Close by June 30th to Claim the Federal Tax Credit

If you’re closing on your home this June, you may be eligible for the federal home buyer tax credit.

June 30^th is the closing deadline for this tax credit, so there will be a lot of people trying to close on their homes. That means some serious volume at your local lender, with underwriters who are struggling to keep up with all the loan approvals.

Long story short: there might be some unlucky home buyers who try to close in time for the tax credit, but end up slipping into July. You don’t want to be one of those people.

We put together a list of tips for our clients who are trying to close in time to qualify for the tax credit. Here’s what we came up with:

1. Have all of your mortgage approval documentation ready. Put them in an easy-to-transfer electronic format, such as PDF. Keep these files ready on your desktop, a zip drive, or uploaded to an email account.  This documentation includes: pay stubs, W9s, tax returns, bank statements, employment letters, stock positions, ID, and any other information required by your lender.
2. Make sure your bank has ordered and processed your appraisal. Also, be sure that your loan file is in process with underwriting.  An appraisal can take anywhere from a few days to over a week and no loan is ready to close until it has been approved by your lender.
3. Contact your loan officer daily. Be a “squeaky wheel” to get your loan closed. The squeaky wheel gets the grease, and in this case the grease happens to be worth several thousand dollars.
4. Keep your agent in the loop. It’s your agent’s job to keep the process moving and to look out for your best interests. If your agent is napping on the job, nag them. Nicely. But nag them.
5. Move your money around now, and do not take out any new lines of credit.  No new loans, no new cars, no new credit cards, and no new major purchases. New credit = changes to your credit score. Changes to your credit score = your lender’s underwriter starting all over again. The underwriter starting all over again = bad.
6. Schedule your closing as soon as possible. You won’t be able to schedule closing until you get the final underwriter approval from your lender. Your lender should tell your agent as soon as this happens, but don’t take any chances — call your agent to make sure the info went through. Once you have underwriting approval on your loan, work to get your closing date set as early as possible. You want to have at least a two-day buffer before June 30^th, but a week is even better.
7. Perform your final walk through at least 2-3 days before closing. Make sure everything that was supposed to be fixed post-inspection was actually fixed. Also, make sure no new damage popped up in the meantime. This is especially critical with FHA loans, which can be rejected unless the FHA’s standards of livability are met. For example, we’ve had clients who needed to paint a set of stairs or replace rotted wood before their FHA loans were approved. Not the sort of thing you want to be doing on June 29^th.
8. Stay calm and collected. With a little planning, attention to detail, and teamwork with your agent, you should have no problem closing in time to claim the tax credit.

The New California Home Buyer Tax Credit

We’ve received a lot of comments and questions about our post on the new California Home Buyer Tax Credit. We’ve updated the post to clarify a few points and answer our readers’ questions.

By now, I’m sure most of you have heard about the extension of California’s $10K home buyer tax credit, which Governor Schwarzenegger signed into law on March 25. I’ve had a couple clients ask me about this, so I thought I would pass some info on to our Sweet Digsters.

Here are the highlights:

The program:

• California plans to spend around $200 million dollars to fund this tax credit.
• This is twice as much funding as the state’s previous home buyer tax credit, which was rolled out in March 2009 and exhausted by July 2009.

Who is eligible?

• The home buyer must be a California taxpayer.
• There is no limit on the income of the home buyer.
• The program is available to both existing homeowners and first-time home buyers.
• Current homeowners are eligible only if they buy a newly-built home.
• First-time home buyers are eligible whether they buy a newly-built or existing home.
  • To be a first time home buyer, you cannot have owned a home anywhere in the world during the three years prior to buying your new home. If you’re married, that applies to your spouse as well.

How much is the credit worth?

• The tax credit is worth up to 5% of the purchase price of the home, or $10K, whichever is less.

How does the home buyer receive the tax credit?

• The payment is credited against the home buyer’s annual CA state income tax.
• The total payment will be spread evenly over three years.
• If you qualify for the full $10K, you’d get up to $3,333 per year – but only if you pay at least that much in annual CA state income tax.
  • If your CA state income tax is $4,000 a year, you get a $3,333 credit against that amount, effectively lowering your state income tax to $667.
  • If you owe less than $3,333 per year in CA state income tax, you’ll receive a tax credit only for that amount. The extra will not roll over into the following year’s payment.
  • The credit will begin to be applied to the tax year in which the home was purchased. If you buy your home in 2010, the tax credit will begin to be applied against your 2010 taxes.
  • You cannot apply the tax credit to your 2009 taxes, even if you file your 2009 taxes after you purchase your home.

