Understanding the First Time Homebuyer Tax Credit.

The first-time homebuyer credit is similar to a 15-year interest-free loan. It is repaid in 15 equal annual installments beginning with the second tax year after the year the credit is claimed. You may need to adjust your withholding or make quarterly estimated tax payments to ensure you are not under-withheld.

Some exceptions apply to the repayment rule:

-If you die, any remaining annual installments are not due. If you filed a joint return and then you die, your surviving spouse would be required to repay his or her half of the remaining repayment amount.

-If you stop using the home as your main home, all remaining annual installments become due on the return for the year that happens. This includes situations where the main home becomes a vacation home or is converted to business or rental property. There are special rules for involuntary conversions. Taxpayers are urged to consult a professional to determine the tax consequences of an involuntary conversion.

-If you sell your home, all remaining annual installments become due on the return for the year of sale. The repayment is limited to the amount of gain on the sale, if the home is sold to an unrelated taxpayer. If there is no gain or if there is a loss on the sale, the remaining annual installments may be reduced or even eliminated. Taxpayers are urged to consult a professional to determine the tax consequences of a sale.

-If you transfer your home to your spouse, or, as part of a divorce settlement, to your former spouse, that person is responsible for making all subsequent installment payments.

Only purchases of a main home located in the United States qualify, and the home must have been purchased after April 8, 2008, and before July 1, 2009. For a home you construct, the purchase date is the date you first occupy the home.

Article Source: http://www.irs.gov/newsroom/article/0,,id=187935,00.html

Money in your pocket with first-time homebuyer credit.

"The First Time Homebuyer Credit is a new tax credit included in the recently enacted Housing and Economic Recovery Act of 2008. The credit operates like an interest free loan because it must be repaid over a 15-year period."

"The credit is 10 percent of the purchase of the home, with a maximum available credit of $7,500 for either a single taxpayer or a married couple filing a joint return; $3,750 for married persons filing separate returns. The full credit is available for homes costing $75,000 or more."

"Only the purchase of a main home located in the United States qualifies. You must buy the home after April 8, 2008, and before July 1, 2009. For a home that you construct, the purchase date is the first date you occupy the home."

"Taxpayers who owned a main home at any time during the three years prior to the date of purchase are not eligible for the credit. This means that first-time homebuyers and those who have not owned a home in the three years prior to a purchase can qualify for the credit. If you make an eligible purchase in 2008, you claim the first-time homebuyer credit on your 2008 tax return. For an eligible purchase in 2009, you can choose to claim the credit on either your 2008 (or amended 2008 return) or 2009 return."

"You must begin repaying the loan the second year after claiming the credit. For example, if you properly claim the maximum available credit of $7,500 on your 2008 federal tax return, you must begin repaying the credit by including one-fifteenth of this amount, or $500, as an additional tax on your 2010 federal tax return. Normally, $500 will be due each year from 2010 to 2024."

Article Source: First-Time Homebuyer Credit Information Center

What about having multiple lenders compete for your loan?

How to Get Good Credit: "What about having multiple lenders compete for your loan?
Many Internet services and brokers allow you to submit one form and have up to four lenders review your credit information.

Credit agencies understand that these services may require an inquiry by 'multiple lenders' at the same time.

These kinds of inquiries, coming from multiple lenders within 20-30 days of each other, indicate that you are shopping for the best deal. Credit agencies will count these inquiries as being only one inquiry. This allows you to shop and negotiate the best deal without being penalized on your credit report."

How to Get Good Credit Final Step

How to Get Good Credit: "Step 7: Review Your Credit Report Annually
About one in four credit reports have errors. Either a payment on a loan amount has not been recorded correctly or another billing company has posted incorrect non-payment information to your account.

Your credit report also maintains records on your employment, salary, bank accounts, etc., especially the information that you supplied when making a previous credit application.

You should review your report annually for errors and make the necessary corrections as instructed by the credit agency.

Step 8: Limit Inquiries on Your Credit Report
Multiple credit report inquiries over a period of time may negatively impact your credit score.
Every time you apply for credit, seek some kind on contractual service, or in some cases employment, a credit inquiry will be made on your report.

Models show that multiple inquiries over a period of time indicate an applicant who is anticipating credit problems. So limit credit inquiries when only necessary."

