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I've been scouring the definition of "principal residence" myself. We owned a home that was foreclosed on in '08. We filed BK7 and started renting elsewhere 11/05. The house wasn't sold at sheriff sale until 11/07.
I called the IRS hotline to ask if we would qualify, since it appears you are allowed to own property, just not a "principal residence." I explained our situation and was told we wouldn't qualify. Knowing that the IRS hotlines are not always reliable, I continued to research. Everything I read says that we should qualify.
http://www.irs.gov/publications/p523/ar02.html#d0e500
We filed our taxes from the rental address for '06-'08. That's been the address for our driver licenses and car registration.
They spell out:
Example 2.
You own a house, but you live in another house that you rent. The rented house is your main home.
So, I guess we may need to talk to an accountant also, but it sure seems like the hotline guy was wrong on this one.
Re changes to the tax credit program:
I wonder if they double the credit for married couples if both people will have to be on the mortgage? We were planning to have it in just my husband's name.
Hey deemac,
You're right. I'd talk to an accountant.
As I understand it, your primary residence
is one that you own AND where you reside.
If you're renting from someone else, you do
reside in their home but you don't own it.
Therefore, it's not your primary residence.
As far as the foreclosure is concerned, the
3yr clock to qualify for your next "first time
home buyers" opportunity doesn't start until
you are no longer responsible for the debt.
This date is called your "date of satisfaction"
Based on the date of your sheriff's sale, your
next opportunity to qualify as a first time
homebuyer won't begin until November 2010,
or about 22 months from now.
And regarding any possible changes to the
tax credit program: you can rest assured that
if the tax credit is increased to $15,000 for
married couples then both people will have to
be on the mortgage. If you just want your
husband to be on the mortgage, then he would
use his 7.5k portion and you'd keep your share
in reserve.
Like I said, lots of things are on the table right now
and this conversation is strictly conjecture. But we'll
have to wait and see how things shake out.
CanDo
"The right attitude is everything"
I don't believe the foreclosure date has anything to do with qualifying as a first time homebuyer. I'm aware of all the pertinent dates and rules with regard to qualifying for a mortgage. We really got shafted ... our discharge on a simple ch 7 took nearly 18 months because the trustees office screwed up, our atty didn't follow up, and we didn't know any better. (It sat in a file because they thought it had been sent to the court, but it hadn't.)
Worse, since we're finally at the 2 years post discharge, it took over two years for the bank to complete the foreclosure.
However, it would appear that we will qualify for a USDA mortgage, with steady income for 2½ years and a 675 middle FICO score. The area we're in qualifies and we're within the income limits for a USDA guaranteed mtg.
The IRS website flat out says if you own a home but live in one you rent, the rental home is your primary residence. It also gives other tests such as the address you use for filing taxes (check) the address on your driver license (check) and other things with regard to location that aren't really applicable since our former and current homes are in the same neighborhood.
Thanks for the clarification, deemac.
You're right about the 3yr clock having nothing to do
with being first time homebuyer-qualified. I was thinking
about something else. Sorry about that...
And you're also right about a USDA Guaranteed Loan in
regards to a BK. Regardless of whether the BK was
a discharged 7 or 13, there's no waiting period as long
as your middle FICO is 620 or higher.....which means you.
More specifically, if your BK7 or BK13 were discharged today,
you could go out and apply for a USDA Guaranteed Loan tomorrow.
It's that quick and clean.
CanDo
"The right attitude is everything"
And regarding any possible changes to the
tax credit program: you can rest assured that
if the tax credit is increased to $15,000 for
married couples then both people will have to
be on the mortgage. If you just want your
husband to be on the mortgage, then he would
use his 7.5k portion and you'd keep your share
in reserve.
Well, I'm not sure about that because, given the current rules, if either spouse owns a home neither qualify for the credit. So it might be done jointly the same way if they increase it. I had no earned income last year, but still received the full tax stimulus payment as a married couple filing jointly.
Regarding the definition of "principle residence" take a look at the IRS link I posted above and see if you read it the same way I do...
I went to the IRS link you posted. I read it the same
way you do.
Regarding the credit, it all depends how the rules are written.
If it's a flat 7.5k for single/head of household and
15k married household, what you say is right.
But if the credit is determined on a per person basis,
that would give married couples more flexibility.
In situations where only 1 person qualifies for the
mortgage, it would be a shame to penalize the
non-qualifying spouse in the event the marriage dissolves.
Conversely, it's much more fair to give a 15k tax credit
to both married members as long as they qualify jointly
for the mortgage. Twice the "risk" yields twice the reward.
But if only 1 person qualifies, they should get half the credit (7.5k).
But like you said, we'll have to wait and see how
things play out and how the final version is written.
CanDo
"The right attitude is everything"
oops - just realize I wrote the foreclosure started in '08. It was actually sold 11/07 and was filed in '05. But doesn't matter for FHA; we're SOL (and I don't mean statute of limitations )
It'll be interesting to see what comes out of congress. Honestly, a $15k tax credit sounds like an astonishing number - I can't believe they'd do that, but I'd be happy to take it if it came my way. And if it sounds like it might go that way, I'd better start thinking about whether it makes sense for me to be on the mortgage. I've got about $80 in monthly debt that would hurt our back-end ratio. They're covered by money I make selling stuff on eBay, but it's never been enough income that we've documented it so that's why we were going to put it on him alone (not sure I want to try selling that to a government agency!) My scores should be okay - hurt a little by high util as we focused on reducing his, but while I've got the same BK and paid tax liens, the foreclosure was in his name only and there aren't any baddies since we filed.