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Funds for a Handyman-Special and Fixer Uppers

Many times one of the best ways for a person to become a homeowner is to buy a fixer upper. A new buyer trying to get their first home often can get a great deal on a fixer upper, however often the purchase of a house that needs repairs is often a catch-22 situation, because the bank usually will not lend the money to buy a house until the repairs are made. Of course the repairs can’t be made (at least they should not be made by the buyer) until the house has been purchased.

Did you know that HUD has a program, called the HUD 203(k) that can help you overcome this obstacle by enabling you to purchase or refinance a property plus the cost of making the repairs and improvements in one mortgage. The FHA-insured 203(k) loan is provided through many of the leading lenders nationwide and is available to any individual who is looking to occupy the home.

The down payment requirement for an owner-occupant is typically 3.5% of the purchase price and repair cost for the property.

There are few key steps to follow when using a 203(k) loan:

·         Locate a fixer-upper and execute a sales contract, of course you should do this with a real estate professional. The contract should state that the buyer is seeking a 203(k) loan and that the contract is contingent on loan approval based on additional required repairs by the FHA or the lender.

·         The homebuyer next selects a FHA-approved 203(k) lender and arranges for a detailed proposal showing the scope of work to be completed, including a detailed cost estimate on each repair or improvement of the project.

·         An appraisal is then performed to determine the value of the property after renovation (ARV)

·         Borrower then passes the lenders credit worthiness test, and the loan is closed in an amount to purchase the house and perform all repairs listed in the repair cost. The loan will also include the allowed amount of closing cost as well as a contingency reserve of 10% to 20% of the total remodeling cost and is used to cover any extra work not included in the original proposal.

·         At closing the seller is paid off and the remaining amount of funds are placed into an escrow account to pay for the repairs and improvements during the rehab period.

·         Mortgage payments begin after the loan closes. The buyer can opt to have up to 6 months of mortgage payments placed into the cost of the rehab if the property is not going to be occupied during the construction / repair period. However they cannot exceed the length of time it is estimated to complete the rehab.

·         Escrowed funds are released to the contractor during construction through a series of draw request for completed work. To ensure completion of the job, 10% of each draw is held back, this money is paid after the lender determines there will be no liens on the property.

Here are some common mistakes to avoid

There is no doubt that when you turn on HGTV, A&E or any of the other channels that follow “flippers” they make it look so easy. Investors of all levels from first timers to seasoned vets buy run-down houses, fix them up and sell them for huge profits. The term flipping has been coined for this process and make no mistake about it… many millionaires were created doing this especially during the recently passed real estate boom.  So yes it can be lucrative and contrary to many stories out there now it is still lucrative WHEN DONE CORRECTLY! Go in blind and hopefully the only thing you lose is the shirt on your back.

We sat down with several other seasoned “flippers” and came up with some of the most common mistakes made by novice investors and decided to share that list with you in hopes that you are able to avoid them on your flipping endeavors.

Not knowing enough about the market:  The biggest mistake made… not understanding where you are buying; if you don’t know about the comparable homes in the neighborhood and what they sold for you cannot make an educated decision on whether the investment property you are considering buying is a solid deal. If you don’t buy at the right price you have a much harder time making a decent profit.  Another important detail many investors over look when accessing the neighborhood is the days on market. How long are properties taking to sell? Until it sells it’s your expense and each day lessens your profit.

Over-improving the property:   Yes, there is little debate that if you update the kitchen and bathrooms you are generally going to increase value. However you can quickly get in over your head especially when you start making structural changes to the property or putting upgrades that do not fit the neighborhood demographics.  Typically paint, new carpet and cosmetic updates to the kitchen and bathrooms may be all you need to make a profit. Keep in mind if you improve your flip to the most expensive home in the neighborhood you may have a problem selling it.

