$8,000 First-Time Homebuyer Tax Credit

Disclaimer:

The following $8,000 First-Time Homebuyer Tax Credit Q&A is from a RealtyTrac.com email dated June 29, 2009.

Q&A

When do I need to purchase to qualify?

If you buy a home between Jan. 1 and Dec. 1 this year and close escrow during these dates, you will qualify for an $8,000 tax credit - as long as it is your primary residence and you meet the simple requirements.

How does the law define "first-time homebuyer"?

The law defines "first-time homebuyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase.


What are other requirements to qualify?

All U.S. citizens who file taxes are eligible to participate. An income limit of $75,000 a year for individuals and $150,000 a year for joint filers also applies.

How do I apply for the credit?

Taxpayers should use IRS Tax Form 5450 to claim the first-time homebuyer tax credit.

Does the credit have to be repaid?

No. Unlike a similar tax credit passed in 2008, this $8,000 tax credit does not have to be repaid to the IRS.

Can I use the tax credit toward a down payment or other closing costs?

Yes. An announcement made May 29 allows the tax credit to be used toward purchase costs of a home, including down payment in some cases. This can be done one of two ways. First, buyers using an FHA-approved lender can sell their anticipated tax credit to the lender and use the proceeds to immediately apply the tax credit to any down payment above the minimum down payment of 3.5 percent required with FHA-insured mortgages. Second, buyers who receive financing through state housing finance agencies and certain non-profits will be able to use the tax credit for their down payments via a tax credit advance loan that does not result in any cash back to the buyer.

Source: RealtyTrac.com

Today's Economy

If you have been reading the blog posts for the past few days, you remember me talking about saving, creating a budget, the importance of having excellent credit scores, and having the right mortgage. With the condition of today's economy, it is critical to have a financial plan for you and your family. In regards to saving, many experts now are saying that you need to have 9 to 12 months saved for monthly expenses instead of the usual 3 to 6 months. Again, a way to save is to create a budget and account for every dollar that is being spent on a monthly basis. Over the last few months, the housing market has changed tremendously. With that being said, it is important to work on your credit scores to get that excellent credit. If you are not doing so, start paying your bills on time and pay down debt. Last but not least, it is imperative to have the right mortgage. If you have an adjustable rate mortgage and your payments are increasing, now is the time to refinance to a fixed rate mortgage. CALL EDJ TODAY!!! If you are looking to buy or sell a home, CALL EDJ TODAY!!!

If you have any questions or comments, please contact Edmond Donte' James at 832-647-1769 or 1-877-469-3353 or email me at donte@RealEstateByEDJ.com.

Escrow Accounts

When you have an escrow account, the mortgage company will pay your property taxes and homeowner's insurance for you. When you make your monthly mortgage payment, a portion of the payment goes towards your escrow account. If you look at your statement, you should have a breakdown of how much goes into the escrow account. Always know how much is in your escrow account. If your escrow account goes into the negative, your mortgage payments will go up. The reason your escrow account is in the negative is because you did not have enough money in the account to cover the property taxes and/or homeowner's insurance when the mortgage company made those payments. As a result, the mortgage company increases your monthly payment to make up the difference in the escrow account, and to make sure you have enough money in the account when your taxes and insurance are due again. If you notice that there is a shortage in your escrow account before the mortgage company pays your taxes and insurance, I would recommend that you send in extra money to be put into the escrow account. On the other hand, if you have an overage in the escrow account, the mortgage company will either refund you the overage or keep the money in the escrow account and decrease your monthly payments.



Should you have an escrow account? If you are good with money management, then you can actually set up your own escrow account in the form of a savings account and pay your taxes and insurance on your own. If money management is not one of your strengths, then I would recommend having an escrow account. That way, the mortgage company will pay your taxes and insurance for you, and you do not have to worry about coming up with money when the taxes and insurance are due.

Your 2009 Progress Report

Did you make any New Year's resolutions for 2009? If so, now is a great time for you to do a progress report. In the previous blog posts, we have talked about establishing excellent credit, creating a budget, buying your first home or investment property, having the right mortgage, avoiding foreclosure, and a number of other topics.

With that being said, I have a few questions to make you go HMMM!!! Have you worked on getting excellent credit, have you been sticking to your budget, have you purchased your first home or investment property, and do you have the right mortgage? I almost forgot the most important question, have you sent any referrals to EDJ? If you answered "No" to any of these questions, then we have a lot of work to do the second half of 2009. The great news is that the year is not over, so get in the game and make it happen.

If you want "The EDJe On Real Estate", please contact Edmond Donte' James at 832-647-1769 or 1-877- 469-3353 or email me at donte@RealEstateByEDJ.com.

What Is Wealth Strategies?

