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New Home builders, big and small, would be among the winners if the $838 billion stimulus measure the U.S. Senate passes today.

The Senate bill seems to be more generous to home builders than the House was in the $819 billion measure it passed last month.

President Barack Obama, who spoke to the nation last night, has said he wants stimulus legislation signed by this weekend. President Obama is counting on the plan to help revive the economy. The economy has lost 3.6 million jobs since December 2007. This has caused the unemployment rate to soar to the highest level since 1992.

To quote a Bloomberg wire: “In a bill this big, there are countless private-sector winners and losers,” Rogan Kersh, associate dean of New York University’s Wagner School of Public Service was quoted as saying.

The Senate cleared the stimulus proposal yesterday by a vote of 61 to 36. There were three Republicans siding with Democrats.

It’s quite possible that U.S. home builders could see sales increase if consumers tap into the planned tax credit of $15,000, or 10 percent of the purchase price, whichever is less, under the Senate legislation.

Morningstar analyst, Eric Landry said “If someone’s going to give you $15,000 in free money it has to be stimulative”.

The proposed new tax credit does not have to be repaid. And it appears that all home buyers are eligible for the home purchase tax credit. This proposed home tax credit would replace the $7,500 tax credit for first-time home buyers that was passed sometime last year. In addition to the amount of the proposed home purchase tax credit, another difference is that the $7,500 home tax credit had to be repaid over 15 years.

Jerry Howard, president and chief executive officer of the National Association of Home Builders stated, “We’re pretty happy with the way the Senate bill is shaping up. We think it will entice a lot of those people sitting on the sidelines into the marketplace.”

As a home builder building new homes in the Washington D.C. area, I feel lucky because our area inside the Washington D.C. beltway is relatively strong. Values have held up and business is steady. So I can see real benefits to home builders, subcontractors and home building and remodeling vendors.

We also work with a large number of families and individuals that are just starting out and are looking for their first home to purchase. So it will be a huge benefit to individuals and families like that. But I’m not sure it is the best thing in the long run for our economy.

What do you think? Let me know your thoughts and comments.

This is some great news if it passes and is from a newsletter we subscribe to call

Builder Business Update:

Senate Adds $15,000 Home Buyer Tax Credit to Stimulus
Amendment to Senate version of stimulus bill provides the credit to all home buyers and doesn’t require repayment.
By Pat Curry

The U.S. Senate on Wednesday voted unanimously to approve a home buyer tax credit of $15,000 or up to 10 percent of the purchase price in its version of the stimulus bill. This proposed credit would be available to all home buyers and would not have to be repaid as long as a buyer lives in the house for at least two years. The amendment to the Senate’s economic stimulus package, co-sponsored by Sen. Johnny Isakson (R-Ga.) and Sen. Joe Lieberman (I-Conn.), offers the credit on purchases from one year of the date of enactment and could be applied to the home buyer’s 2008 taxes.

Isakson, who spent more than 30 years in the real estate business, proposed the tax credit because he’d seen it used effectively to jump-start housing in the 1970s.

“It is rare that we have a road map to success in times of difficulty, but this country has once before realized a housing crisis every bit as bad as the one we have today and economic troubles every bit as dangerous,” Isakson said in a prepared statement Wednesday evening. “We have a pervasive housing problem, and we have a historical precedent that works. I am proud this Senate has joined together, learned from history, and repeated a method that worked by adopting this amendment.”

Dwight Jaffee, a professor of finance and real estate at the Haas School of Business at the University of California, Berkeley, called the 1973-1975 recession the “classic example” of how a direct stimulus to housing demand impacted economic recovery. “Housing led us into this recession, and we really need a stimulus for it to lead us out,” Jaffee said in a statement released by the Fix Housing First coalition, a group of home builders, manufacturers, and others advocating for several housing-related measures, including the tax credit.

According to Jerry Howard, the NAHB’s CEO, the amendment’s provision to offer the tax credit for a year from the date of enactment “reflects Sen. Isakson’s in-depth understanding of housing. It gives the people who market housing a chance to ramp this up and put it in its proper perspective in the field.” Depending on the enactment date, it could make the tax credit available well into 2010. (In previous versions, the tax credit was only availble through Dec. 31, 2009.)

