Do's and Don'ts for a Smooth Approval

Tips for a Smooth Loan Approval:

• Do keep original and updated pay stubs, bank statements, investment account statements, W-2 forms, and other important financial documentation. Current supporting documentation may be required and updated prior to the closing of your mortgage loan..
  
• Do provide all documentation from the sale of your home when proceeds will be used for down payment on your new mortgage.
  
• Do notify your loan officer if you plan to receive and use gift funds for your down payment. An additional form must be completed and must accompany a copy of the check showing funds transferred to you, and a copy of the deposit slip showing the funds were deposited to your account. Specific paper-trails must befollowed, so ask your loan officer for details BEFORE transferring funds.
• Do notify your loan officer of any changes in your job, income amount, job promotion, location transfer, or change in method of income (i.e. from salary to commission).
• Do disclose all debts that you are obligated to pay if they are not being reported on the credit report (i.e. personal loans to family members or employer, property taxes on real estate where there is no debt or where owner financing “real estate contracts” occur, etc.
• Do return all original signed disclosures along with the original signed loan application to your loan officer along with the supporting documents requested for approval as soon as possible. A delay could result in a postponed closing.
• Do Not change employers or the industry in which you work without inquiring about the impact this change may have on your mortgage loan.. A second verification of employment will be conducted prior to closing to insure there has been no changes that will affect your approval.
• Do Not make any major purchases during the processing of your loan or prior to closing (i.e. furniture, a new car, major appliances, electronics, etc.). If in doubt, ask your loan officer first before purchasing anything that might impact your monthly debts used in qualifying. A second credit report will be pulled prior to closing to verify that there has been no additional changes that could affect eligibility.
• Do Not obtain and/or deposit unusually large sums of money without notifying your loan officer. FNMA/HUD guidelines require documentation as to the source of theses funds which may include a copy of a bonus check, tax refund, insurance settlement, or a gift letter as discussed above. All irregular deposits on the statement and its source will need to be paper-trailed.
• Do Not close, open or transfer any asset accounts without providing proper documentation. For example, transferring money in stock or retirement accounts to a checking or savings account would require supporting documentation. Ask your loan officer first for specific details.
  

The Clock is Ticking...
Extended and Expanded Tax Credit Expires 4/30/10
For prospective homebuyers who are on the fence about making a home purchase, the next few months represent a countdown of sorts as
huge tax credits are about to expire. Here are important details for you to know:
Tax Credit for First-Time Homebuyers (FTHBs)
FTHBs (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10%
of the purchase price of the home, with a maximum available credit of $8,000. Single taxpayers and married couples filing a joint return may
qualify for the full tax credit amount.
Tax Credit for Current Homeowners
The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes
in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five
consecutive years during the last eight years. Single taxpayers and married couples filing a joint return may qualify for the full tax credit
amount.
What Are the New Deadlines?
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010. Those in
the military do have some special extensions on the timelines available.
What's So Great About a "Tax Credit"?
The benefit of a tax credit is that it's a dollar-for-dollar benefit, rather than a "tax deduction", or reduction in a tax liability that would only save
you $1,000 to $1,500 when all was said and done. So, if a first-time homebuyer who qualified for the entire benefit were to owe $8,000 in
income taxes and would qualify for a tax credit of $8,000, she would owe nothing.
Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little or no income tax
liability. For example, if a first-time homebuyer is eligible for a tax credit of $8,000 but is liable for $4,000 in income tax, she can still receive a check for the remaining $4,000!

New Disclosure Regulations

Recent guidelines from Washington have forced a change to the way that loan originators will disclose closing costs for all homebuyers. The purpose of the new Good Faith Estimate is to level the playing field for borrowers comparing loans to be able to make apples to apples comparisons for loan scenarios.

In essence, HUD is working to bring all lenders up to the same standard of excellence in reporting closing costs that we at Legacy have always adhered to, estimating realistic fees that a buyer should expect to pay at closing with no last minute surprises.

Below are some important points to know:

All fees paid to the lender/broker are to be consolidated in one line, including processing fees, origination fees, etc. These charges cannot change from the original estimate without a material change to the loan requested.


In the event fees are being charged to obtain a lower rate, these are to be broken out and itemized for the borrower's ease of comparison to other loan programs.


Estimates for fees from government recording charges and third party settlement providers we suggest are to be itemized and the lender is held to a tolerance of 10% for their accuracy. In the event the estimated charges exceed the amount listed by the allowable tolerance, the lender will be responsible for making up the difference.


Estimates for services that the buyer can shop for and do choose can change at settlement without the lender being held accountable. This can include title charges, homeowner's insurance, and initial deposits for an escrow account.

First Time Homebuyer Tax Credit Extended Into 2010! Plus...A New Tax Credit for Certain Existing Home Owners!

It's official. President Obama has signed a bill that extends the tax credit for first-time homebuyers (FTHBs) into the first half of 2010. This program had been scheduled to expire on November 30, 2009.
In addition to extending the tax credit of up to $8,000 through June 30, 2010, the extension measure also opens up opportunities for others who are not buying a home for the first time.
So Who Gets What? The program that has existed for FTHBs remains intact with the one exception that more people are now eligible based on an increase in the amount of income someone may now earn.

Additionally, the program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Deadlines In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

Higher Income Caps in Effect The amount of income someone can earn and qualify for the full amount of the credit has been increased.
Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible.
Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

Maximum Purchase Price Qualifying buyers may purchase a property with a maximum sales price of $800,000. First-Time Homebuyer Tax Credit – Frequently Asked QuestionsHere are answers to some commonly asked questions about the tax credit.
What is a tax credit? A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual's primary residence.

What is the tax credit for first-time homebuyers (FTHBs)? An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.

Who is eligible for the FTHB tax credit? Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible. This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.
As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.

How do I claim the credit? For those taking advantage of the tax credit in 2009, you may choose to either apply for the credit with your 2009 tax return or you may apply for the credit sooner by filing an amended 2008 tax return with Form 5405 (http://www.irs.gov/pub/irs-pdf/f5405.pdf).

Can you claim the tax credit in advance of purchasing a property? No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.
Can a taxpayer claim a credit if the property is purchased from a seller with seller financing and the seller retains title to the property? Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Examples of this would include a land contract, contract for deed, etc. According to the IRS, factors that would demonstrate the ownership of the property would include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property.

Are there other restrictions to taking the credit? Yes. According to the IRS, if any of the following describe your situation, a credit would not be due.
You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild.
You do not use the home as your principal residence.
You sell your home before the end of the year.
You are a nonresident alien.
You are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)
Your home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
You owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2009, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2006, through July 1, 2009.

Can you buy a home from a step-relative and be eligible for the credit? Yes. Provided the person you are buying a home from is not a direct blood relative, the purchase would be allowed.

Can parent(s) who will not live in the property cosign for a mortgage for their child and the child that is a qualifying FTHB still be eligible for the credit? Yes.

Can a separated spouse who has not owned a home for four years qualify for the FTHB tax credit if the spouse has owned a property anytime in the last three years? No. However, the spouse may be eligible for the repeat buyer credit. The best path to take in any situation regarding income taxes is to speak with a professional tax preparer or CPA.

If you have any questions that fall outside the situations here, give us acall at Legacy Mortgage, 505-296-4747.