My New Blog

Many have wondered what the breakdown of the stimulus will be. One glaring question most asked to me is "Ray, what will the new first time buyer tax credit be?"

While not all of the details have been released, what I can find so far is limited. Not even the I.R.S website has anything on it. The I.R.S website does have this information for the individual "Making work pay":

When and how will people get the $400 to $800 “Making Work Pay” tax credit? Taxpayers will not get a separate, special check mailed to them like last year’s economic stimulus payment.

For many taxpayers, the additional credit will automatically start showing up in their paychecks this spring. For people who receive a paycheck, the credit will typically be handled by their employers through automated withholding changes. For some other people, the credit can be claimed when they file their 2009 tax return next year.

More details about the “Making Work Pay” credit will be available soon, including an updated version of the withholding tables contained in Publication 15, (Circular E), Employer’s Tax Guide.

From there I was able to locate some information on the first time home buyer credit. It was scaled back from $15,000 down to $8,000, or 10% of the value of the home. Buyer's are eligible who buy from the beginning of the year until the end of November. As before there is a pair off in incomes earned for $75,000 to $150,000 (for married couples). The one interesting twist is that it appears if you live in it for 3 years, the credit is forgiven.

Obviously the tax credit details haven't been fully released, but watch for more to come.

Ray

In the last few months we have constantly seen the grind of conventional mortgage insurance companies tightening their belts. Awhile back we saw the elimination of mortgage insurance for investment properties, which led to the 20% down payment requirement for investment properties. Then we have seen conventional loan programs require you have a 680 to put down 3%, then 5% down.

Now we have just seen 5 of the mortgage insurance companies left require you have a 700 or better credit score to be eligible for mortgage insurance, and with that you will have to put 10% down. So as it stands I would expect that soon we will see mortgage insurance on primary residences come to a crawl as well.

This will put us back to the model of 20% down on conventional loans. Or with great credit you may be able to get a first mortgage at 80% and a second at 10% with a 10% down payment (which gets you around mortgage insurance). And if you don't have it, then you will be left with 3.5% down and going F.H.A or VA on your home loan. Not that , that is too bad of an option as we are still seeing 5% rates for F.H.A and VA loans today.

I don't feel this will be a permanent position for primary home loans, but for quite a while until the mortgage insurance companies stop bleeding money from foreclosure claims.