How to Get Good Credit Step 3-6

How to Get Good Credit: "Step 3: Maintain only a Few Credit Cards As your credit rating improves, you will soon receive pre-approved offers from credit card companies and lenders with attractive rates and programs.

You should limit your credit to three to four cards only. Maintaining a large collection of cards can hurt your credit rating.

Step 4: Close All Retail and Gas Cards
Since you maintain three to four major credit cards (e.g., VISA, MasterCard, Discover, or American Express), it isn't necessary to hold gasoline cards, retail store cards, and other specialized credit cards.
Simply use your major credit cards.

Again, holding multiple cards can drag down your credit score.

Step 5: Don't Have Too Many Outstanding Loans
Excessive loan balances (especially loans that exceed your Debt-to-Income ratios) can effect your credit rating:

Maintaining a good credit rating requires that you reduce your debt holdings by consolidating balances, closing unused credit card accounts, and paying off outstanding loans.

Step 6: Avoid Charging Close to Your Credit Line Limit
Don't use your credit card up to your maximum credit line balance because this can negatively impact your credit rating.

Maximized credit lines (including home equity lines, credit cards and unsecured credit lines) indicate that you are a consumer who borrows willingly. Many lenders consider this a great risk and may not approve you for additional credit.

A good rule to follow is to keep your balances at or below 60 percent of the available credit line."

Bad Credit? How to Get Good Credit? Step 1

How to Get Good Credit: "Step 1: Pay Your Bills on Time
Make it your personal goal to pay your credit and other obligations on time and for the required amount each month.

Debt obligations will include:

· Credit card charges

· Loan payments

· Rent or mortgage payments

· Utility bills

· Service or product bills

· Taxes

· Support payments

· Other

Take advantage of automatic payments and other online bill payment strategies offered by lenders and credit card issuers. This will ensure timely payments.

If you forget to make a payment, act promptly on any notices of non- or late payments. Call the bill servicer to notify them that your payment will be sent immediately.

Do not ignore any creditor notices of non-payment. Contact the creditor to fix the problem."

Home Equity Credits.

Home Equity Line of Credit Home Equity Loans: "Home Equity Loans
Home Equity Loans are yet another way to finance larger projects from the equity you have in your home. These are often called second mortgages (as are HELOCs), and you are allowed to borrow a certain amount no larger than the current equity you have in your home, either from principle payments or property value increases. These are standard loans with fixed rates, and they usually have to be paid back in 15 years or less. With these loans, you borrow a specific amount and have a set monthly payment.

Advantages to Financing Home Remodeling Projects with Home Equity
The average cost of a complete kitchen remodel in the United States in 2004 was $30,000. This is a big enough number that most homeowners need some type of financing, if only partially, to help cover the cost. While both Home Equity Lines of Credit and Home Equity Loans are good candidates for any remodeling project, depending on the project, one might be better than the other.

Kitchen & Bathroom Remodels
These are the two most popular home remodels. They add value to a house, and in many cases have a massive return on their investment. The problem is that estimates from contractors are exactly that, and nearly every project ends up costing a different amount—whether higher or lower—than was originally planned. You will change your mind about 100 times on which materials you want to use, the contractor will run into unforeseen problems, the market price of your materials will fluctuate, among many other things that will swing the price.

The great thing about HELOC is that it is a credit card and you are only paying interest on what you borrow. Let's say you have a $25,000 line of credit that you have earmarked for a kitchen remodel. Your contract"

Using Home Equity for Remodels.

Home Equity Line of Credit Home Equity Loans: "You have already paid all of this money in principle, and it stands to reason that you should leverage that in whatever way you can. There are two basic ways to get the most of your home equity when you are considering a remodeling project. The two smartest and most common methods of financing a home remodeling project are using your Home Equity Line of Credit (HELOC) and/or a Home Equity Loan. These two methods are often difficult to distinguish, but this article can shed a little light on which is which, while getting you on your way to a fantastic home remodel.


HELOC
So how does it work? A Home Equity Line of Credit is exactly like a credit card that you set up with your lender. You have a credit limit that is proportional to the amount of equity you have in your home. Once you have your HELOC account set up, simply advance yourself funds by writing a check. You will pay interest only on the amount you borrow, just like with a credit card. You can use your home equity line whenever you need just like the plastic you have now."