Howard also said Thursday that the NAHB’s staff is working closely with the Senate offices of Sen. Mitch McConnell (R-Ky.), John Ensign (R-Nev.) and Lamar Alexander (R-Tenn.) on additional amendments that the Fix Housing First Coalition considers crucial to solving the housing crisis. Those include low-interest mortgages for home buyers and additional measures to stem foreclosures.

The National Lumber and Building Material Dealers Association also issued a statement this morning applauding the adoption of the amendment and thanking the senators for their leadership. “We believe, if adopted in the final stimulus package, the tax credit could go a long way toward reviving the housing economy by encouraging more home purchases, creating new jobs, and restoring consumer confidence in the housing market,” said NLBMDA President and CEO Michael O’Brien.

The Fix Housing First coalition, which includes the NAHB and NLBMDA, continues to advocate for additional housing stimulus measures, including an amendment that would provide discounted 30-year fixed-rate mortgage financing for eligible home buyers.

In appearances on television news shows, several senators this week expressed support for such an amendment. “We have a 4% mortgage proposal where creditworthy home buyers could buy down their mortgages or save them on the average $5,600 a year,” Sen. McConnell said on Sunday on “Face the Nation.”

One disappointment for home builders in the bill is that this amendment does not include the ability to monetize the credit at closing, a feature in an earlier bill Isakson filed in mid-January. “Emails were flying back and forth this morning, asking ‘Can it be used for closing?’” says Michelle Smallwood, vice president of sales for Melbourne, Fla.-based Holiday Builders.

Pat Curry is senior editor, sales and marketing, at BUILDER magazine.Senate Adds $15,000 Home Buyer Tax Credit to Stimulus
Amendment to Senate version of stimulus bill provides the credit to all home buyers and doesn’t require repayment.

By:
Pat Curry

The U.S. Senate on Wednesday voted unanimously to approve a home buyer tax credit of $15,000 or up to 10 percent of the purchase price in its version of the stimulus bill. This proposed credit would be available to all home buyers and would not have to be repaid as long as a buyer lives in the house for at least two years. The amendment to the Senate’s economic stimulus package, co-sponsored by Sen. Johnny Isakson (R-Ga.) and Sen. Joe Lieberman (I-Conn.), offers the credit on purchases from one year of the date of enactment and could be applied to the home buyer’s 2008 taxes.

Isakson, who spent more than 30 years in the real estate business, proposed the tax credit because he’d seen it used effectively to jump-start housing in the 1970s.

“It is rare that we have a road map to success in times of difficulty, but this country has once before realized a housing crisis every bit as bad as the one we have today and economic troubles every bit as dangerous,” Isakson said in a prepared statement Wednesday evening. “We have a pervasive housing problem, and we have a historical precedent that works. I am proud this Senate has joined together, learned from history, and repeated a method that worked by adopting this amendment.”

Dwight Jaffee, a professor of finance and real estate at the Haas School of Business at the University of California, Berkeley, called the 1973-1975 recession the “classic example” of how a direct stimulus to housing demand impacted economic recovery. “Housing led us into this recession, and we really need a stimulus for it to lead us out,” Jaffee said in a statement released by the Fix Housing First coalition, a group of home builders, manufacturers, and others advocating for several housing-related measures, including the tax credit.

According to Jerry Howard, the NAHB’s CEO, the amendment’s provision to offer the tax credit for a year from the date of enactment “reflects Sen. Isakson’s in-depth understanding of housing. It gives the people who market housing a chance to ramp this up and put it in its proper perspective in the field.” Depending on the enactment date, it could make the tax credit available well into 2010. (In previous versions, the tax credit was only availble through Dec. 31, 2009.)

Howard also said Thursday that the NAHB’s staff is working closely with the Senate offices of Sen. Mitch McConnell (R-Ky.), John Ensign (R-Nev.) and Lamar Alexander (R-Tenn.) on additional amendments that the Fix Housing First Coalition considers crucial to solving the housing crisis. Those include low-interest mortgages for home buyers and additional measures to stem foreclosures.