Decorating to your tastes instead of buyer’s tastes:  I love bold colors and contemporary decorating but the safest choices to make when trying to appeal to mass amounts of buyers is to stay neutral. One our first flip I remember spending much money on little “designer” touches that; while they looked good they did not add to our bottom line profit, in actuality they took away from it. Needless to say they were left out of every flip after that one.

Under-Budgeting:  Golden Rule… Over estimate the cost on everything! It’s better to come in high and have money left over from your repair budget than to come in low and searching for additional money. Oh yeah and by the way when you under estimate you also give yourself a “false” profit, be upfront with yourself and when you come in under your budget you’ll have a bonus to your end profit! By the way while we are talking about budget here, do not forget to spend some of your budget on curb appeal. I cannot stress to you how big curb appeal is. If the inside is beautiful but the outside still looks like the Sahara desert you not going to get folks in the front door!

Indecision aka no exit strategy:  Here is a cold harsh fact… If you don’t know what you want to do with a property as soon as you close your deal, or you dare go into it without having contractors already lined up, you are wasting your time!, and with flipping…TIME IS MONEY.

There are many reasons to going with a lease-option or lease-to-own deal when trying to become a homeowner. If you been turned down by banks or just don’t have the crazy amounts of cash they want you to use for a down payment, plus closing costs then lease options are an amazingly great alternative to get you to homeownership.

Another great benefit of lease options are you get to check out the neighborhood and occupy the home before you decide to buy it. And when you go with ASG Investments’, award winning Lease Option Program you have significant advantages given to you such as down payment and closing cost assistance. 

SO WHAT IS A LEASE OPTION or LEASE-TO-OWN AGREEMENT?

A lease-option agreement is both a lease that allows you to occupy a home as well as an option that allows you to purchase the home in the future at an agreed upon price.  Our program typically provides for 12-month, 24-month, and 36-month time frames and we work with you to get you ready to purchase that home when the time comes.

One of the great ways we get you ready for owning your home is through our MPC initiation (Monthly Payment Credit) where we take a specified amount of your monthly rental payment and apply it directly to your down payment. For example let’s say the monthly payment is $1800.00 with a $300.00 down payment credit (the amount is determined in your lease-option agreement) after just one year you would already have a $3,600 credit towards your down payment.

A FORMAL CONTRACT IS A MUST

Do not work with ANYONE who doesn’t want to formalize your agreement on paper; and when we say anyone we mean anyone from a family member to your best friend —get everything in writing. When you work with ASG Investments we sit down with you and go over the contract, make sure everything is clear to you and answer any questions or concerns that you may have.

With us you will always have the monthly payment, MPC (monthly credit), purchase price, expiration of option, and other contingencies like home inspections written in your contract. You will always get a copy of your paperwork for your personal records and we will always be available to you for assistance or to answer any questions; its part of the ASG commitment to YOU!

LEASE-OPTION IS NOT AN OBLIGATION TO BUY!

A lease-option should never force you to buy (hence the word OPTION) rather it is simply an opportunity to buy with the advantages of already knowing your purchase price, getting monthly down payment credit, as well as a chance to get settle into the house (kind of like a test drive of a car), interact with neighbors and neighborhood and most importantly you get time to get accustomed to the financial obligation that come with the house, like paying the utility bills and lawn care, etc.

You may wonder why you wouldn’t buy, well you may find out that you don’t like your neighbors or you may become disenchanted with the community itself, maybe your job relocates you, there are plenty of reasons as to why you may not do so. Being in a lease-option gives you the ability to quickly move on without worrying about selling a home you no longer want.

You should now have a better understanding of lease-options. So when you hear people tell you “oh there is no way you can get approved for a loan, and that’s the only way you can own a house” now YOU know better and also know that you have access to one of the industry leading lease-option programs when you work with ASG Investments!

Looking forward to helping you with you homeowner needs.

Regards,

ASG Investments, LLC

DID YOU KNOW THE GOVERNMENT IS GIVING AWAY AN $8,000 HOUSEWARMING GIFT FOR BUYING A HOME THIS YEAR? 

