The extended home buyer tax credit is soon to come to an end. Back in November 2009, the Senate and House passed a bill  (the House vote was 403-12) extending the first-time homebuyer tax credit through mid 2010 so that buyers can take advantage of a monumental tax credit from the U.S. Government. The time is running out for qualified buyers. Take advantage of the give-away while you still can.

Here’s a rundown of the most recent criteria and details of the extended program:

First time home buyers (who are defined as buyers who have not owned a home in the past three years) may be eligible for a credit of up to $8,000.

New Buyer Categories
Along with first-time homebuyers, existing homeowners (or “repeat buyers”) who have lived in their principal homes for 5 consecutive years (out of the past 8 years) and are purchasing a new principal residence may be now eligible for a credit of up to $6,500.

New Income Limits
Buyers filing as single or head-of-household taxpayers can claim the full credit if their modified adjusted gross income is less than $125,000. Married couples filing joint returns are eligible if their combined income is less than $225,000. Single or head-of-household taxpayers who earn between $125,000 and $145,000, and married couples who earn between $225,000 and $245,000 are eligible to receive a partial credit.

New Dates
Many news outlets are referring to the credit as being extended through May, others are referencing June as the deadline. Specifically: to be eligible, binding purchase agreements must be signed by April 30, 2010 and deals must be closed by June 30, 2010.

New Guidelines for Qualifying Homes
All homes with a purchase price of less than $800,000 qualify. Vacation home and rental property purchases are not eligible.

The Credit is Refundable
If the amount of income taxes you owe is less than the credit amount you qualify for, the government will send you a check for the difference. For example: a first-time buyer qualifying for the full $8,000 credit who owes $5,000 in federal income taxes would receive a $3,000 refund. Qualified home buyers can take the tax credit on their 2009 or 2010 income tax return.

The tax credit does not have to be repaid unless the owner sells, or stops using the home as their principal residence, within three years after the date of purchase.

All spheres of the housing industry are very excited about this breaking development! With rates still hovering at historic lows and a renewed extension on this historic tax credit, now is the time for first time homebuyers to consider entering the market!

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Choosing the right lender for your home purchase is vitally important. But are you prepared to be the right loan candidate in today’s new lending world? Oftentimes during the loan application process, applicants try to be the best candidate possible by painting the most optimistic picture about their debt, credit and affordability goals.

While it’s important to put your best foot forward, it’s even more important to be honest, open and forthright with your mortgage adviser so that he or she can accurately and effectively customize your mortgage and financial plan. Think of it this way: the better the information you give, the better the product you will get!

With that in mind, here are a few things that will help move your loan application forward and give you the best chances for success:

Be open about your entire debt portfolio.
Student loans, car loans, small business loans, personal loans and credit cards are some of the most common and high profile elements of a “debt portfolio.” Associated payoff amounts, loan terms and payment histories directly affect your credit worthiness.

It’s important to divulge the entirety of your debt portfolio so your mortgage adviser can guide you through the loan application process. Surprise debts can slow down the process and could jeopardize a potentially great loan!

Know your credit score.
In a challenging lending market, your credit score is one of the most important factors in determining your credit worthiness. For the potential lender, it’s the most accurate demonstration of your debt to income ratio and your ability to pay down debt effectively and on time.

Your mortgage advisor will check your score with a “merged” report from all three credit rating agencies – Equifax, TransUnion and Experian. This gives you the most accurate overlay of credit information – and will eliminate any potential hiccups!

Express your lifestyle intentions and financial goals.
People buy homes for many different reasons. Some may purchase a single-family home in order to raise a family while others might buy a condominium with the intention of buying a house a few years later. Still, others might buy a townhome purely for long-term investment purposes. No matter the reason, it’s important to express your intentions to your mortgage adviser to help them guide you to the appropriate loan package.

For instance, if you’re a newly married couple planning to raise a family, you may be looking to establish good credit knowing that you’ll quickly outgrow your first condominium. Hence, a more aggressive, variable rate loan program might best serve your short-term needs. A 5/1 ARM, for example, keeps your interest payments low for the first few years of wedded bliss – making it easier to buy a home when the tots arrive!

Gather the appropriate documentation prior to application.
The loan process takes a little longer than it did a few years ago. And since most loan locks last for 30 days, it’s a good idea to have all of your documentation at the ready. That way your mortgage adviser can strike when fluctuating mortgage rates are most favorable to you and your needs.

So what exactly do you, the borrower – and co-borrower, if applicable – need to have on hand?

1. Recent paystubs
2. Two years of year-end W-2’s
3. Recent bank and asset statements (Note: be sure to include all pages. Believe it or not, this includes the one that says “this page intentionally left blank.”)
4. A copy of your driver’s license
5. Copy of purchase agreement (if applicable)

Try to get the cleanest copies of all your documentation. A smudged, blurry or faded copy or fax will slow things down!

These items will help you prepare for the loan application process.

If you have any questions or wish to get started in earnest, call your PERL Mortgage adviser for a free, in-depth consultation.

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These days, appraisals in the mortgage industry are taking center stage. With lending guidelines changing on a daily basis, many deals are driven by loan-to-value ratios, which are first and foremost defined by the appraised value of the subject property. On this edition of the podcast, I sat down with Tom Oles from 1st Executive Appraisal Services to discuss this topic — and how home values in Chicago can differ, even if they’re in the same building.

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