The National Lumber and Building Material Dealers Association also issued a statement this morning applauding the adoption of the amendment and thanking the senators for their leadership. “We believe, if adopted in the final stimulus package, the tax credit could go a long way toward reviving the housing economy by encouraging more home purchases, creating new jobs, and restoring consumer confidence in the housing market,” said NLBMDA President and CEO Michael O’Brien.

The Fix Housing First coalition, which includes the NAHB and NLBMDA, continues to advocate for additional housing stimulus measures, including an amendment that would provide discounted 30-year fixed-rate mortgage financing for eligible home buyers.

In appearances on television news shows, several senators this week expressed support for such an amendment. “We have a 4% mortgage proposal where creditworthy home buyers could buy down their mortgages or save them on the average $5,600 a year,” Sen. McConnell said on Sunday on “Face the Nation.”

One disappointment for home builders in the bill is that this amendment does not include the ability to monetize the credit at closing, a feature in an earlier bill Isakson filed in mid-January. “Emails were flying back and forth this morning, asking ‘Can it be used for closing?’” says Michelle Smallwood, vice president of sales for Melbourne, Fla.-based Holiday Builders.

Pat Curry is senior editor, sales and marketing, at BUILDER magazine.

Question:
Do you think this is a good idea as a taxpayer?
If you are in the market to purchase a home, will this impact your decision to buy a home?

Here’s another of my “insider” strategy tips and secrets, that a head-shakingly few other “professionals” are even remotely aware of, for:

  • Finding your perfect “build-able” lot
  • Financing your new home or home addition
  • Designing your new home or home addition
  • Building your new home or home addition

So here’s my “insider” strategy for today:

One of the secrets to having a successful- on time…on budget…great design You love…high quality
workmanship…smooth and hassle free process – and fun home building experience,is putting together the right team of professional “partners” to guide you through the process.

Not many people even know this (I’ve been doing this for 20+ years and only a few savvy real estate developer/investor “types” have a clue), but the right team can make it “real estate heaven”, a process so smooth that you’ll be looking for another transaction to do as soon as you finish this one…

And the wrong team can turn the whole project into a nightmarish mistake that could be excruciatingly painful and and an ordeal that you’ll want to wipe from your mind immediately.

And since the process really starts way before the first shovel ever pierces the earth, I view the partner checklist in terms of Phases.

Phase 1 partners are needed to determine project feasibility:

  • Is the project a go or no go?
  • Can you afford it?
  • If you can, is this how you want to spend your money?
  • Does the piece of land work for your needs?
  • Is the land build-able?
  • Are there subdivision, zoning orsetback issues?
  • Will the home plan work for you?

Many of the Phase 1 partners need to stay involved in Phase 2… through out the life of the project.

Like a lot of partnerships, many of these relationships are inter-dependent; decisions and input from one partner are needed for another partner to complete their portion of work.

Phase 2 Partners are brought in only after the go/no-go litmus test is passed. Why spend money if you don’t have to?

And here’s a bonus for you, this is the actual checklist that we use on our projects…

Phase 1 Partners:

  • CPA/Tax Advisor
  • Real estate agent
  • Bank Loan officer
  • Property owner or landowner (if you are purchasing from owner)
  • Architect and Builder
  • Planning department
  • Design review committee
  • Building department

Key Point: You do not have to retain the entire team at the
beginning of the process… And YOU DON’T WANT TO. Only bring
in the partners that are appropriate for that section of
the job.

Phase 2 Partners:

  • Land Surveyor
  • Soils engineer
  • Well/septic engineer
  • Appraiser
  • Attorney
  • Insurance agent
  • Material suppliers
  • Structural engineer
  • Arborist
  • Subcontractors
  • Laborers
  • Building inspectors
  • Disbursement agents
  • Bank inspectors
  • Landscaper
  • Mover
  • Interior Designer

In my next “insider” strategy tip email I’ll explain the partner
roles in more detail.

I think you’ll be astonished at some simple-fix-steps, that if
assigned early on to some of the partners, could result in
huge economic windfalls or could give you a quick signal that
your project may not make sense in its initial form and you
need to re-purpose the plan.

