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What's Ahead For Mortgage Rates This Week : November 30, 2009

Posted: 30 Nov 2009 06:45 AM PST

Jobs are in focus this weekMortgage markets improved last week on stronger-than-expected economic data and safe haven buying.

The holiday-shortened trading week amplified what should have been modest gains into large ones.

Conforming mortgage rates dropped by about a quarter-percent last week, dropping them near their best levels of the year -- and of all-time.

Oddly, mortgage rates are falling as the U.S. dollar weakens. This is atypical because mortgage bonds are repaid in U.S. dollars. When the value of the dollar is falling, therefore, the value of holding mortgage bonds become less over time.

Investors are snapping up bonds with fury, however. Partially because of lingering concerns related to Dubai, and partially because of faith in the U.S. economy's long-term health.

This week, those beliefs could be shaken to the core -- specifically because of Friday's jobs report.

It's no secret that the economy is growing. Housing is improving, banks are re-capitalizing, and businesses are making capital investment. However, employment is lagging.

More than 4 million jobs have been lost this year and the unemployment rate is north of 10 percent for the first time since 1983. Consumers are worried for their jobs and are guarding their wallets the holiday season as a result.

The economy can't grow without consumer spending, though, and that's why Friday's job figures will play an especially large role in mortgage markets. If employment data goes positive, stock markets will rally at the expense of mortgage rates.

Conversely, if data looks worse, mortgage rates should dip.

Either way, it's a gamble. If you haven't looked at the benefits of a refinance lately, waiting until Friday to see what happens may be ill-advised. This is because the last two times mortgage rates fell this low, markets corrected within 48 hours, sending rates soaring higher.

Rates look good today. Consider locking something in before rates have reason to rise.


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Latest From : Atlanta RE 5 by 5

One Reason Why Mortgage Rates Are Back To All-Time Lows

Posted: 27 Nov 2009 06:55 AM PST

FOMC Minutes November 3-4 2009Home affordability improved this week after the Federal Reserve released its November 3-4, 2009 meeting minutes.

The FOMC Minutes is a companion to the Federal Reserve's post-meeting press release. It's released 3 weeks after the Fed adjourns and details the internal debates that shape our nation's monetary policy.

As compared to the press release, the minutes can be rather lengthy. November's press release featured 428 words, the minutes offered 6531.

However, this extra level of detail shapes markets and mortgage rates. With Wall Street unsure about the economy's path, investors look to our nation's central bankers for guidance.

The Fed has made several points clear:

  1. The economy shows tell-tale signs of improvement
  2. Unemployment threatens the recovery
  3. Inflation pressures are low, for now

Overall, the FOMC Minutes paint the economy as in a state of measured repair, and under tight federal surveillance. Investors like this message and, as a result, stock and bonds markets are improving.

If you haven't checked mortgage rates lately, make a point to do that. In the wake of the FOMC Minutes, conforming mortgage rates are now hovering near their all-time lows set exactly 1 year ago.


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Latest From : Atlanta RE 5 by 5

The Home Price Index Shows Home Values Increasing. Case-Shiller Agrees.

Posted: 25 Nov 2009 06:45 AM PST

Home Price Index October 2009It's official -- home prices are no longer in free fall.

According to the Federal Housing Finance Agency, the Home Price Index posted its first quarterly increase since 2007 last quarter.

The news was reported Tuesday.

The Home Price Index is an interesting metric. It's huge in its scope, accounting for every home sold in the country that backs a mortgage bound for Fannie Mae or Freddie Mac with two notable exceptions:

  1. It doesn't track new construction
  2. It doesn't track multi-unit homes

Because the Home Price Index makes these specific exclusions, and because it doesn't account for FHA and jumbo mortgages, some analysts discount the HPI's relevance. They prefer the private-sector Case-Shiller Index instead.

Now, to be fair, the Case-Shiller has its own set of flaws, too.

For example, it excludes condos and co-ops, and only tracks sales in 20 cities nationwide. But, of all the private home valuation models, Case-Shiller is the most well-known and most widely-used.

