IRS funded Orlando Down Payment Assistance

Okay, we all know that the loss [unless something changes] of Ameridream and Nehemiah is going to stifle the first-time buyer’s ability to jump in the market, do we not?

Well… maybe not so fast. What about the IRS-Funded Down Payment Assistance?

I am talking, obviously, about the new $7500 Tax Credit for First-time home buyers. How do we position this so that buyers can legitimately see the benefit and be willing to re-engage.

First things first.

What is the difference between a Tax Deduction and a Tax Credit

Tax Deduction –The benefit is relative to the tax bracket that the last dollars of your income falls in. For example, if you had a $7500 tax deduction in a 25% bracket, the realized benefit would be $1875.00 [7500 x .25 = 1875]

Tax Credit – A dollar for dollar reduction of your tax liability. If you owe $4000 in taxes, a $4000 tax credit, would wipe it out completely and any taxes you had paid through your withholding would be returned to you.

The Example

Now….

1. Assuming the tax credit is coupled with FHA financing [what isn’t these days?], they will still need the 3% down at the closing table. This can still be a gift. Imagine this …

[Ring… ring… Hi, Mom? I know you haven’t heard from me since your last birthday… I hope you got my belated card. Sorry I couldn’t make it over, but Spike had diarrhea. Listen, anyway… we were thinking about buying a house…]

2. Lets say that Mr. and Mrs. Firsttimebuyersonsteinburg, through their withholding out of their w-2’d job, end up having $3750 as a tax liability for the year. Well, at the time of their tax-refund, that $3750 would be returned to them as a “check from the gov’t”. [Sorry for the quotes, don’t get me started on that.]

3. Now with that $3750 in hand, they can either thank Mom & Dad by gifting the money back, more creatively sending them on a weeks cruise or something, or in many cases…likely most… keep it.

The end result, however is that they still get the 100% financing… they just have to wait for the $$ to come full circle.

Just a thought.

FYI: Now, just because seller-assisted DPA is going away, it doesn;t mean that there is still not other things available.  Here locally, the SHIP program is still something that people turn to, in fact, Heather Joubran of Re/Max Central Realty is one of those that goes above and beyond for her clients… read the story of what she recently did.

Chris the Implementer

P.S. Want to do what YOU can to help save DPA? Visit DPA Groundswell.

Chris the Implementer

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Mortgage Chili Blog

“No” Vote on bailout… what happened to Orlando Mortgage Rates

On Sept 29th, the U.S. House of Representatives whooped up on the the $700 billion “Bailout Bill”, surprising Wall Street and the rest of the world for that matter.

The Dow responded by falling an astonishing 777.68 points — its largest one-day loss in all U.S. history.  The media, in prime fashion, did a great job in over reporting that… but guess what they missed? [Gee, have they over-reported anything else…say…over the last 3 years!! LOL… sorry pet-peeve of mind and how they scare consumers, but I digress.]

What they missed, however, is how the “No” vote created a terrific opportunity for Orlando mortgage rate shoppers.

Throughout the day Monday,money fled the tanking stock market and most of it ended up getting parked in the relative safety of government-backed bonds which includes, of course, the mortgage bonds. This phenom is called, “Flight to Quality”. This rising demand for mortgage bonds caused rates to fall.

To investors, both institutional and on street level, the stock market represented extreme risk and bond markets represented comparative safety… Translation: Rates get better.  Media seemed to miss that…. huh.  So, when market sentiment changes, as it did on Monday, Wall Street players often shift their dollars from one place to the other. This is why Monday’s stock sell-off was good news for Orlando mortgage rate shoppers — the added demand for “safe” securities drove down rates.

Mortgage rates were about about an eighth-percent less Monday.

Now, Tuesday, mortgage rates are opened flat, Then it got u.g.l.y.. Mortgage Backed Securities fell [fell is bad for rates, btw] back to where they were in the beginning of September… erasing the benefits gained.  In today’s volatile market, you need to be able to move quick… or that rate you saw…WILL be gone.

If the new-look bill is viewed as favorable to U.S. businesses without harming taxpayers, expect stock markets to improve and mortgage rates to rise. If the bill fails to accomplish that goal, however, expect mortgage rates to improve.

Quick sidebar… re-looks at this kinda stuff make me nervous.  When has a Bill that didn;t get enough votes, get smaller, in order to get more people on-board?  Never… they add more pork to it to convince other to vote.  Ughhhh.

Other Articles of Interest:

$7500 Tax Credit

Is DPA… DOA?

Lowering your rate EVERYTIME rates go down…

Mortgage Chili – Is DPA… DOA? Should it be?

OMG! Now what.

First the gov’t takes away down-payment assistance and now it wants to give it back?

Honestly, I have mixed emotions about this.

One one hand, it could be the shot in the arm that the housing market needs. Right now the industry is teetering on the influx of the First-Time Home Buyers. Move up buyers can’t move until the FTHB buys their home and the Dream home buyers can’t move up until the move-up buyers buy their home.

In essence that first domino must fall… butttttttt, at what cost?

The downside of the DPA programs is that the default rate on those loans was over 300% higher… don’t fool yourself… this does effect everyone in the end and might have more to do with our current situation than may be able to be measured.

I guess, being intellectually honest, the reimmergence of DPA, if in fact it makes it through all the hoops, may be a mixed bag at best.

Sure, having the new folks enter into the marketplace is necessary, but what is the long-term cost??

My advice to those that are reading this and may personally benefit from the new DPA, please do not let some smooth-talking mortgage professional… uh person… get you in over your head.

The future rests on it, and only time will tell.