All,

If you need an FHA loan in UTAH please visit fhahomeloanutah.org by our very own president, Matt Madlang. Go Here: FHA Home Loan Utah

If you have been to our website and have not used the mortgage inquiry form for your next refinance or purchase, please view the video below for a quick and easy explanation on how to utilize the form to find the lowest mortgage rates!




Direct Link to Lowest Mortgage Rates YouTube video

The American Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009.

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.

2. Who is eligible to claim the tax credit?
   First-time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and before December 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner.
3. 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, unmarried joint purchasers may 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.

4. 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 $8,000.
5. Are there any income limits for claiming the tax credit?
   Yes. The income limit for single taxpayers is $75,000; the limit is $150,000 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 $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. 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 $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.
6. 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 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.

7. 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 $8,000 are available for some taxpayers whose MAGI exceeds the phaseout limits.
8. 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 $160,000. The applicable phaseout to qualify for the tax credit is $150,000, 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 $8,000 by 0.5. The result is $4,000.

   Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 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 $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.

   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.

9. How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008?
   The most significant difference is that this tax credit does not have to be repaid. Because it had to be repaid, the previous “credit” was essentially an interest-free loan. This tax incentive is a true tax credit. However, home buyers must use the residence as a principal residence for at least three years or face recapture of the tax credit amount. Certain exceptions apply.
10. How do I claim the tax credit? Do I need to complete a form or application?
    Participating in the tax credit program is easy. 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 69 of their 1040 income tax return. No other applications or forms 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 first-time 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.
11. 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. 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.
12. 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 $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).

13. I purchased a home in early 2009 and have already filed to receive the $7,500 tax credit on my 2008 tax returns. How can I claim the new $8,000 tax credit instead?
    Home buyers in this situation may file an amended 2008 tax return with a 1040X form. You should consult with a tax advisor to ensure you file this return properly.
14. 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 on or after January 1, 2009 and before December 1, 2009.

    In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.

15. 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 the MRB home buyer program. Note that first-time home buyers who purchased a home in 2008 may not claim the tax credit if they are participating in an MRB program.
16. I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?
    No. You can claim only one.
17. I am not a U.S. citizen. Can I claim the tax credit?
    Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of “nonresident alien” in IRS Publication 519.
18. 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 $8,000 in income taxes and who receives an $8,000 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 $8,000 in income taxes. If the taxpayer receives an $8,000 deduction, the taxpayer’s tax liability would be reduced by $1,200 (15 percent of $8,000), or lowered from $8,000 to $6,800.

19. I bought a home in 2008. Do I qualify for this credit?
    No, but if you purchased your first home between April 9, 2008 and January 1, 2009, you may qualify for a different tax credit. Please consult with your tax advisor for more information.
20. Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 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 their 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.

    Further, 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. Some state housing finance agencies have introduced programs that provide short-term credit acceleration loans that may be used to fund a downpayment. Prospective home buyers should inquire with their state housing finance agency to determine the availability of such a program in their community.

    The National Council of State Housing Agencies (NCSHA) has compiled a list of such programs, which can be found here.

21. The Secretary of Housing and Urban Development has announced that HUD will allow “monetization” of the tax credit. What does that mean?
    It means that HUD will allow buyers to apply their anticipated tax credit toward their home purchase immediately rather than waiting until they file their 2009 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 will be allowed to give home buyers short-term loans of up to $8,000.

    The guidelines also allow longer term loans secured by second liens to be used by government agencies, such as state housing finance agencies, to facilitate home sales.

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

    In addition, approved FHA lenders will also be able to purchase a home buyer’s anticipated tax credit to pay closing costs and downpayment costs above the 3.5% 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.

22. If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
    Yes. The law allows taxpayers to choose (”elect”) to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 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 2008 tax return, but who have already submitted their 2008 return to the IRS, may file an amended 2008 return claiming the tax credit. You should consult with a tax professional to determine how to arrange this.

23. For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, 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 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.

Yesterday was a bad day for mortgage rates, however, we are clawing our way back this afternoon with many lenders repricing better.

Most lenders are going to have wholesale rates in the low 5% range, however, the market leader that most mortgage brokers turn to are still offering interest rates in the high 4% range for well qualified borrowers.

Rate and Term Refinance or Purchase - 4.75% is Par (Expect to pay orgination fees if a broker offers you this rate).

There’s a couple ways to answer the question of when to lock your mortgage rate.  If you are purchasing a home, you likely have purchase contract constraints such as the settlement deadline that forces you to lock by a certain date in order to close on your house in time.  In the case of a refinance, you might have much more time to consider your lock date because there are no time constraints beyond the date of your credit report, approval, and appraisal.

Locking your Mortgage Rate - Purchase

Since you are constrained to time, locking your rate should come down to what you expect in your payment, and a consideration of current mortgage conditions. It is unusual for a mortgage professional to be able to guarantee a lower rate in coming days. Recently however, the overwhelming consensus among mortgage experts is that rates will remain the same or improve over the coming months. Obviously, that ensures a borrower of nothing.

Lock your interest rate when rates are good. If you have been offered 4.875% on a 30 year fixed mortgage, at this time BeatMyBroker.com can say that the offered rate is excellent. Do not hold out for an eighth better in rate. Interest rates usually get worse much faster than they get better.

Additionally, what does 1/8th lower in interest rate really mean? On smaller loan amounts, that 1/8th difference might only save your $10-$15 a month. Is it worth risking rate worsening that could happen in a matter of hours that could increase your rate by .25%? Probably not.