The Case-Schiller Index was also released Tuesday and the report showed the same results as its government-issued counterpart -- home values increased between the second and third quarter.

When the Home Price Index and Case-Shiller Index reach similar conclusions, markets tend to buy-in. Home buyers should, too.

Home values have likely bottomed and are starting to turn higher, as shown in two separate reports. High sales volume and dwindling supply are contributing factors. So are low mortgage rates and a tax credit.

If you're on the fence about buying a home, at least consider your options. In 2010, homes are unlikely to be as cheap to buy, or as cheap to finance.


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Latest From : Atlanta RE 5 by 5

Existing Home Sales Blow Past Expectations

Posted: 24 Nov 2009 06:45 AM PST

Existing Home Sales October 2009

Another month, another piece of evidence that the housing market is in recovery.

Existing Home Sales surged in October as the nation's homebuyers took advantage of low mortgage rates, low list prices, and, for some, a generous tax credit.

Home resales are 23 percent higher versus a year ago and home supply is down to 7 months nationwide.

Inventory hasn't been this low since February 2007.

The news shouldn't be surprising, however. The same real estate trade group that produces the Existing Home Sales report also publishes a monthly report meant to predict future home sales called the Pending Home Sales Index.

Pending Home Sales have been through the roof since mid-May.

So, with pending home sales showing no signs of slowing and 80% of pendings turning into actual, closed sales, we can expect existing home sales volume to rise in the coming months, too. Especially because Congress extended the home buyer tax credit to include (1) "Move-up" buyers and, (2) Buyers with higher household incomes.

It's terrific news for home sellers. The housing market turnaround means higher sale prices and fewer concessions to buyers long-term.

To buyers, on the other hand, the news isn't so good. The window to find a "deal" appears to be closing quickly.


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What's Ahead For Mortgage Rates This Week : November 23, 2009

Posted: 23 Nov 2009 06:45 AM PST

What drives mortgage rates this weekMortgage markets worsened last week on a mixed bag of economic data. Inflation data came in soft, but so did the start of the holiday shopping season.

For the first time in a month, mortgage rates worsened last week, adding roughly 0.125 percent on conforming fixed-rate products, and a little bit more on ARMs.

Despite rates worsening, there was still some good news for home buyers and would-be refinancers. Mortgage rate volatility was markedly lower than in recent weeks. You could shop for mortgage rate last week and actually take your time about it.

This is in stark contrast to the last month or so over which mortgage rates changed every few hours, on average.

This week, though, because a heavy data calendar is combining with a holiday-shortened trading week, rates aren't likely to stay as tame.

  • Monday: Existing Home Sales
  • Tuesday: Consumer Confidence, Home Price Index, Fed Minutes
  • Wednesday: New Home Sales, Personal Income and Outlays

Each of these data points are market-movers by themselves. In tandem, however, they could really shake things up. Then, at the tail end of the week, markets will react to Black Friday.

If stores look full Friday and initial receipts appear high, stock markets should rise at the expense of bonds, leading mortgage rates higher.

Additionally, expect that mortgage rate changes will be amplified because of low trading volume. This could work in your favor, or out of your favor -- depending on the market direction.

With mortgage rates at such low levels and unlikely to fall much further, locking a rate is advisable. If you choose to float, though, keep your loan officer on speed dial because when rates do rise, they're going to rise quickly.


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Latest From : Atlanta RE 5 by 5

Should You Consider A 15-Year Fixed Mortgage?

Posted: 20 Nov 2009 06:45 AM PST

Comparing 15-year mortgage rates to 30-year mortgage rates

For today's home buyers and homeowners that can manage the higher monthly payments, 15-year fixed rate mortgage rates look attractive as compared to comparable 30-year products.

The 15-year/30-year interest rate spread is near its 5-year high.

Despite lower rates, however, homeowners opting for a 15-year fixed mortgage should be prepared for its higher monthly payments. This is because the principal balance of a 15-year fixed is repaid in half the years as with a standard, 30-year amortizing product.

As compared to 30-year terms, 15-year products repay 3 times as much principal each month.

