Mortgage Rate Update

Markets Up, Goldman Brings Down Stocks.

(When the bond goes up, rates go down.)

As you can see by the chart below the bond is currently surging higher, currently up +28 basis points. 
This is going to help rates going into the weekend if we can hold on to those gains.

The news moving the bond today: 

• There’s really only one story that seems to be moving the bond positively: the government’s investigation of Goldman Sachs. Today, a criminal investigation was opened by Federal prosecutors in addition to the civil suit that has been put them front and center in the news.  Goldman’s stock was just over $170.00 per share on March 1.  As of today, the stock has fallen about $27.00 per share, currently around $143.00 per share.  The rest of the stock market is being weighed down by the recent news of the criminal investigation. 

When investors pull their money out of the stock market, they usually invest it into something more safe like bonds.  This is often referred to as a “flight to safety.”  That is what we are seeing right now, and the bond has reached a high we have not seen since March 24^th of this year.

If you have not yet locked in these great rates, now might be a great time to act. 
If the current action against Goldman Sachs was not in the news, the bond would most likely not be this positive.  That means any recovery in Goldman’s shares that bring investors back to the market will probably have an immediate negative impact on bonds as investors move their money back to the stock market.

Don’t forget – the Homebuyer Tax Credit for non-military ends on April 30^th!!  Must have an executed contract by then.  If you have questions about the extension for military, contact me at your next opportunity.

Do I need to complete a form or application? Are there documentation requirements?

You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on line 67 of the 1040 income tax form for 2009 returns. Home buyers must attach a copy of their HUD-1 settlement form (closing statement) to Form 5405 as proof of the completed home purchase.  If you are unable to provide the settlement statement, an executed retail sales contract with the same information as a settlement statement or a certificate of occupancy in the case of new home construction is sufficient. 

To qualify for the Move-up/ Repeat Buyer, you must verify you have lived in your old home for a five-consecutive-year period during the eight-year period ending on the purchase date of the new home. The IRS recommends attaching, in addition to the documents described above, any of the following documentation of the five-consecutive-year period:

• Form 1098, Mortgage Interest Statement, or substitute mortgage interest statements,
• Property tax records or 
• Homeowner’s insurance records.

Note that taxpayers who claim the credit on their 2009 tax return must file a paper return because of the documentation requirements.

To download IRS Form 5405, visit http://bit.ly/annO0y.  If you need help determining your tax credit amount, a tax advisor can help you complete the form.  Or, if you have not yet purchased, but still want to take advantage of the great deals on homes that are still on the market, contact one of our Home Loan Specialist at 1-888-562-6200 for more information or to get pre-qualified for your loan.

Is there a way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 or 2010 tax return?

Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the down payment.

Buyers should adjust the withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.

In addition, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. As a result, some state housing finance agencies have introduced programs that provide short-term second mortgage loans that may be used to fund a down payment. Prospective home buyers should check with their state housing finance agency to see if such a program is available in their community. To date, 18 state agencies have announced tax credit assistance programs, and more are expected to follow suit. The National Council of State Housing Agencies (NCSHA) has compiled a list of such programs, which can be found at http://bit.ly/9gc7Pb.

If you are interested in reducing your income tax withholding, a tax advisor can help you determine the amount you should withhold.  Just make sure to have your purchase agreement signed by April 30, 2010 and the closing documents signed by June 30, 2010 to qualify for the tax credit.

Mortgage Rate Update

Markets Up, But Unstable.

 (When the bond goes up, rates go down.)

As you can see by the chart below the bond is currently surging higher, currently up +62 basis points.  This is going to help rates if we can hold on to those gains.

The news moving the bond today: 

• Consumer Confidence was much higher than expected and IBM raised its quarterly dividend by .65 cents, which initially weighed negatively on the bond. 
• However, the news ruling the moment is Greece’s bond rating being reduced to “junk” status by S&P.  In addition, Portugal’s bond rating has also dropped.  These two world economic factors have trumped the good news in the economy and have turned stocks negative and sent bonds higher.  

If you have not yet locked in these great rates, you may very well miss them. 

Don’t forget – the Homebuyer Tax Credit for non-military ends on April 30^th!!  Must have an executed contract by then.

For a home purchase in 2009 or 2010, can I choose whether to treat the purchase as occurring in the prior or present year, depending on in which year my credit amount is the largest?

Yes. If the applicable income phase-out would reduce your home buyer tax credit amount in the present year and a larger credit would be available using the prior year MAGI amounts, then you can choose the year that yields the largest credit amount.

If I’m qualified for the tax credit and buy a home in 2009 (or 2010), can I apply the tax credit against my 2008 (or 2009) tax return?

Yes. The law allows taxpayers to choose (“elect”) to treat qualified home purchases in 2009 (or 2010) as if the purchase occurred on December 31, 2008 (or if in 2010, December 31, 2009). This means that the previous year’s income limit (MAGI) applies and the election accelerates when the credit can be claimed. A benefit of this election is that a home buyer in 2009 or 2010 will know their prior year MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.

Taxpayers buying a home who wish to claim it on their prior year tax return, but who have already submitted their tax return to the IRS, may file an amended return claiming the tax credit using Form 1040X. You should consult with a tax professional to determine how to arrange this.

A tax advisor can help you determine when the best time to file your taxes is.  Or, if you have not yet purchased a home, but still want to take advantage of the Home Buyer Tax Credit, quickly contact one of our Home Loan Specialist at 1-888-562-6200 or Apply Online at our website www.churchillmortgage.com.  Remember, to qualify for the credit, a purchase agreement must be signed by April 30, 2010 and the closing documents signed by June 30, 2010.