We know you have been watching what’s going on with the real estate market, right? Prices and interest rates are the lowest they have been in 37 years! Are you one of the many people who want to take advantage of this opportunity to buy a home? Great! You have made a wise choice! If you are serious about buying a home, keep reading…….How long are you going to keep renting and watching yourself waste money every month? When you pay rent, there is no investment in your own future. You need to buy a home so you and your family can have an investment for the future. You need a mortgage for the tax benefits as well. The government is giving you $8000 “housewarming” gift for purchasing a home this year.  Although the money can’t be used for a down payment, you can actually claim the home purchase on your 2008 taxes if you do an amendment, and therefore, you can get the money a lot sooner than you think. While YOU faithfully pay your rent every month, YOUR LANDLORD is receiving the benefits of homeownership from YOUR hard work. It’s time to invest in YOU! Don’t think you can afford a mortgage? After all, as a renter, you ARE paying a mortgage every month, just not your own. YOU need to receive the benefit of homeownership. Stop and do me a favor before you keep reading, go get a calculator, its o.k., I’ll wait………… got it? Good. Now, multiply what you pay in rent every month by 12. Example: $1650 a month in rent multiplied by 12 months in a year. What did you get? $18,000, $20,000, $30,000 or more? You didn’t pass out did you? Your answer is the amount of money you have given your landlord for his/her mortgage this year; I thought you said you didn’t have any money. Now you see why you don’t. Now, one more task, take the amount in rent you have paid this year and multiply that number by the number of years you have been renting that house. Example: $1650 a month x 12 months = $19,800 a year in rent. $19,800 x 4 years living in your rental= $79,200. That’s enough to pay for a small condo! Do you see what we’re getting at now? You can afford to buy a home; you just need to apply your money differently. THIS MONEY NEEDS TO BE GOING IN YOUR POCKET! Now is the best time to buy, prices are low and so are interest rates. As you know, the lower the interest rate, the lower the monthly payment! Get in now before the spring boom! O.k., so now we know how important it is to buy and we know now is a good time. Now we have to figure out HOW to buy, it’s easy, keep reading……….AS LONG AS YOU HAVE A JOB, YOU CAN BUY A HOME, THAT’S ALL YOU NEED, WE WILL TAKE CARE OF THE REST! Please don’t waste your tax return this year. Remember last year? The shoes, trips, cars….. What have they done for you lately? What investment did those items give you? This year, invest you tax return. Save it to help save the money you need to buy a home! O.k. now that we have the financial part of buying a home out of the way. Here are our 5 simple steps to buying a home. Trust me, it’s easer that in sounds.

STEP 1: Get qualified to buy a home. This means talking to a lender to see if your credit and income are sufficient to buy a home. It may seem backwards to shop for a mortgage before you shop for the house, but there are several reasons for doing this. First, you’ll find our how much you can borrow, which has a lot to do with how much house you can buy. If you have a credit union or bank you trust, start there. If not, we can refer a lender to you. If your credit is bad, don’t worry, we have a credit repair department to fix that. Once you are approved, you will get a form called a Pre-approval letter. This letter is very important, you need this letter so you can start looking at homes and so you will be taken seriously when you offer to purchase one of our homes.

STEP 2:  Come up with a down payment; without a down payment, you don’t own even a piece of the house. The bank owns the whole thing.

STEP 3:  Start house shopping! Make a list of what you want and need in a home. Also keep in mind your plans for the home. Example: Is this a starter home or a home I plan to stay in for several years?  We have lists of homes for sale that we can show you. I’m sure we can find the right home for you!

STEP 4: CLOSING DAY! You have done steps 1-3 and now it’s time for your reward! You are now a homeowner! Closing day consists of you and our team coming together to sign the papers to sign the home over to you.

STEP 5:  YOU GET THE KEYS.  It’s all over. The home is yours. CONGRATULATIONS!!!!!!!!!!!!!!! So, now we’ve covered all the basics for you, all you have to do is call to get started. Don’t wait on the side lines while everyone else is buying a home. Buy now while you still have the power! Take a look at what we have available and some of the most recent homes our clients have purchased @ http://www.asginvestments.com.