Versus a 30-year, 15-year fixed mortgages have a few downsides worth noting. The first is that, because 15-year mortgages are heavy on principal and light on interest, homeowners who itemize tax returns may have to claim a smaller mortgage interest tax deduction at tax time.

Another negative is that the sheer size of the payment. If you run into fiscal trouble down the road, the only way to reduce the monthly obligation is to refinance into a 30-year product and that costs money to do.

In other words, be sure you can manage the payments over the long-term before you opt for a 15-year term. If you can manage it, though, the rewards are tangible.

At today's rates, a 15-year fixed and 30-year fixed costs $230 extra per $100,000 borrowed.


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Housing Starts Are Down And Why It's Terrific News For Sellers

Posted: 19 Nov 2009 05:13 AM PST

Housing Starts October 2009

A "Housing Start" is a home on which construction has started and, for the 4th straight month, national single-family housing starts held steady last month.

When the demand for homes grows faster than the number of homes for sale, prices increase.

As recent home sales data confirms, buyers currently outpace sellers and one consequence of this is an increase in multiple-offer situations this year.

It's no wonder home prices are up across so many neighborhoods.

October's Housing Starts report is yet another piece of housing data foreshadowing rising home prices into 2010.

Building Permits were also down in October, a potential demand-to-supply imbalance magnifier. Without permits, there's no future construction. This drains supply. Meanwhile, tax breaks and low rates tend to stimulate demand and, right now, we've got both.

Therefore, so long as demand remains semi-constant into the New Year, expect home prices to rise.

In many markets, they already are.


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The 2010 Conforming Loan Limits

Posted: 18 Nov 2009 06:45 AM PST

Conforming loan limits since 1980

A conforming mortgage is one that, quite literally, conforms to the mortgage guidelines set forth by Fannie Mae or Freddie Mac.

Each year, the government sets the maximum allowable loan size for a conforming mortgage, based on "typical" housing costs nationwide.

Loans in excess of this amount are typically called "jumbo".

While home prices increased from 1980 to 2006, so did conforming loan limits. Since then, however, as home prices have dipped, the conforming loan limit has held.

Now, in 2010, for the 5th consecutive year, the government set $417,000 as the nation's conforming mortgage loan limit.

The 2010 conforming loan limits, as released by the government, are:

  • 1-unit properties : $417,000
  • 2-unit properties : $533,850
  • 3-unit properties : $645,300
  • 4-unit properties : $801,950

But conforming loan limits don't apply to all U.S. geographies equally. As a result of various economic stimuli since 2008, the government now considers certain regions around the country "high-cost" areas. In these areas, conforming loan limits can range to $729,750.

There are less than 200 such areas nationwide. The complete list is published on the Fannie Mae website.


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Simple Real Estate Definitions : APR

Posted: 17 Nov 2009 06:46 AM PST

APR on Reg ZAPR is an acronym for Annual Percentage Rate. It's a government-mandated calculation meant to simplify the comparison of mortgage options.

A loan's APR can always be found in the top-left corner of the Federal Truth-In-Lending Disclosure.

Because APR is expressed as a percentage, many people confuse it for the loan's interest rate. It's not. APR represents the total cost of borrowing over the life of a loan. "Interest rate" is the basis for monthly mortgage repayments.

The main advantage of APR is that it allows an "apples-to-apples" comparison between loan products.

As an example, a 5.000 percent mortgage with origination points and fees will almost certainly have a higher APR than a 5.500 percent mortgage with zero fees. In this sense, APR can help a borrower determine which loan is least costly long-term.

However, APR is not without its shortcomings.

First, different banks includes different fees into their APR calculations. By definition, this spoils APR as a choose-between-lenders, apples-to-apples comparison method.

And, second, when calculating APR, "life of the loan" is assumed to be full-term. When a 30-year mortgage pays off in 7 years or fewer -- as most of them do -- APR comparisons are rendered moot.

In other words, APR is just one metric to compare mortgages -- it's not the only metric. The best way to compare your mortgage options is to review all the loan terms together and determine which is most suitable.