Please keep the comments and critiques coming and let me know
what’s on your mind. And I’d appreciate if you could tell me:

  • What would you love to see during the home building process that would make your life easier?
  • What frustrates you the most aboutthe home design and building process ?

If you want more “insider” secrets to make a yo9ur new home a profitable investment sign up here for our special series

Elizabeth Razzi, a writer for the Washington Post Real Estate section, wrote on October 19, 2008:

“There will be some attractive federal tax credits …. you can research them at www.Energystar.gov  ”

Here is a partial list from her article:

  1. for qualifying exterior doors, storm doors, metal roofs, insulation the tax credit will be 10% of the cost, up to a $500 credit
  2. Windows, skylights, storm windows will qualify for 10% of the cost, with a credit capped at $200
  3. Central AC and heat pumps will qualify for $300 credits
  4. Top efficiency furnaces or boilers that go beyond the government’s Energy Star standard will qualify for a $150 tax credit. Some super efficient tankless or electric heat pump water heaters will qualify for a $300 credit
  5. for solar water heaters (except those used for swimming pools) homeowners can get a tax credit covering 30% of the cost, up to $2000

Leave me a comment and let me know what you think.

Renovation financing gives you:

* More money to work with. The amount you can borrow is based on the expected increased value of your home, after improvements are made.
* Less Strain on Your Budget. You can pay for your renovation gradually and affordably, over the loan term of your mortgage.
* Less to Pay at Tax Time. Unlike other credit options, the interest you pay on funds used for a renovation may be tax deductible.
* Less Hassle. You’ll have one loan to apply for, one set of fees, one closing to attend, and one monthly payment to make.

Is Renovation Financing for You?
It is, if you have any plans for minor or major renovations to your home in the next six to 24 months. If you’re buying a house today and considering some home improvements next year, you may find it’s cheaper and easier to have the renovations done now with your financing for the purchase and the renovation all handled in one transaction.
All Kinds of Needs Covered
You should be able to finance any kind of improvement or repair to eligible properties.

Mortgages can and the costs associated with mortgages can make your head spin! Here’s a real basic primer on mortgages that hopefully adds a little clarity.

Although each individual new home financing package has its own variety of features, the concept of a mortgage is really quite simple: a mortgage is a loan made to help you finance a home. Your lender advances you a certain amount of money, which you repay over a specified period.
Interest Rates, points, and loan fees
The total cost of your mortgage is determined by a number of different factors, most notably the interest rate, discount points, and loan fees.

* Interest rate refers to the percentage of your outstanding loan balance that you pay the lender each month as part of the cost of borrowing money. Your interest rate will be based on the current overall rate environment, as well as your financial profile and the specific features of your loan.
* Discount points allow you to “buy down” your interest rate at closing. One point equals 1% of your loan amount, and the more points you pay, the lower your interest rate will be, and the less you will have to pay each month. If you wanted to lower your closing expenses, you could also accept a slightly higher rate and pay no points.
* Loan fees are up-front charges to cover the cost of originating, processing, and closing your loan, among other things. An origination point is a loan fee that equals 1% of your loan amount.

When considering loan pricing, keep in mind that interest rates, points and fees should be considered together. The interest rate alone only tells part of the story. The expenses that contribute to the cost of your loan can be expressed as the annual percentage rate (APR).

The interest rate only tells
part of the story

Your monthly mortgage payment
Mortgage payments can generally be divided into four parts: principal, interest, taxes, and insurance. These are often referred to with the acronym PITI.

* Principal refers to the amount of money you borrow to buy a home, and to the outstanding loan balance at any point during the mortgage term.
* Interest is the cost of borrowing money. As noted above, the amount of interest you pay each month is determined by your interest rate.
* Taxes assessed by your local government will likely be collected by your lender as part of your monthly payments, and then paid annually or semi-annually on your behalf. This process is known as an escrow.
* Insurance, like property taxes, is normally collected by the lender in an escrow account. Insurance offers financial protection, and has two major components:
o Homeowner’s insurance, also called hazard insurance, protects you against damage to your property caused by fire, wind, or other hazards.
o Mortgage insurance protects your lender in the event that you fail to repay your mortgage. Whether you must pay mortgage insurance usually depends on the loan program and the size of your down payment.