The EDJ Philosophy is an eight step plan to wealth strategies. The first strategy to building wealth is paying your tithes. My belief is if you pay God what He is owed, He will in return bless you, your family, your business, and your career. Next, live on a budget. We talked about creating a budget earlier. If you have a budget, then you have a sense of what your monthly household expenses are, and how much discretionary funds you have available at the end of every month.Thirdly, pay-off all your debts excluding your mortgage. We will get to paying off the mortgage later. If you have a budget, then you can use some of those discretionary funds to pay-off your debts.

Fourth, start a savings and retirement plan. Once you pay-off your debts, you can use that extra money to contribute to a savings and/or retirement account. Fifth, you should have good to excellent credit. If you have paid your debts off, this will help your credit scores, which brings me to my sixth strategy, having the right mortgage. How do you get the right mortgage? First you call EDJ Mortgage & Wealth Strategies. With good to excellent credit, you will get a great interest rate. This will save you tons of money in interest. Another thought about having the right mortgage, you can get a great deal on the purchase price of a property. But if you get the wrong mortgage, this will totally negate the fact that you negotiated a good deal. The seventh strategy is paying off your mortgage early. Ways to pay your mortgage off early are to do bi-weekly payments, or make extra payments towards the principal. If you have been following EDJ's wealth strategies, you can use the extra money that you have to make extra payments towards the principal. Edmond Donte' James is a realtor and mortgage broker that does not want you to be broke because of your mortgage.

Finally, you should acquire real estate. The majority of the successful financial people that I know and read about have real estate in their portfolio. You can either acquire real estate and sell it for a profit or have rental properties. Again, if you have been following EDJ's wealth strategies, you should have good to excellent credit which will allow you to obtain financing to get these properties, and pay them off early.

This is EDJ's philosophy on building wealth. Call EDJ and let me give you that EDJe.

Advantages Of Home Ownership

The first advantage of owning your home is the fact that you achieve that great "American Dream" of home ownership. As you know, home ownership is an important component to building wealth.

Secondly, there are also tax benefits to owning your home. The interest that you pay on your mortgage is tax deductible when you file your taxes every year.

The third advantage is every time you make your mortgage payment, you are gaining equity in your home because you are paying down your principal balance. In addition, most real estate appreciates, so this is another way to gain equity in your home. If you decide to sell your home, you will walk away from the closing with a profit because you have been paying your mortgage principal down every month and the value of your home has increased from when you first purchased it.

Finally, when you own your home, you are making an investment in your community and an investment in your financial future. This investment will assure you a great return, but to guarantee that great return, you must first obtain the right financing. To get the right financing and the best deal for your home, call EDJ today at 832-647-1769 or 1-877-469-3353!!! June is a good month to start building your wealth. CALL EDJ TODAY!

Creating A Budget

My first question to you is, how much do you spend each month on household expenses? If you don’t know, I would recommend that you create an excel spreadsheet that lists all your expenses (i.e. mortgage/rent, car note, credit cards, insurance, student loans, cable, electricity, gas, phone, cell phone, water, etc.). You should also be tracking how much you spend each month on each bill.

In addition to your household expenses, establish a monthly budget for your groceries and entertainment. Next, determine your total monthly household income. Now, subtract your total expenses from your total income (Hopefully this is a positive number). If this is a positive number, this is considered your discretionary funds. My recommendation is that you put a percentage or certain amount of your discretionary funds in some type of savings account. This savings account can be used for your emergency funds. Each household should have 9 to 12 months of monthly expenses saved in case of an emergency or life changing circumstance (i.e. sickness, losing a job, etc.).

If you are already doing this, CONGRATULATIONS! You already have “The EDJe On Building Wealth.” If you do not have a household budget, NOW would be a great time to start building wealth.

What Are Your Credit Scores?

What are your credit scores? I always tell my clients, just like you are supposed to have an annual physical, you should also check your credit at least once a year. Your credit scores follow you everywhere you go. There are even companies that pull your credit report before they hire you. If your credit isn’t good to excellent, it could prevent you from getting that job.

You have three credit scores from three different credit bureaus: Equifax, Experian, and Trans Union. The 3 reasons you need to review your credit scores are: 1) Make sure your identity has not been stolen. 2) Make sure everything is accurate on your credit report. 3) Know what your scores are so you can clean up your credit. Here are some of the ways to increase your credit scores: 1) Look for any past due balances on the credit report and bring them current 2) Pay off past dues and charge-offs within the last two years 3) Reduce all outstanding debt to as close to a zero balance as possible. If you are unable to pay all debt down, try to keep balances below 50% of available credit. For example, if your available credit is $1000, you want to keep your balance below $500, but keeping it below 30% or $300 would be even better. Also do not close existing accounts. 4) Too many inquiries for credit will negatively impact the score.

Certain low credit scores can hinder you from buying a home, but if you check your credit every year and dispute any inaccuracies on your report in a timely fashion, you can be assured of maintaining good to excellent credit scores. If you are seeking to purchase a home, your should acquire a credit report from Real Estate By EDJ. Knowing Your Credit Scores is the 1st Step toward purchasing your new home!