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Latest From : Atlanta RE 5 by 5

What's Ahead For Mortgage Rates This Week : November 16, 2009

Posted: 16 Nov 2009 06:45 AM PST

University of Michigan Consumer SentimentMortgage markets improved last week as foreign buyers of mortgage debt helped to push mortgage rates to a 4-week low.

It marked the 3rd consecutive week that rates improved, breathing extra life into this year's ongoing Refi Boom.

Fixed-rate, conforming mortgage rates fell about 0.125 percent on the week. ARMs did about the same.

There wasn't much data to move mortgage rates last week; investors worked mostly on momentum and trends. However, the Friday University of Michigan Consumer Sentiment survey release garnered some attention.

After worsening in August and September, consumer sentiment fell for the third straight month in October. Analysts worry about what it could mean to the economy. Holiday Shopping season is here and consumer spending fuels the economy. If households hold the purse strings tight, our nation's budding economic recovery may stall.

In a scenario like that, employment rates won't rebound so fast, but rate shoppers might not mind. Slower-than-expected economic growth tends to suppress mortgage rates, helping to improve home affordability overall.

This week, data comes back into focus.

At 8:30 AM ET today, the government will release October's Retail Sales report. This one should be closely watched for its ability to change rates. A weak report should drag rates down, and a strong one should push rates up.

Then, on Tuesday and Wednesday, look for PPI and CPI -- two key inflation indices. Inflation causes mortgage rates to rise so if either of these reports comes in hotter-than-expected, rates will almost certainly rise.

And, lastly, also on Wednesday, we'll get the Housing Starts report for October. Don't expect the markets to move on this one, but keep an eye on the data anyway. Housing markets remain crucial to economic recovery.

Despite rates hovering near recent lows, remember that markets change quickly. A rate quote from the morning is rarely valid by the afternoon and, when rates rise, rates rise fast.


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Latest From : Atlanta RE 5 by 5

Are There Any Foreclosure Deals Left?

Posted: 13 Nov 2009 06:46 AM PST

National foreclosure concentration October 2009For the eighth straight consecutive month, national foreclosure activity in the U.S. was dominated by a small set of states.

As reported by RealtyTrac.com, more than half of October's foreclosure-related activity came from just 4 states:

  1. California
  2. Florida
  3. Illinois
  4. Michigan

The remaining Top 10 states in terms of total foreclosure activity included Arizona, Georgia, Texas, Ohio, New Jersey, and Maryland.

Foreclosures are up 19 percent from last October, but a deeper look at the RealtyTrac report revealed two positive developments for the housing market.

  1. Foreclosure activity is down 3 percent from last month
  2. Foreclosures per Household decreased in 9 of the 10 most heavily concentrated states

Furthermore, Nevada's foreclosure pace is down 4% from last year. This is a big deal because Nevada has long led the nation in foreclosure-related activity. Until last month, Nevada's year-to-year foreclosure rate hadn't fallen in more than 4 years.

It's too soon to say that the foreclosure market is drying up, but bargains are getting harder to come by. First-time buyers and bona fide investors alike have been snapping up property at a furious pace.

According to an industry trade group, distressed homes account for nearly one-third of home resale activity.

That said, buying foreclosures isn't for everyone.

For one, properties are often sold as-is and may be defective. The cost of repairs may negate "the deal" or "the steal" -- depending on the cost of the home.

Secondly, closing on a foreclosed home can be a 3-month long process. This is because banks rarely process home sale paperwork as fast as a "person" would. A 3-month timeframe may not fit your schedule.

In the end, fundamentally, buying a foreclosed home is the same as buying a "regular" home -- there's a contract and a closing. Most of the steps in the middle, however, are different.

Read the complete foreclosure report and take a peek at the foreclosure heat maps on the RealtyTrac website. If you like what you see, talk to your real estate agent about what to do next.

There's still good deals in the foreclosure market, but based on October's data, they may not last through the winter.


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Latest From : Atlanta RE 5 by 5

Banks Raise Mortgage Qualification Standards

Posted: 12 Nov 2009 06:45 AM PST

Fed Senior Loan Officer Survey Q3 2009

Despite the economy's improvement and prodding from Congress, banks don't seem ready to open their purse strings just yet.