 And remember, SAVE, SAVE, SAVE! CALL 1-888-210-6134 TODAY!

Buying a home is the one of the largest investments most people will make in their life. There are many emotions and feelings that come into play when it’s time to make this decision from excitement to anxiety, fear and nervousness. Therefore there are a few things you need to make sure you are aware of to make this process as smooth as possible and make the overall experience a memorable one. Use our list of commonly made housing mistakes to avoid any regrets.

1. Doing it alone – Buying a home is a complex transaction involving many complex pieces such as the sales contract, inspection, title search, insurance, escrow, etc. This is not a journey that anyone should ever take alone regardless if this is your first home or your fifth home. Form your dependable team of family, friends and professionals, while the ultimate decision will remain with you it is good to get the opinion and advice of those you respect.
2. Buying at first sight – You may walk into a property and fall in love with it at first site and are 100% positive that this is the one. Don’t make that decision to quickly, make a list of your family needs, budget, and family wants then make sure that the house can accommodate these needs. You may have to sacrifice some things to get others but it should overall fit you and your family. Don’t forget to check out the neighborhood and the community before you buy, visit at different times of the day and the week to learn about noise, traffic problems and patterns. Regardless if you have kids or not check out the schools they play a huge part in your resale value.
3. Not getting pre-qualified and pre-approved – Being pre-qualified gives you a sense of how much you can afford if you are doing traditional lending. Being pre-approved means a lender has verified your information and will provide you with financing for a specific amount of money.
4. Overbuying – You may qualify for more, but can you afford to. You must take into account all your other expenses. Analyze your monthly obligations like debt, food, transportation, entertainment, savings, and miscellaneous and emergency.  The general rule used is to try and keep your mortgage payment to about 36% of your income before taxes. Don’t forget that you need to budget money for closing cost (typically 2% - 5% of your homes purchase price), plus moving expenses, decorating and maintenance. You should also allow for increase in bills like utilities and taxes.
5. Misplacing your trust – No matter how much you like the people you are working with or the fact that someone vouched for them, you must remember that this is a business transaction. Do your research as well
6. Relying on oral agreements - Make no mistake a written agreement will always trump a verbal one. No matter who you are dealing with you do not have a contract until it’s written on paper.
7. Skipping the fine print – Make sure you understand everything that you are signing before you pick up the pen. Take time to read the documents and ask questions. Always get copies of your mortgage papers.
8. Forgetting or betting on resale – Avoid buying a home that cost 50% more than neighboring homes and think buying the most expensive home on the block is a cool thing. This is not a good thing the lower home values affects your value and remember markets change.  It is important to buy your home at the correct home value.
9. Making an unconditional offer – Protect yourself from taking a house as is. You should always want to get a home inspection done on your home regardless if it is brand new or existing. Make sure that you can get adequate home insurance, and don’t forget that if you are doing traditional financing the lender will want an official appraisal done before they provide funds.
10. Having buyer’s remorse – Remember that no place is perfect. It’s a guarantee that you will get some surprises in your home. Don’t let these little blips spoil the entire ride and certainly don’t miss a great house trying to find the perfect house!

ASG Investments certainly loves working with home buyers to make this process as simple and smooth as possible. We have a large selection of homes to choose from and our staff is highly trained and experienced with working with first time home buyers to experienced home shoppers.

We have many financing options to choose from and we are sure we have one that can get you into a home today. Don’t wait any longer, the time is right now to buy call us 1-888-210-6134 or email us at Info@asginvestments.com

Because of the nature of real estate the trends that exist within it move and change much slower than other markets. Real estate trends tend to get moving in one direction for long periods of time until they reach a “Bubble” (as it’s commonly being called right now). When this inflection point is reached the balance of power changes, the other side of the table begins to realize that they are now the ones holding the cards and setting the rules. There usually are some big problems for the participants involved when these changes begin to take place, that problem… They usually don’t realize the changes are occurring. For instance in a seller’s market it usually takes a homeowner a year or two to realize and accept that the buyer is actually back in control now and that they must adapt their expectations and price to the buyers.