Also, many lenders in this low interest rate period have put priority on locked loans. This means that when your loan is submitted for approval, if its locked, it will get underwritten before unlocked loans. When you have time constraints like those found in a real estate purchase contract, this can mean getting your loan approved in time for closing…or NOT if you don’t lock.

Locking Your Mortgage Rate - Refinance

Locking your interest rate when refinancing is a little bit different. You could lock at any point up until your approval has expired. This time period usually lasts from 60-90 days after your initial application with the mortgage company.

It would probably take 60-90 days of research just to understand rates well enough to make a good prediction on whether or not rates will increase or decrease. True mortgage professionals have invested a considerable amount of time learning about market indicators and mortgage backed securities just to make educated guesses on interest rate trends.

So when do you lock? Lock when you see a benefit. While there are no time constraints beyond your approval time frames, is it really worth gambling with odds of interest rate decreases? Or increases if you lose your bet?

Case in point, if you have 6.25% on your mortgage, and you have the ability to lock in at 5%, with the SLIGHT chance of interest rates dropping to 4.875% or maybe even 4.75% if the planets align correctly, lock the loan. Decreasing your interest rate 1.25% should have a substantial effect on your monthly cash flow from an interest savings perspective. You will be kicking yourself if you hold out for that extra .125%-.250% if interest rates actually increase.

Always lock if you see a real benefit to doing so. That’s all we’re saying.

If you’re trying to make the plunge and lock in at a low mortgage rate, you’re either going to need to depend on the advice of your mortgage professional, or take the time to “read” the market.

If you are relying on your mortgage professional to lock your rate (which in reality, should be the case), you better make sure they understand how mortgage rates change.  If your mortgage professional is talking about the following when referring to locking your rate, you better think twice about their true understanding of mortgage rate movement.

1. Excessive talk about 10 year treasury figures
2. Relying on a fed rate cut to indicate mortgage rate drops
3. Reference to prime lending rates (unless you’re doing a HELOC)
4. Checking their crystal ball

Mortgage lending rates have EVERYTHING to do with the sale and purchase of mortgage backed securities (MBS).  If your lender understands this, there’s a good chance they are in tune with what really drives interest rate changes.  They are likely following some of the more credible blogs created for mortgage professionals or subscribing to live data feeds of the MBS market.

It is not really the the function of the borrower to learn and understand the way mortgage backed securities work, what stimulates the purchase of MBS in the secondary market, and what the effects of buying and selling are.

If you just want the best interest rate from a lender that knows how to lock in at a low mortgage rate, is committed to the best mortgage offers in writing, find the best mortgage rates now!

The best place for a consumer to read up about MBS is at Mortgage News Daily. They provide a consumer section for mortgage rate indications that can be really helpful.

The fed announced they would be purchasing mortgage backed securities by the end of the second quarter (2009).  This had a positive impact on interest rates but it seems like it just won’t stick for now.  Big deal - rates are still low.

Here are some wholesale rates for today from 2 different lenders on a 30 year fixed:

4.5% 12 day lock

4.625% 15 day lock

If you are able to obtain the rates above through a mortgage broker, except to pay at least a 1 point origination fee.

Here’s a glimpse at wholesale mortgage rates through random lenders.  Here are 30 year conventional rates:

Lender 1: 4.625%

Lender 2: 4.75%

These are wholesale rates for borrowers with good to excellent credit with at least 10% down.

FHA wholesale rates are not quite as good hovering around 5.0% for the competitive FHA lenders.

We have been asked several times what wholesale mortgage rates are and what percentage they are at.  How LOW are they compared to what you end up with as a consumer?

Well, in the spirit of transparency, BeatMyBroker.com is going to start posting wholesale interest rates from various WHOLESALE lenders.  These are not lenders you can work with directly.  These will be rates from the wholesale channel.  The lender names will not be disclosed, however you will be able to see how low they are to give you a head start on your mortgage rate shopping.

Remember, these rates are not an offer to lend.  They are going to be posted to give you, the consumer, an idea of how low interest rates might be.  This is like being able to see the invoice cost of a car - well, that is if car invoices show the real cost of the vehicle.

Subscribe to the BeatMyBroker.com blog feed if you have not already done so.  It’s easy and a lot of the rates that will be posted here are going to be real eye openers to those that are not being offered competitive mortgage rates.

STAY TUNED!

This is a common question.  People want to know why mortgage brokers have an advantage over banks when it comes to interest rates (and hopefully fees).

You need to read the YSP (Yield Spread) post to understand this unless you already know what it is.

CHECK IT OUT!

A certain retail bank that starts with “W” (and it hasn’t been in turmoil like some of the other “W” ones) was offering 5.25% on a 30 year fixed mortgage.  They were charging a 1% origination fee.

The same 30 year fixed rate could be obtained at the same time through a brokerage using a particular lender at 5.0% and 1 point origination or 5.25% and NO orgination.

That means the broker would save the borrower either a whole percentage point in fees or a quarter in the interest rate.

The bank loan was equivalent to a 2.375% commission to a mortgage broker.  A fair mortgage broker will glady lower the interest rates and fees to beat the bank ALL DAY LONG.

Keep this in mind folks.  Find the right mortgage broker or mortgage bank and get better loans.  It’s that simple.  If none of this makes sense check out the mortgage resources section.