Nationally, mortgage approval standards are tightening.

The data comes from a quarterly survey the Federal Reserve sends to its member banks. The Fed asks senior bank loan officers around the country whether "prime" residential mortgage guidelines had tightened in the last 3 months.

For the period July-September 2009:

  • Roughly 1 in 4 banks said guidelines tightened
  • Roughly 3 in 4 banks said guidelines were "basically unchanged"

Just one bank said its guidelines had loosened.

Combine the Fed's survey with recent underwriting updates from the FHA and from Fannie Mae and it becomes clear that mortgage lenders are much more cautious about their loans than they were, say, 2 years ago.

Today's borrowers face a host of hurdles including:

  • Higher minimum FICO scores
  • Larger downpayment requirements for purchases
  • Larger equity positions for refinances
  • Lower debt-to-income ratios

In other words, mortgage rates may stay low into 2010, but that won't matter to homeowners that don't meet minimum eligibility standards. With each passing quarter, that list gets smaller.

Therefore, if you're on the fence about whether now is a good time to buy a home, remember that, along with an increase in mortgage approval standards, home values are rising, too.

Acting sooner is probably better than acting later.


Atlanta Woman Admits to Running Mortgage Business Without License November 10, 2009

Kawana Latrell Melvin of Atlanta pleaded guilty in Superior Court of Clayton County in Georgia to felony charges that she operated a mortgage banking business without a license. She also admitted to making a false statement with respect to her eligibility to work in the state's residential mortgage industry. The Georgia Department of Banking and Finance referred this matter to the State Attorney General's Office after learning she continued to work a as mortgage loan processor for a residential mortgage licensee in violation of a final cease and desist order. Melvin used a false document purportedly written by the Commissioner of the Department that provided that she was not prohibited from engaging in residential mortgage activities. Melvin has been placed on probation for a period of three years and must pay a fine in the amount of $2,000. While on probation, she is prohibited from obtaining employment in any real estate or mortgage business and cannot apply for or obtain professional licenses in either of these industries.



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Latest From : Atlanta RE 5 by 5

FHA Streamline Refinance Program : There's 5 Days Left

Posted: 10 Nov 2009 06:45 AM PST

Changing FHA Streamline Refi programConsider this a last call for FHA Streamline Refinances. Starting next Tuesday, the popular rate-lowering program gets strict on borrowers.

There's 5 days left.

Under the current streamline refi guidelines, FHA homeowners have minimal program eligibility requirements.

  • FICO scores must be 620 or higher
  • The refinance must provide a "tangible benefit"
  • No mortgage lates allowed in the last 12 months

Beyond that, everything else goes, practically. There's no income, asset, or job verification with the current FHA Streamline program. Neither is there an appraisal requirement. It doesn't matter if you're 50% underwater.

Until next week, that is.

Beginning November 17, FHA Streamline Refinance applicants must show evidence of income and employment, plus proof of cash required to close. Furthermore, the FHA is limited loan-to-values to 97.75% for homeowners that want to "roll closing costs" into their mortgage.

In areas of declining home values, this may render refinancing impossible.

There's more changes, too, as highlighted by the Federal Housing Commissioner. Read up for yourself, or ask a mortgage professional for help.

If you're a homeowner and you're currently financed through the FHA, it may be prudent to explore the possibility of an FHA Streamline Refi. Mortgage rates are low right now and FHA guidelines are loose.

Starting next week, FHA Streamlines will be a completely different beast.