2006 was the height of the last seller’s bubble, where sellers were holding all the chips. The agent’s job was simple and there was no need for a marketing strategy other than list it on the MLS. Pricing the house for the realtor was really simple; look at the recent comparables and price their listing about 5% to 10% higher than the last one that sold. Then they sat back as bidding wars started and many offers came in above the already inflated asking price.  The belief was that prices were going to continue to go up and no matter what price a buyer purchased the house at it would be worth more very shortly afterwards. The laws of supply and demand are no exception here and since houses were in huge demand with little supply prices continued to increase.

This frenzy continued its course and buyers bought, and as they did the pool of qualified buyers shrank. Home prices remained inflated and a surplus of homes began to enter the market. Top this off with a shrinking pool of qualified buyers and soon sellers are forced to bring prices down. They must adjust realizing that those who could buy have already done so and there are fewer buyers on the market.

What we are currently in is without a doubt a buyer’s market; sellers are now competing with one another to get the attention of any buyer who is looking to buy a home. This causes home prices to drop, closing cost to be paid in full by seller; we have even seen cases where sellers agree to pay two months mortgage payments to us in order to off load the property. This is the time when many part-time real estate agents drop out the game, and those with experience are challenged with having sellers accept the reality that they are not going to get top dollar for their home right now.  Failure for a realtor to correctly educate their seller simply ends up wasting both parties time.

Sellers must realize in a buyer’s market getting top dollar for their property is highly unlikely, regardless of what comparable sales come in at, a buyer simply does not have to pay top dollar in this market. Even harder to accept for some sellers is if their home has some negatives such as repairs, outdated rooms, lack of curb appeal, etc they can expect offers 15% or more lower than recent comps. If a seller is stubborn in their way they will be stuck with the property, simply put there is no amount of marketing that is going to convince a buyer to overpay in a buyer’s market.

P.S. If you are a seller who really wants to sell your house don’t hesitate to call us today 1-888-210-6134.

P.S.S You can email us for more information at info@asginvestments.com

P.S.S: Buyers if you are ready to take advantage of the 2008 Housing Tax Credit and receive your $8,000.00 you need to call us today! @ 1-888-210-6134 or sign up here to get the free special report http://www.asginvestments.com/buyer-welcome.htm

I must confess I have an absolute passion for shoes.  Even my tagline suggest this … “Successfully making deals in heels”.  I wear heels everywhere, and I do mean everywhere.  To the grocery store, to football games to walk the dogs — you get my drift.  I was watching a TV show the other night and the topic was, “Are you spending less money than you make?”  This thought had me pondering and re-evaluating my passion for hours after the show ended.  Indeed I have over 100 pair of shoes, but would I say I spend more than I make just for this desire.  I quickly answered “no” and the wheels starting turning.  Although I have indulgence, I have to admit I have never (and I mean never) spent money that I never had.  The show showcased individuals and couples whose spending habits were out of control; consumer debt has risen astronomically over the past few decades, and it has contributed to weakened marriages, rising bankruptcies, and foreclosures.

Paying cash for a car, real estate, or even furniture is considered to be not normal. After a self-check, it started me to thinking about how others struggle with the principle of spending less money than you make.  One hundred years ago it was very hard to spend more money than you made, because credit was unbelievably hard to get, and it was considered shameful to borrow from someone else. Today, borrowing is a way of life. You are actually considered not normal if you don’t borrow money. So many people speak of it being easier to receive credit has made our lives better and given us more opportunities. I think that’s a boat load of crap. All it has done is given people the appearance that they are able to live a better lifestyle, but the added pressure paying numerous bills, living paycheck to paycheck, and fluctuating interest rates has most likely diminished the quality of life of so many people.

