joe@yourchicagomortgageguy.com

773-742-6707

What's with the $15,000.00 Tax Credit I Keep Hearing About?

Lots of calls on this yesterday.  Here's what we know so far.  The $7500.00 tax credit that was put in place last year is set to expire.  A lot of people probably won't even take advantage of it because in essence, it was just a loan anyway.  You had to pay each dollar you took, back to the IRS over a 15 year period, following the year that you took the credit in anyway. 

It looks like the new proposed tax credit to come out of the senate this week could have some real teeth to it.  It will actually be a deduction against your actual tax burden on your 1040.  So, if your real tax at the end of the year is $15,000.00 or greater, you can essentially write that down to zero.  Now, most singles, and even couples, don't have a $15,000.00 a year tax burden.  But, the beauty with this proposed credit is that you can take it over two years.  So, if you have a $9,000.00 tax burden in 2009, you can write off $9,000.00 for 2009 and another $6,000.00 in 2010. 

Here's what we don't know.  Income limits.  They have been proposed in the House version and stripped in the Senate version.  We'll have to wait and see.  We also don't know what the time frame will be for home buyers.  Right now, it looks like it will apply to everyone, not just first time buyers, which has some in the House and Senate concerned that there aren't enough restrictions.  They are concerned that, in theory, people could sell there houses to one another, just to get the tax credit.  In the real world, I would say this is iffy, but from what we have seen in some areas of the country with flipping properties and straw buyers, I guess anything is possible.

As soon as we something definite, I will get it posted.  This could be the difference for a lot of people making the decision to buy this year.

Joe Burke

Your Chicago Mortgage Guy

773-742-6707

joe@yourchicagomortgageguy.com