Real Estate Investing

I’ve been reading with a great deal of interest the FAQ’s provided by the National Association of Realtors regarding the expanded tax credit for existing homeowners who buy something else.  I am working with a couple of buyers now - and my sister is thinking about buying again after just selling her home - who have lots of questions.  For my buyers:

Can the home already have been sold and some time passed to qualify when buying again?  The answer is yes.  If the new home buyer has owned the same home for at least five consistent years, they may qualify for the $6500 tax credit.  So if they sold their home two years ago and have been renting since, but owned for five years before selling, they retain their eligibility.

What if the seller owned one home for four years, then another for three?  The buyer may NOT be eligible for the tax credit in this case because the ownership must be for five consecutive years.  I’d advise anyone in this situation to consult with the IRS to clarify if this is the case, but that’s how I’m reading the FAQ’s.

Is there a minimum purchase price on the new home?  If haven’t found where there is a minimum purchase price yet, but the maximum is $800,000.  And my own thoughts… if you can afford an $800,000 home, then you don’t really need the lousy $6500 tax credit, do you?  Yeah, I didn’t think so.

You need to be under contract no later than April 30th and close by June 30, 2010 to get the tax credit.  Happy house hunting!

First, I want to express my sincere gratitude to all the men and women who have served in the Armed Forces of the United States.  I grew up an Air Force brat, so I know the sacrifices made by our soldiers, airmen, sailors, and marines.  They have to be ready with just a moment’s notice to defend our country.  They often serve overseas - far away from home and loved ones.  They are also sent on short-term missions the coincide perfectly with holidays.  Many have been injured, killed, or mentally wounded.  Others have been more fortunate.  But ALL OF THEM are heroes, whether they’ve served in wartime or in peace.

Fortunately, veterans are eligible for VA loans if they served on active duty - they must have been discharged under conditions other than dishonorable and must have served during or after World War II.  According to Mortgage 101,

Veterans with service only during peacetime periods and active duty military personnel must have had more than 180 days active service. Veterans of enlisted service which began after September 7, 1980, or officers with service beginning after October 16, 1981, must in most cases have served at least 2 years of continuous active duty…

The VA does not actually fund the home loan, but it guarantees the loan on behalf of the borrower so a lending institution is more willing to lend.  The U.S. Department of Veterans Affairs says,

When VA refunds a loan, the loan is purchased from the private lender. VA only refunds a loan when the veteran has had problems making the payments due to circumstances beyond his or her control, the problems have improved so that payments can now be made or will be in the near future, but the loan holder is not willing to wait before taking action to terminate the loan. Refunding is rare because most lenders prefer to work out the problems, if at all possible, rather than selling the loan to VA and thereby giving up the right to future income from that loan.

Loans are transferable - as long as the person taking it over meets the same qualifications as the original borrower.  The VA will also require the house being purchased to be livable - it must have heat/air, flooring, finished walls, and the ability to cook.   A VA appraiser will visit the property prior to funding to be sure the requirements are met.

If you’re a lender or a Realtor, be sure to mention the availability of VA loans to your veterans.  If you’re a veteran,  take advantage of this government benefit there to help you.

Again, my gratitude to all of our veterans and current service members.

For some people, foreclosure doesn’t mean they’ll be losing their house.  Fannie Mae is offering a Deed for Lease program for people where people may rent their homes back from Fannie Mae for up to 12 months.  In return, they hand over the deed rather than going through foreclosure.

According to Miranda Marquit over at Loan Shak, there are benefits and problems,

These might be an elegant solution for those who are desperate to stay in their homes rather than lose them to foreclosure. However, it is important to note that if you participate in this program, you will no longer own your home. The money you have put into so far is basically gone, and when you pay your lease, it will be like you are renting again. Although, there is a strong possibility that you will avoid the credit stigma that can come with foreclosure.

When the option is to ruin your credit score and live on the street, I think it’s a pretty good choice for some people.  But not everyone will be eligible.  Fannie Mae says,

To participate in the program, borrowers must live in the home as their primary residence and must be released from any subordinate liens on the property.  Borrowers or tenants interested in a lease must be able to document that the new market rental rate is no more than 31% of their gross income.

Once a property is sold by Fannie Mae, the lease is assigned to the buyer who may then continue accepting rent from the former owner or ask them to find another place to live.  Meanwhile if it keeps a roof over someone’s head for another year and all the other planets line up, it sounds like an excellent option.