Tuesday, February 24, 2009


The housing industry is generally happy with the $8,000 tax credit for first-time buyers. It improves upon the first credit of $7,500 passed in July, which is similar to a low interest loan as it needs repayment over a period of time and is for first time buyers only. The new tax credit is just that, a refundable credit.

But, the industry is disappointed that Congress did not adopt the Senate proposal of a $15,000 non-refundable credit for all homebuyers. An economist and director of forecasting for the National Association of Homebuilders, Bernard Markstein, stated “The Senate version would have done a lot more to turn around the housing market; we have reports of people who would be coming off the fence because of it”.

An additional 300,000 new homebuyers could come into the market due to the $8,000 credit according to NAR’s (National Association of Realtors) chief economist, Lawrence Yun. Then, a domino effect could be created, because most first-time buyer transactions will generate one or two trade-up purchases. Yun said “ I think there are many homeowners who would be trading up but they have had no buyers for their own homes.”

The first-time buyers who won’t benefit from this portion of the stimulus package are those purchasers without funds for the down payment. Buyers still have to close on the home purchase before claiming the credit.

Missouri is taking action on overcoming the down payment hurdle by creating a short-term loan out of the tax credit of up to $6,750. Missouri would loan purchasers the money to be used as part or all of the needed down payment. Then, after buyers receive their IRS refund, they pay back the state. This unique solution may be adopted by other states.

Another take on the tax credit could be a perception of a “discount” on a home price. An example would be a $120,000 home purchase effectively becoming a $112,000 one, thus reassuring buyers who are nervous about buying and then seeing home values continue to fall.

A second take is that the tax credit refund could provide a cushion for the first few difficult years when unexpected expenses and repairs crop up. Purchases needed for the new home -- a refrigerator, yard equipment, washer/dryer – would help stimulate the economy too.

We are here to help with your home loan questions and concerns. Please call me at 913-642-3334 or email me at michele@wantinsight.com
We look forward to working with you.

Wednesday, February 18, 2009


On Tuesday, February 18, 2009, President Obama signed the economic stimulus bill and one of the provisions included a tax credit for first-time buyers. The credit claimed is worth up to $8,000 or 10% of a home’s value, whichever is less, and can be claimed on 2008 or 2009 taxes.

This is a refundable tax credit – which means that most new buyers will pocket extra cash after filing their taxes; the amount depends on various filing and withholding factors.

Examples of how this works:

A) You owe $5,000 (your tax liability). Each paycheck has withholding for taxes and by year end you’ve paid $5,000 to the US Treasury. Since you’re “paid up”, you’d receive the full tax credit as a refund check.

B) You owe $5,000 (tax liability). Through your payroll withholding you’ve overpaid by $500, which results in a $500 refund check. You’d now qualify for the $500 overpayment PLUS the $8,000 tax credit.

C) You owe $5,000 (tax liability). Unfortunately payroll withholding was underfunded by $500, and you’d usually write a check to the US Treasury for $500. But this time, the tax credit pays that $500 owed and you get a refund of $7,500.

Certain qualifications must be met to receive this tax credit, such as purchasing a home between Jan. 1, 2009 and Nov. 30, 2009. “First-time” buyers are purchasers who have not had ownership in a property for the past three years. To avoid repayment of the credit, buyers must remain in the home for at lest three years.

Income restrictions include: Singles must make less than $75,000 and couples no more than $150,000. (partial credit may be given to higher income buyers)

The credit application will be relatively easy – or as easy as doing your taxes. No additional forms needed, just claim it on the return! And, a taxpayer who has already submitted a completed return can claim the credit by filing an amended return.

I'll share some industry thoughts about the tax credit and stimulus plan in my next blog. As always, please call me at 913-642-3334 or email me at michele@wantinsight.com with any questions or comments.

Thursday, February 12, 2009


There’s so much financial news to absorb, what’s fact or fiction, it’s almost overwhelming. The media picked up the news of the Fed’s recent purchases of Mortgage Backed Securities. BUT, the news that rates should continue to drop into the summer due to these purchases is in error!

Yes, the Fed has been buying Mortgage Bonds. Note: what is being purchased is many 30 year 5.0% and 5.5% FNMA Bonds. These pools consist of numerous home loans with 6.0% and 6.5% rates. The coupon rate given to an investor is different than the rate the home borrower pays, and that difference is the profit Wall Street and government agencies gain. These loans are more than likely to be refinanced and paid as current rates make it very attractive to refinance a loan over 6% . In turn, the Fed gets a quick return on some of their investment.

These higher rate coupons purchased by the Feds does not necessarily affect rates to move lower as their actions do not impact the loans originated at today’s low rates.

The Problem …

Many homeowners could save hundreds of dollars a month on their mortgage payments if they would refinance now. But with the media throwing out “what if’s” and “maybe this summer” without factual basis, many homeowners are deciding to delay making the decision to save now, with the HOPE of gaining a few mere dollars of savings per month IF a lower rate MAY come their way! And, while these consumers wait, rates could turn higher. In turn, they could miss the window of opportunity entirely.

Another Thought

Suppose a homeowner was able to time the market perfectly and save a few dollars a month, it’s possible to still lose in the end. Because, while Mr.& Ms. Homeowner delayed on their refinance, they ended up losing the savings each month they could have made by acting sooner. They may have lost hundreds of dollars for every month they waited for the “perfect” rate.

So, even have gotten the rate they were looking for, it could take a few years to make up what they lost by waiting.