Home Refinance vs. Home Equity

Home Refinance Mortgage Rates: "Refinance vs. Home Equity
How about using the existing equity in your home to pay off your mortgage? Let's illustrate an example.
Say your existing home has an estimated market value of $250,000 and the amount remaining on your first mortgage loan is $150,000.

You will find that most banks charge zero closing costs with minimal hassle. You simply apply for a home equity loan with a participating lender and instruct the lender to use the equity in your home to pay off your mortgage.

Note that interest rates at 80 percent LTV or lower for large borrowing amounts come with very attractive rates. And many lenders offer up to 15-, 20- and, in some cases, 30-year repayment plans.

You can even use your excess home equity to:
Remodel your home
Finance a new car, truck or recreational vehicle
Consolidate your loans
Send your child to college

Unlike traditional refinancing programs where you pay a lot to refinance your home, using the equity in your home to pay off your mortgage saves you all of the up-front mortgage refinancing costs"

Is it Beneficial to Refinance?

Home Refinance Mortgage Rates: "Is it Beneficial to Refinance?
Whether or not it's beneficial for you to refinance will depend on prevailing interest rates, costs to refinance, the expected length of stay in your home, among other factors.

Refinancing will also require the same steps as when you purchase a home, except for the presence of a seller.

You hear a lot about refinancing your home mortgage when rates are falling. But did you know that the cost to refinance can be very expensive?

Think back to the day you closed on your existing home. Remember those excessive closing and filing fees you had to come up with? Many of those similar closing costs may be charged again when you refinance, such as:

Mortgage Points
Attorney Fees
Appraisal And Inspection Fees
Title Search And Insurance Fees
Document Preparation

In fact, experts say that your new refinancing rate should be anywhere from 1.5 to 2.0 percent lower than your existing mortgage loan rate in order to recoup your cost to refinance."

Which Type of Financing is Best for You?

Home Remodel Financing - home equity, lines of credit, & loans: "Which Type of Financing is Best for You?
Again, this is going to vary a lot on a case-by-case basis. Loans are granted based on your credit history, income, present level of debt, and securable assets. Your lender will review all of these things and use what they discover to determine what kinds of financing you qualify for. Depending on your situation, here's a list of some of the most common financing options for homeowners to use (though keep in mind this list is by no means an exhaustive one):

Cash-out refinancing. If you've built up a substantial amount of equity in your home, and interest rates have dropped since you acquired your mortgage, this can be a financial windfall. You'll pay for your project and lower rates on the rest of your mortgage to boot.

Home equity lines of credit and home equity loans. These two financing options are very similar and very popular for home improvement. Both offer financing based on the equity you've built up in your home. Because of that they usually come with very reasonable interest rates, and the interest you pay is tax deductible.

Value Added Loans. These loans are granted based on the value that will be added to your home after the project you hope to undertake is finished. It allows owners of homes that have a lot of potential to borrow more than the home is presently worth.

Homeowner Loans. This type of financing is generally based on your income rather your equity. You won't be able to borrow as much, and your interest rate will be a little bit higher, but you won't have to jump through all the hoops that equity secured loans require."

Why Choose Home Financing?

Home Remodel Financing - home equity, lines of credit, & loans: "Why Choose Financing?

There are a number of practical reasons to finance a home improvement project. The first is simply time. With any home improvement project you want to get it done as soon as possible so you can enjoy the benefits in the present, not somewhere far off in the future. Saving up for a major project is a sound financial decision, but it will likely take years to stow away enough for what you've got in mind, years that you could have spent enjoying your new kitchen, bath or deck if you'd have chosen to finance instead. And of course, the truth is few individuals are disciplined enough to leave that money untouched. Other unforeseen expenses come up, people dip into the penny jar, and in the end most homeowners find themselves right back where they started.

Where to Start?
When you're ready to finance, the first step is talk to a lender about financing options available to you. Where you choose to go is really a matter of personal preference and your situation. Many contractors offer financing, though it's often unsecured and will usually run a higher interest rate than other options. Still, it is an attractive, convenient, and reasonable way to go, especially if you're unsure about qualifying for financing elsewhere.

Besides that, most homeowners choose to patronize more traditional lending institutions. Your bank or credit union is an excellent place to begin. They often offer good interest rates, generous terms, and many will bend over backwards for their members. Mortgage brokers are also good places to inquire. Home financing is their business, so they bring a wealth of experience to the table and a wide array of options for you to choose from."