What’s the deadline for claiming the credit?

• Buyers of existing homes must close escrow between May 1 and December 31, 2010.
  
• Buyers of new homes can either:
  • Close escrow between May 1 and December 31, 2010, or…
  • If they are unable to close escrows during that time, they can reserve a credit by entering into an enforceable contract between May 1 and December 31. They must then file the proper paperwork with the tax board and close escrow by August 1, 2011.

What types of homes are eligible?

• Eligible home types include:
  • Single family homes
  • Condominiums
  • Units in a cooperative project
  • House boats
  • Manufactured homes
  • Mobile homes
• There is no price limit on the home purchase.
• A home constructed by the taxpayer is not eligible, since the home has not been “purchased.”

Can the new CA tax credit be combined with Federal Home Buyer Tax Credit?

Yes, but the window is very small. You will need to have your contracts signed by April 30, and you must close escrow between May 1^st (when the California program begins) and June 30^th (when the Federal program ends). The two programs combined could be worth up to $18K in tax credits.

However, remember to think carefully before diving in on a home purchase, regardless of any available tax credits. Buying a home is a major financial commitment. Don’t be lured into making a rash decision because you’re worried about missing out on “free” money. Instead, make sure that buying a home – with or without tax credits – is in your best long-term interests.

You can read more about the new California home buyer tax credit here.

Here’s the full language of the bill, AB 183.

Here’s California’s official website on the new home buyer tax credit.

–Brad Le, Redfin agent serving Silicon Valley and San Jose

Now We’re Showing More Homes for Sale, Even Faster!

Redfin’s database of homes for sale just got more comprehensive and faster in the greater LA area. Before, we got homes for sale directly from CLAW, which serves Los Angeles County, and MRMLS, which serves the Inland Empire and the South Bay. Now, we get those listings even faster from CARETS, (California Real Estate Technology Services), a larger database of Southern California Multiple Listing Services that real estate brokers use to list homes for sale.

Here’s what changed:

• Updated on the hour, every hour: We get updated listings from CLAW every hour. Before, we only could update them once a day.
• More homes for sale: We just added 145 more listings from CLAW and 217 more from MRMLS that we previously couldn’t show. There’s one catch: to see all the details for these homes for sale, MLS rules require that you sign in with a Redfin account or register with a verified email address before we can show you all the information.
• More amenities: Before, we couldn’t tell you whether the home has wood floors, if there’s a fireplace, whether the kitchen’s got marble counters. Now we can show all these details.

We plan on switching over even more Southern California MLS’s in the near future.

Questions about the updates? Just comment below or ask a question in our website forum.

3 Tips for Winning with an FHA Offer

We’ve seen a lot of posts in our Inland Empire Real Estate forum from FHA-qualified buyers expressing frustration about losing out to all-cash offers in multiple offer situations.

Our partner agent Tyson Robinson recently posted in our Inland Empire forums about his recent client’s successful offer with an FHA loan. Tyson was even able to get his clients money back for closing costs. Way to go Tyson! Every situation is different and your mileage may vary, but check out Tyson’s tips below for how to put your best foot forward with FHA financing.

Redfin Partner Agent’s Tips for Making a Successful FHA Offer

• Be ready: In addition to knowing what you want and where you’re looking to live, you need to have all your ducks in a row. Make sure your pre-approval, proof of funds, earnest money deposit, and credit score documentation are finalized. Put them all together in case your agent needs them with the offer.
• Be quick: That often means making an offer the very same day the home is listed. The goal is to move first and get get your offer accepted by the listing agent before other buyers have a chance to react.
• Be strong up front: Your goal is to get your first offer accepted. If you want to be quick (see above) there’s no time for counters. So lead with your best offer for that home.

Is anyone else who’s had success with an FHA offer willing to share his/her tips and tricks?

Best of luck to all the FHA buyers out there!

Welcome to the Inland Empire Blog!

We’ve got Orange County, San Diego and Los Angeles covered, but figured the Inland Empire deserves a blog all its own. We’ll be posting tons of data on the local market including the largest sale-to-list price discounts by zip-code, monthly neighborhood price reductions, and much more. If you haven’t already, check out our Inland Empire Real Estate Forum to chat with other real estate junkies in the area.

Sign up to receive Inland Empire updates via email or RSS in the upper right hand box on this page. And as always, thanks for using Redfin!