For more information contact:
Peter Bright
Capital City
Atlanta GA 3031


Who is Eligible
  • First-time home buyers, who are defined by the law as buyers who have not owned a principal residence during the three-year period prior to the purchase, may be eligible for up to an $8,000 tax credit. 
  • Existing home owners who have been residing in their principal residence for five consecutive years out of the last eight and are purchasing a home to be their principal residence (“repeat buyer”), may be eligible for up to a $6,500 tax credit. 
  • All U.S. citizens who file taxes are eligible to participate in the program. 
Income Limits
  • Home buyers who file as single or head-of-household taxpayers can claim the full credit ($8,000 for first-time buyers and $6,500 for repeat buyers) if their modified adjusted gross income (MAGI) is less than $125,000.  
  • For married couples filing a joint return, the combined income limit is $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.  
  • The credit is not available for single taxpayers whose MAGI is greater than $145,000 and married couples with a MAGI that exceeds $245,000. 
Effective Dates
  • The eligibility period for the tax credit is for homes purchased after Nov. 6, 2009, and before May 1, 2010. However, home purchases subject to a binding sales contract signed by April 30, 2010, will qualify for the tax credit provided closing occurs prior to July 1, 2010.  
 Types of Homes that Qualify
  • All homes with a purchase price of less than $800,000 qualify, including newly-constructed or resale, and single-family detached, townhomes or condominiums, provided that the home will be used as their principal residence. Vacation home and rental property purchases do NOT qualify.   
 Tax Credit is Refundable
  • A refundable credit means that 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 who qualifies for the full $8,000 credit who owes $5,000 in federal income taxes would pay nothing to the IRS and receive a $3,000 payment from the government. If you are due to receive a $1,000 refund, you would receive $9,000 ($1,000 plus the $8,000 first-time home buyer tax credit).  
    • A repeat buyer who owes $5,000 would pay nothing to the IRS and receive $1,500 back from the government. If you are due to get a $1,000 refund, you would get $7,500 ($1,000 plus the $6,500 repeat buyer tax credit). 
  • All qualified home buyers can take the tax credit on their 2009 or 2010 income tax return. 
Payback Provisions
  • The tax credit is a true credit. It does not have to be repaid unless the home owner sells or stops using the home as their principal residence within three years after the purchase.

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What's Ahead For Mortgage Rates This Week : November 9, 2009

Posted: 09 Nov 2009 06:45 AM PST

As the economy improves slowly, mortgage rates benefitMortgage markets were extremely volatile last week, carving out a wide range between Monday and Friday.

Thankfully for rate shoppers, the overall momentum was positive.

Mortgage rates fell for the second time in as many weeks. Rates still sit higher versus their early-October lows.

For pure "news", last week was a busy one:

Combined, the 3 events reinforced the growing belief on Wall Street that the U.S. economy is in recovery, but not yet out of the woods. This particular philosophy has been excellent for mortgage rates, helping to hold conforming 30-year fixed mortgage rates near 5.250 percent since the start of the year.

It helped rates last week, too. But low rates aren't without threats.

For one, the Fed's vote to hold the Fed Funds Rate near 0.000 percent will eventually spark inflation concerns. When it does, mortgage rates will rise. That won't be this week, though.

Actually, nothing may happen this week -- there's not much data to release. Apart from a retail report, a confidence survey and some Fed speakers, the calendar is bare. That, and Wednesday is a federal holiday.

However, without data, markets often trade on things like geopolitics, or energy concerns, or momentum. In other words, don't be lulled into thinking rates won't change this week.

At least for now, the mortgage rates look good. By the end of the week, that may not be the case.


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Congress Expands And Extends The First-Time Home Buyer Tax Credit

Posted: 06 Nov 2009 06:45 AM PST

First-Time Home Buyer expanded and extendedCongress both extended and expanded the First-Time Home Buyer Tax Credit program Thursday.

The White House says the President will sign it into law today.

The up-to-$8000 tax credit's expiration date has been pushed forward to spring, requiring homebuyers to be under contract by April 30, 2010, and to be closed by June 30, 2010.

The program's basic eligibility requirements remain the same:

  • Buyers can't purchase the home from a parent, spouse, or child
  • Buyers can't purchase the home from an entity in which they're a majority owner
  • Buyers can't acquire the home by gift or inheritance
  • All parties to the purchase must meet eligibility requirements

The new law includes some notable updates, however.

For one, the definition of "first-time home buyer" has been expanded to include most homeowners with at least 5 years in their current home. "Move-up" buyers like these are now eligible for IRS tax credits, but with a cap at $6,500.