When it comes down to it, what makes you happy? Does having stuff make you a happier as a person? Being able to finance anything gives you the ability to have more stuff, but it does not make you happy. What makes us happy is maintaining healthy relationships with family and friends, being physically healthy, and working with a purpose in life. The size of your house, the brand of your car, and the technology of your television do not define who you are. Your personality, morals, and passions define who you are.

This may sound like I am getting overly philosophical about the topic on a TV show, but spending less than you make affects all aspects of your life. If you can sit down tonight and say to yourself, “I am going to take more personal responsibility with my finances”, you will immediately begin to see a change in the way you live, your attitude towards life, and the way you treat your loved ones. The problem is that most want to blame everyone else about why they’re struggling with money when all they have to do is look at themselves in the mirror to find the problem.

Are you ready to take responsibility of your finances? Let today be the day that you start taking control of your money and tell it how to behave.

By: Shonda Grier
ASG Investments, LLC

Over the weekend I got the chance to read a book entitled “The Present” by Spencer Johnson. It was a nice quick read with a wonderful message attached to it. The messages primary purpose was to give focus to the ways you take advantage of your present moments in life and do not let them slip away. Considering the tough times what many people are going through right now it’s very easy to focus on the negative events that have already occurred to only let the present time waste away as well.

So for those out there that might need a little inspirational reminder I thought this would be a nice one.

BE IN THE PRESENT
When you want to be happy and successful
Focus on what is right now
Use your Purpose to respond
to what is important NOW.

LEARN FROM THE PAST
When you want to make the present better than the past
Look at what happened in the past
Learn something valuable from it.
Do things differently in the Present

PLAN FOR THE FUTURE
When you want to make the future better than the present
See what a wonderful future would look like
Make plans to help it happen
Put your plan into action in the Present

Too often we sit and mope over things that have happened to us in the past and continue to wish that they would change. The fact is no one can rewrite history but we are all in charge of our future and we control that with the decision we make in the present. Mistakes will be made by all of us, they are a part of life that we must embrace. Remember the only bad mistake made is one we do not learn from and continue to make over and over again. What we need is a synchronized life… enjoy the past, use it for the present and plan for the future!

By: Antoine Grier
ASG Investments, LLC

We are very glad to hear from so many who found yesterdays part 1 very informative. Today in part two we break down the exact meaning to each qualification along with answering some of the most common questions that have been asked. We are sure you will find todays information extremely useful to you.

Part 2…

We have had tons of people emailing us asking if this tax bill is just a renewal of the one enacted by Congress in July 2008 and the answer is a BIG “NO”. There are a few key differences between the two and probably the most important one to you is that this new tax credit does not have to be repaid. The previous one (which is still available to those who may not qualify for this specific one) basically was an interest free loan that you had to pay back. This new credit is truly that… a credit, however the home being purchased must be the principal residence for the taxpayer for a minimum of three years or you will be faced with a recapture of the credited amount, and like all rules there are some exceptions that will apply to that.

Here’s some additional good news; participating in the tax credit is really easy and simple. All you have to do is claim your tax credit on your federal income tax returns for 2009. More specifically home buyers will complete IRS form 5405 to determine their tax credit amounts, and then claim this amount on Line 69 of their 1040 returns, that’s it nothing else to do not even a pre-approval or screening all you have to do is make sure you fit the guidelines that have been laid out under the tax credit (hopefully this is being accomplished with the reading of this article).

Looking back through the thousands of emails we received that prompted us to write this article there were two other very common questions being asked and they were, what types of homes will qualify for the tax credit and what does it mean when they say the tax credit is refundable? The first question has a simple answer and that is ANY home qualifies from a single-family, to an attached home i.e. townhomes and condo’s, new construction (regardless if by a builder or if you hire your own contractors to build a home), manufactured homes (mobile homes) heck they have even included houseboats. As long as it’s your principal residence it qualifies. Principal residence is determined identically to how you may qualify for the $250,000 / $500,000 capital gain tax exclusion.

