Statewide, the Cincinnati region posted the second highest average selling price last month. Columbus was highest at $168,576. Dayton was at $125,236; Cleveland/Akron $118,016, and Toledo

$104,146.

In comparing month-over-month, May sales were down 13.7% from a year ago. For the first five months, sales were off 14.6% from the same period one year ago. Nationwide, seasonally-adjusted home sales climbed 2.4% in May over April.

“The public continues to buy homes despite a soft economy” said Paul Jacob, president of the Cincinnati Area Board of Realtors. “That’s because continued home buying is a testament to asset building.” Mortgage rates near 5.7% remain favorable, Jacob added. “It’s not as low as two months ago at
5.2%, but it’s better than a year ago when mortgage rates were at 6.7%.”
Inventory of homes available for sales is another plus for buyers. Current inventory is 8.48 months of homes for sale. Last month it was 9.96 months. A year ago it was 8.35 months. A lower number means greater demand for current inventory. A balanced market for buyers and sellers is around six months, and that’s why a buyers’ market still exists.

The current $8,000 tax credit for persons who buy a home that haven’t owned a home in the past three years is another part of a buyer’s current-day advantage. That program expires Nov. 30. Jacob said home buying should continue to improve, as buyers realize that sitting on the fence too long simply delays asset wealth building. Bargains exist today, and smart buyers are doing just that buying smartly.

The Making Home Affordable Program was created to assist homeowners whose home values have declined to the point where they may no longer have equity in their homes. So the homeowners have not be able to refinance their homes and take advantage of lower interest rates. In addition, many of these homeowners are also locked in to 3,5 or 7 year adjustable mortgage rates which will soon reset at higher rates. To try to assist these homeowners  the federal government started the Making Home Affordable Program. The purpose of the program is to stop the cycle of foreclosures and short sales and to provide homeowners who are in this position to have options to save their home and financial stability. This program has eligibility requirements that must be met.  For more information please visit the Making Home Affordable Website. This site  helps borrowers learn basic facts about mortgages, homeownership, and resources available, with more than 17.7 million page views in less than two months.

Fourteen servicers, including the five largest, have now signed contracts and begun modifications under MHA. Between loans covered by these servicers and loans owned or securitized by Fannie Mae or Freddie Mac, more than 75 percent of all loans in the country are now covered by the program. The 14 participating servicers have extended offers on over 55,000 trial modifications and mailed out over 300,000 letters with information about trial modifications to borrowers.

A consumer credit score is made up of five key components:

35% :    Payment History -   Types of accounts (credit card, mortgage, etc.), accounts paid as agreed, number of past due accounts, etc.

30% :    Amounts Owed -  Balances of current loans, debt-to-credit ratio, proportion of installments still owed, etc.

15% :    Length of Credit History -  Time since accounts opened, last activity, etc.
10%      New Credit – Recent inquiries, new accounts, etc.

10%      Types of Credit Used -  Mortgages, credit, retail, etc.

Frequently Asked Questions About the Home Buyer Tax Credit

As a follow up to my Guidance for the First time homebuyers entry a couple of months ago, I found a link to answer most of the questions buyers have about the 2009 tax credit. This credit is a caveat to many buyers in the Cincinnati Real Estate Market to buy in 2009. The American Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and closing on or before November 30, 2009.

The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.

1. Who is eligible to claim the tax credit?
2. What is the definition of a first-time home buyer?
3. How is the amount of the tax credit determined?
4. Are there any income limits for claiming the tax credit?
5. What is “modified adjusted gross income”?
6. If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
7. Can you give me an example of how the partial tax credit is determined?
8. How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008?
9. How do I claim the tax credit? Do I need to complete a form or application?
10. What types of homes will qualify for the tax credit?
11. I read that the tax credit is “refundable.” What does that mean?
12. I purchased a home in early 2009 and have already filed to receive the $7,500 tax credit on my 2008 tax returns. How can I claim the new $8,000 tax credit instead?
13. Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
14. Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
15. I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?
16. I am not a U.S. citizen. Can I claim the tax credit?
17. Is a tax credit the same as a tax deduction?
18. I bought a home in 2008. Do I qualify for this credit?
19. Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 tax return?
20. If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
21. For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?

1. Who is eligible to claim the tax credit?
   First-time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and before December 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner.
2. What is the definition of a first-time home buyer?
   The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.

   For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.

3. How is the amount of the tax credit determined?
   The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
4. Are there any income limits for claiming the tax credit?
   Yes. The income limit for single taxpayers is $75,000; the limit is $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.
5. What is “modified adjusted gross income”?
   Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine “adjusted gross income” or AGI. AGI is total income for a year minus certain deductions (known as “adjustments” or “above-the-line deductions”), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.

   To determine modified adjusted gross income (MAGI), add to AGI certain amounts of foreign-earned income. See IRS Form 5405 for more details.

6. If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
   Possibly. It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose MAGI exceeds the phaseout limits.
7. Can you give me an example of how the partial tax credit is determined?
   Just as an example, assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by the phaseout range of $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.

   Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by the phaseout range of $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.

   Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.