Here’s the kind of information you should have at hand when you apply for your construction loan. This is a general list:
Salaried Borrowers

* Pay stubs for the most recent 30-day period (including a year-to-date summary) for each of the borrowers on the loan
* Most recent W-2 statements for all borrowers
* Relocation letter on company letterhead, if applicable

Self-Employed Borrowers

* Complete signed tax returns for the last two years, including schedules and statements. If incorporated, personal and corporate returns should be provided
* A copy of an extension to file, if applicable
* Year-to-date profit and loss statement, if beyond June 30th

Deposit Verification

* All pages of checking and savings account statements from the most recent 30-day period
* All pages of asset account statements, including money market funds, mutual funds, stock accounts, IRAs, CDs, etc., from the most recent 30-day period. Please note that Internet screen prints are generally not acceptable
* Gift letter, if applicable
* Evidence of the sale of your previous home, if applicable
* Verification of large deposits

Miscellaneous Borrower Documents

* Any divorce decrees, child support agreements, or separate maintenance agreements if alimony or child support is either paid by any borrower on the loan or received by any borrower on the loan and is used as income
* Written explanations for any credit issues that appear on your credit report
* Copies of any leases and two years of federal tax returns on any rental properties you own

Construction and Builder Documents

* Construction plans and specifications
* Fully executed Purchase/Construction contract accounting for all work. This may involve separate bids and/or contracts if work is not included in the contract
* HUD1 Settlement Statement from the purchase of the land, if the purchase occurred within the past 12 months.
* Name, phone number and address of the builder
* Name and phone number of your preferred settlement agent (i.e., title company, attorney, escrow agent, etc.)
* Course of Construction insurance
* Certification for any private well or septic system
* Foundation survey (In most states, this can be handled by your title company).  Its cost is usually not covered in your closing costs.
* Verification of deposits to your builder and/or land seller, such as cancelled checks or a copy of a certified check

Ordering the Appraisal
The Lender will order a full appraisal of the proposed property based on the final plans and building specifications.

All conditions (such as debt reduction or additional documentation) for your permanent loan must be satisfied prior to the close of construction.
Usually your permanent loan commitment is valid for 12 months from the date your construction loan closed. If this loan commitment expires before your permanent loan closes, you will be required to update your application, which will require new documentation. Any change to your credit profile may negatively impact your ability to get a permanent loan.

Generally, there are seven steps for financing the construction of a new home using most construction/perm loan programs.
1. Initial Stage – Prequalify with one of our lenders
You’ve looked at some of our house plans on-line but have not had the first consultation meeting with our design team. Even though you don’t have much finalized, now is great time to start to get your financing in place. We’ll put you in touch with one of the lenders that we work with at this initial stage. This is the time to pre-qualify with our lender.
2. Application
While we are designing your home the plans are starting to solidify. And since we are designing and pricing in-house this happens very early in our process. The benefit to you is you’ll know the amount of money you’ll need early on. This allows you to start the formal loan application early on.
3. Approvals
Our lender will work with you to get your permanent loan approved. We’ll also get the final plans and specs so that the lender can order an appraisal.
After the lender has the appraisal and a fully executed purchase contract, they’ll submit the entire package for construction loan approval.
4. Construction Closing
After the lender has all the necessary approvals, they’ll close on the loan that will finance the construction of your home. A settlement agent will give you specific instructions about the amount you’ll need to bring to closing, and in what form. As soon as you close on the construction loan, we may begin building.

5. Draw Process
During construction, the lender will send out a construction inspector to inspect our work and to approve our requested draws from the construction fund for work that has been completed.

6. Completion of Construction
A final inspection will determine that the construction on your home is complete.  We’ll get a Certificate of Occupancy (or its equivalent) from your local authorities.
Then our lender will also work with you to ensure that you’re ready to transition into your permanent loan product. They’ll schedule a modification of the construction loan to the permanent mortgage.
7. Move In!