Something else we wanted to make clear here before we move on; if you decided to have your home built by contractors yourself you still qualify as long as your first occupy the residence on or after January 1, 2009 and before December 1, 2009.

So what about the refund and what does that mean?  This simply means that the tax credit can be claimed even if the home buyer has little or no federal income tax liabilities to offset. In other words if there are not enough debts to cancel out the tax credit a surplus from the tax credit may remain, in that case the federal government would then send the home buyer a check for any remaining portion. So for example if a qualified individual expected a tax liability of $6,000 and had tax withholdings of $4,000 then without the tax credit the individual would owe the IRS $2,000 on tax day (April 15^th). However if the individual taxes advantage of this tax credit and is qualified for the full $8,000 then on April 15^th they would be receiving a check for $6,000 ($8,000 tax credit - $2,000 tax liability).

For those individuals who purchase their home under the mortgage revenue bond (MBR) program you can combine the two together this is another notable change from the July 2008 tax credit where you could not combine it with your MBR.  As some of you may know there is also a nice home tax credit for first time homebuyers in the District of Columbia but unfortunately you can only claim one.

Tax credit versus tax deduction, are these two the same? The answer is NO. A Tax credit is a dollar for dollar reduction in what you will owe on your taxes. That means if you owed the IRS $8,000 on tax day and qualified for the housing tax credit you would owe the federal government nothing. A tax deduction is subtracted from the amount of income that you are taxed. So in our previous example let’s assume are individual is in the 15% tax bracket and received the $8,000 tax deduction the individuals liability would be reduced by $1,200 ($8,000 x 15%) so your tax liability would be lowered to $6,800 ($8,000 liability - $1,200 deduction). As you can see there is a significant difference between the two, and I am willing to bet a million dollars on which one you would prefer to have; kudos to this administration for really taking the route of tax credit and bringing greater value to the home buyer.

Another interesting note of this tax credit is that home buyers do not have to wait until they file their 2009 tax returns to access this credit. As long as you qualify you are permitted to reduce your income tax withholdings. By doing this by the amount of the credit you will receive will enable you to accumulate cash by raising his/her take home pay. In turn you can take this money and apply it to your down payment. To do this you would need to adjust your W-4 through your employer. Be warned that if you do reduce your withholdings and do not qualify for the tax credit you would then be liable for repayment and possibly interest charges and penalties.

There are some additional rule changes that were made with the economic stimulus that you may be able to take advantage of like the tax-exempt bonds. There are a few states whose housing agencies are introducing programs that will provide short term credit acceleration loans that may be used to fund a down payment.  Check with your state housing agency to determine the availability of such programs. Too our knowledge Maryland has not finalized any such program as of yet, but we have seen a lot about Missouri currently implementing this program.

With regards,

Antoine and Shonda Grier
ASG Investments, LLC

1-888-210-6134
Info@asginvestments.com

A tax credit of up to $8,000 is now available for qualified first-time home buyers purchasing a primary residence on or after January 1, 2009 and before December 1, 2009. Unlike the first tax credit enacted in 2008, the new credit does not have to be repaid. One thing is for sure, the enhanced tax credit is providing an excellent opportunity for new home buyers. It’s no secret that we are in a struggling economy and the government has been taking steps to try and revive it, especially the housing market which many say is the heart of the problems. 

The American Recovery and Reinvestment Act of 2009 (The official name of the tax credit) has a few key components that home buyers should be aware of.  Most importantly … it’s for first time home buyers and the credit does not have to be paid back. The credit is equal to 10% of the homes purchase price or a maximum of $8,000.00, and is available for any home bought on or after January 1, 2009 and before December 1, 2009.  Single taxpayers with an annual income up to $75,000 and married couples with an income up to $150,000.00 can receive the tax break.