8. How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008?
   The most significant difference is that this tax credit does not have to be repaid. Because it had to be repaid, the previous “credit” was essentially an interest-free loan. This tax incentive is a true tax credit. However, home buyers must use the residence as a principal residence for at least three years or face recapture of the tax credit amount. Certain exceptions apply.
9. How do I claim the tax credit? Do I need to complete a form or application?
   Participating in the tax credit program is easy. 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 69 of their 1040 income tax return. No other applications or forms are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests. Note that you cannot claim the credit on Form 5405 for an intended purchase for some future date; it must be a completed purchase.
10. What types of homes will qualify for the tax credit?
    Any home that will be used as a principal residence will qualify for the credit. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.
11. I read that the tax credit is “refundable.” What does that mean?
    The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.

    For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).

12. I purchased a home in early 2009 and have already filed to receive the $7,500 tax credit on my 2008 tax returns. How can I claim the new $8,000 tax credit instead?
    Home buyers in this situation may file an amended 2008 tax return with a 1040X form. You should consult with a tax advisor to ensure you file this return properly.
13. Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
    Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been “purchased” on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after January 1, 2009 and before December 1, 2009.

    In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.

14. Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
    Yes. The tax credit can be combined with the MRB home buyer program. Note that first-time home buyers who purchased a home in 2008 may not claim the tax credit if they are participating in an MRB program.
15. I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?
    No. You can claim only one.
16. I am not a U.S. citizen. Can I claim the tax credit?
    Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of “nonresident alien” in IRS Publication 519.
17. Is a tax credit the same as a tax deduction?
    No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS.

    A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $8,000 in income taxes. If the taxpayer receives an $8,000 deduction, the taxpayer’s tax liability would be reduced by $1,200 (15 percent of $8,000), or lowered from $8,000 to $6,800.

18. I bought a home in 2008. Do I qualify for this credit?
    No, but if you purchased your first home between April 9, 2008 and January 1, 2009, you may qualify for a different tax credit. Please consult with your tax advisor for more information.
19. Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 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 downpayment.

    Buyers should adjust their 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.

    Further, 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. Some state housing finance agencies, such as the Missouri Housing Development Commission, have introduced programs that provide short-term credit acceleration loans that may be used to fund a downpayment. Prospective home buyers should inquire with their state housing finance agency to determine the availability of such a program in their community.

    The National Council of State Housing Agencies (NCSHA) has compiled a list of such programs, which can be found here.

    Finally, HUD has announced that it will allow FHA-approved lenders to issue short-term loans to advance the credit amount for use in purchasing the home. Read NAHB’s press release on the announcement. Additional information will be posted when it becomes available.

20. If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
    Yes. The law allows taxpayers to choose (“elect”) to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 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 2008 tax return, but who have already submitted their 2008 return to the IRS, may file an amended 2008 return claiming the tax credit. You should consult with a tax professional to determine how to arrange this.

21. For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?
    Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.

1) Be sure to purchase the consumer protection insurance.

Even if you have worked with the title company for years, companies that have been around for years are going out of business and $15 is worth the piece of mind.

2) Even though the title company who closes your loan is responsible for seeing that your payoff for your old loan, be sure the bank receives the payoff before the next payment is due.

Sometimes things can go wrong and banks and title companies make mistakes. Ultimately you are inhabiting the home and your name is on the loan, so you are responsible and will bear the burden if the payment isn’t received on time. I spoke to Bank of America today, and I was told that if a payoff isn’t received and you haven’t paid your mortgage that month which most people don’t when they plan to close a refinance mid-month, then the bank will report a late payment to the credit bureaus.

Always call your bank to be sure that they have received the payoff and keep all documentation that they send you in the mail.

3) Ohio law requires the title company to hold your file for 3 business days before processing the payment in case you change your mind and cancel the refinance, so build this into your timeframes when you are trying to plan a closing.

Lenders, home builders and real estate agents were in favor of the  bridge loan proposal, because they believe that  it would open up the housing market to more first-time buyers who may not otherwise have the cash to put down.

The opposition claims that the money should be used for savings not debt and compared the idea to other programs in the past which provided down payment assistance.  How does this effect Cincinnati Real Estate? If you are  seeking an FHA loan and do no thave the 3.5% to put down then you may have to have a relative gift you the money. There is also grant money available in some states depending on the time of year that you buy. At the end of the year most of the grant money has already been distributed.

TASTE OF CINCINNATI AND TASTE THE HYPE – MAY 23 – 25
The annual P&G Taste of Cincinnati USA is this weekend on Fifth Street downtown. Now the nation’s longest running culinary arts festival, the Taste features over 40 fine restaurants serving delectable menu items. Also, enjoy a music festival with continuous live entertainment from local and national recording artists. Admission is free and every entrée is $5 or less. Hours are Saturday, May 23 and Sunday, May 24 from noon to midnight and Monday, May 25 from noon to 9:00 p.m.  For more information Click here

WCPO news ran a story about a local inspector who has begun offering meth detection service part of his home inspections. The chemicals that are used to make meth are extremely harmful and even trace amounts can set off an explosion in homes.  A Drug Enforcement Agency registry of clandestine drug labs in Ohio, Kentucky, and Indiana includes thousands of residential addresses. It is a good idea to check this registry before make an offer on a property to be sure that the subject property is not present.