This means that you don't have to be a true first-time home buyer to claim the "first-time home buyer tax credit".

Other eligibility changes include:

  • The subject property's sales price may not exceed $800,000
  • The subject property must be a primary residence
  • Income thresholds raised to $125,000 for single-filers and $225,500 for joint-filer

And remember, the First-Time Home Buyer program grants a tax credit as opposed to a deduction. This means that a tax filer would receive a cash payment of $2,000 from the U.S. Treasury if his "normal" tax liability totals $6,000 and he was eligible for all $8,000 available under the new law.

The complete list of qualifying criteria is posted on the IRS website. Be sure to review it with a tax professional to determine your eligibility. Then mark your calendar for April 30, 2009.

It's 5 months away.



If you have questions call us we can help 770-792-7979

A growing number of our newsletter readers' e-mails to  are asking the same question lately: Should I opt out of this rate hike? Credit cardholders given the chance to avoid an imminent rate increase face a number of options, each with pros and cons.

No federal law or regulation requires issuers to offer cardholders a chance to reject a rate re-pricing, or opt out, according to Chi Chi Wu, a staff attorney for the National Consumer Law Center in Boston. BUT Issuers may still present an opt-out in the name of goodwill or to comply with state law. THEY usually will, but not always, opting out involves closing the account. The cardholder can't use the card going forward but gets to pay it off at the old rate and under the existing terms. WE HIGHLY SUGGEST CLOSING THE ACCOUNT TO SEND THE CREDIT CARD COMPANIES A MESSAGE!

Your  best course of action depends on your situation. Here are some scenarios.

Paying off the debt

If you can wipe out the outstanding debt before the rate increase applies, this is the best move for your wallet and credit score. You will pay no additional interest charges and your score won't suffer from an account closure. To keep the card active after the higher rate takes effect, use the card once a quarter to purchase something inexpensive and pay the balance off.

Balance transfers

If the amount is too large to pay off and the rate increase is worthy of avoidance, see if you can do a balance transfer to another card. This leaves the original account open and paid off, which will help your credit score as you attack the balance on the new card. Scott Bilker, creator of DebtSmart.com, says he'd first look to his existing cards for balance transfer deals, then consider new cards if his didn't offer any good rates.

It may prove tough for some to qualify for a better interest rate. For rates below 8 percent, you need a stellar credit score. "I'd say north of 720," says Curtis Arnold, founder of CardRatings.com and author of "How You can Profit from Credit Cards."

There's also usually a cost involved with balance transfers. Balance transfer fees are typically 3 percent of the balance, but increasingly issuers are charging 5 percent of the balance with no cap on the fee, says Greg McBride, senior financial analyst at Bankrate.com.


Use the work sheet below to plug in the costs. Note both the teaser balance transfer rate and the regular APR following its expiration.

If the math plays out in favor of a balance transfer, make sure not to charge new purchases until that balance transfer debt is paid off. Issuers will usually apply payments to lower-rate balances first to maximize profit.

First, gather some information on your old card. Dig out your most recent bill and a copy of the current agreement with the old credit card, plus the agreement with the new card company.

Old card Info

Toll-free customer service number (8___)_____-_______

Account # __________________

Balance $__________

APR ____ %

Grace period ____ days

Due Date ___/___/______

New card Info

Toll-free customer service number (8___)_____-_______

Account # __________________

Balance $__________

Introductory APR ___ %

Date intro rate expires ___/___/______

Date balance transfer APR expires ___/___/______

Fees for balance transfer $__________

Annual fee $__________

Grace period ____ days

Due Date ___/___/______

Print out the form now.

Now that you have the necessary information, you're ready to make the transfer.

Follow these steps in order, checking them off one at a time.

Credit card account close-out procedure

Send minimum payment to old company by due date.

Sign up for new card.

Complete balance transfer form.

While balance is pending, continue to make minimum payments by due date to old card.

Receive notice of balance transfer to new company.

Call old company to verify balance transfer.

Receive billing statement with zero balance from old card company.

Close old account by calling or writing the issuer. Ask the issuer to note in any statement to a credit bureau that the account was closed at the customer's request.