So with all this talk about first time home buyers lets be sure that you understand exactly what the government defines as a first time home buyer. The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the past three-year period prior to the new home purchase. In addition for married couples, the law looks at both parties individually but it affects the couple as one. In other words, if you have not owned a property  in the past three years but your spouse has owned a principal residence, neither you or your spouse qualify for the tax credit.

However, the tax credit can work for unmarried joint purchases where one party can allocate the credit amount to any buyer who qualifies as a first time buyer. So a parent may jointly purchase a home with a son or daughter allowing the child to get the tax credit. In addition, ownership of vacation or rental properties that are not used as primary residence do still qualify as first time home buyers for the tax credit.

Now let’s take a closer look at the income limits and what all the small legal print exactly means.  It’s funny as I sit here and type this, a phrase that a good friend says popped into my head.  He would always say “Check the fine print, because what the good Lord giveth the fine print take away”.  Now what the income limits state specifically is that the tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) more than $75,000 for single buyers and $150,000 for married couples who file joint tax returns. If an individual makes greater than $95,000 or a couple makes greater than $170,000.00 then the tax credit is reduced to zero.  For individuals and couples who’s MAGI falls in between these ranges the tax credit is reduced proportionally.

Okay so I can just feel a few of your sitting there reading that last part and scratching your heads thinking  ”I thought you were going to explain this for us in easy terms”.  We are so — let’s first define exactly what this MAGI means. The IRS defines MAGI as the Modified Adjusted Gross Income.  To find yours you must first determine your “adjusted gross income” or “above-the-line deductions”, keep in mind this number is before itemized deductions from Schedule A or personal exemptions are subtracted. Simply put on your 1040 and 1040A tax forms your AGI.  It appears as the last number on page 1 and the first number on page 2. If you use the 1040-EZ, then your AGI shows up on line 4.  It is important to understand that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.

Remember that was to discover your AGI, we still need to get to the MAGI and in order to do that we need to add to the AGI any foreign income, foreign-housing deductions, student-loan deductions, IRA-contributions deductions and deductions for higher-education cost as well. Once you have done that the number that is sitting in front of you is your current MAGI. To reiterate if your MAGI is over the limits either individually ($75,000) or jointly ($150,000) you still possibly can get partial credit of less than $8,000.

If you are like me you might work best with examples so let’s do one for both individuals and couples. Assume a single home buyer has a MAGI of $80,000, that buyer exceeds the single limit of $75,000 by $15,000. We take the $15,000 (amount over the limit) and divide it by $20,000 you get a 0.75 yield. Subtract that 0.75 from 1.0 and the result is .25, we then multiply $8,000 by the .25 and we discover that the homebuyer can still receive a tax credit of $2,000.

The same holds true for a married couple, for our example let’s say jointly they make $160,000 and the maximum amount is again $150,000 which means they are $10,000 over the limit. We take the $10,000 and divide it by $20,000 and we get a 0.5 yield. Subtract that 0.5 yield from 1.0 and we are left with 0.5. Then to determine their tax credit we take $8,000 and divide it by 0.5 to discover they still qualify for a $4,000 tax credit.

Another nice plus is that the law allows you to elect (choose) a qualified home purchase in 2009 as if the purchase occurred on December 31, 2008. I know, what does this mean for you? Well what it means is that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed. (Tax filling for 2008 returns instead of for your 2009 returns) This is a nice benefit to you the buyer because you know your 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.

Taxpayers buying a home who do wish to claim it on their 2008 returns, but have already submitted them to take advantage of the $7,500 tax credit but qualify for this tax credit can file an amendment to your 2008 tax returns (form 1040x) and then use the new tax credit that you will not have to repay.

Please remember ASG Investments is not a tax authority, and what we have just provided are examples of how the tax credits might be applied in different circumstances, you should always consult your tax advisor for information related specifically to you. Sorry folks, I had to get that disclaimer out of the way.

Stay Tuned for Part 2 coming 03/05/09.  Please feel free to contact us with any questions that you may have.

By: Antoine and Shonda Grier
ASG Investments, LLC
1-888-210-6134
Info@asginvestments.com