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What is an Escrow Account & Why is it Needed?

Jan 6

Posted by Blog Admin in Mortgage, Taxation | Comments off

An escrow account is an account used to collect and hold funds to pay property taxes and homeowner’s insurance premiums. Escrow accounts are usually set up by the mortgage company when a home mortgage is taken out. Money is deposited into an escrow account each month and then used to pay annual taxes and insurance.

The monthly mortgage payment includes an amount for property tax and insurance on top of what an individual pays in principle and interest on their home loan. The mortgage company pays the taxes and insurance premiums from the escrow account. The mortgage company also examines any changes in cost and reexamines the escrow amount accordingly. The borrower should receive a yearly statement on their escrow account. The amount put into your escrow amount each month depends on the cost of taxes and insurance annually.

Here is an example of how monthly escrow accounts are calculated if your annual real estate tax is $2,400 and your annual property insurance is $1,200:

$2,400 divided by 12 months equal $200 per month.

$1,200 divided by 12 months equal $100 per month.

Total amount of taxes and insurance each month is $300.

This amount would be added to the principle and interest of your loan. The funds in the escrow account will collect until taxes and insurance are due.

There are many advantages to having an escrow account. An escrow account helps an individual to manage their funds. Instead of having to pay a lump sum of money, payment is made through monthly payments. It is much easier for most people to pay $200 per month into a forced savings account instead of paying $2400 at once. An escrow account is also useful because an individual does not have to worry about remembering to pay their taxes and insurance. The mortgage company does it for them. Also an individual’s taxes and home insurance will be paid on time which prevents late fees or cancellation of their policy. Your payments have already been budgeted for you and the money is waiting and available in your account. When the bill is due, the escrow account takes care of everything for you. It is nice not to have to remember payment dates and amounts. Escrow accounts are also required for North Carolina VA loan, Georgia VA Loan, pretty much all VA loans, and FHA loans as added protection for the lender.

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2009-2010 Home Buyer Tax Credit

Dec 17

Posted by Blog Admin in Taxation | Comments off

If you’re a veteran look for home-buyer relief, the 2009 tax credit is quite the incentive to buy—even in a troubled housing market. The 2009 tax credit is very different from the one offered in 2008. One of the most important differences is that the 2009 tax credit does not have to be repaid. This tax incentive is a true tax credit.

Under the new law, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2010 and close on the home by June 30, 2010. For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 return.

Because of The American Recovery and Reinvestment Act of 2009 and the extension, Veterans have the advantage of receiving the 2009 First Time Homebuyer’s tax credit, whether you’re buying a manufactured home, mobile home or even a houseboat. Regardless of the type of home bought, it must be purchase as a primary residence for at least 3 years or else it will not qualify for the tax credit. The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000. Participating in the tax credit program is easy! All you do is claim the credit on your federal income tax return. Since this great privilege has been extended through 2010, why not take advantage of getting up to $8000 back for serving your country!

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Bringing the Dream of Homeownership Within Reach

Oct 5

Posted by Blog Admin in Taxation | Comments off

There is nothing I love more in the real estate business than to meet with first time home buyers.  Many first time home buyers have done a lot of homework researching homes in there price range and favorite areas.  Once I have a chance to sit down with them I can explain to them how the real estate process works and how I can help them and lead them in the right direction.

There is a question that I get asked many times daily and before I can even explain to my clients the importance of a good lender is “How do I get the $8,000 tax credit?”

So I want to explain the $8,000 tax credit for first-time home buyers looking for and hopefully help many of you off the fence and into a new home.  This could be the best time ever to buy a home.

As part of its plan to stimulate the U.S. housing market and address the economic challenges facing our nation, Congress has passed legislation that grants a tax credit of up to $8,000 to first-time home buyers.

Here is more information about how the 2009 First-Time Home Buyer Tax Credit can help prospective home buyers become part of the American dream.

Who Qualifies?

First-time home buyers who purchase homes between January 1, 2009 and December 1, 2009.

To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.

Which Properties Are Eligible?

The 2009 First-Time Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.

How Much Will the Credit Be?

The maximum allowable credit for home buyers is $8,000. Each home buyer’s tax credit is determined by two factors:

The price of the home—the credit is equal to 10% of the purchase price of the home, up to $8,000.

The buyer’s income—single buyers with incomes up to $75,000 and married couples with incomes up to $150,000—may receive the maximum tax credit.

If the Buyer(s)’ Income Exceeds These Limits, Can He/She Still Get a Credit?

Yes, some buyers may still be eligible for the credit.

The credit decreases for buyers who earn between $75,000 and $95,000 for single buyers and between $150,000 and $170,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit. Home buyers earning more than the maximum qualifying income—over $95,000 for singles and over $170,000 for couples are not eligible for the credit.

Will the Tax Credit Need to Be Repaid?

No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during the three-year period, the credit will be recouped on the sale.

If you have any additional questions please feel free to call me at (801) 830-2030

by Derrick Tornow, Professional Real Estate Agent
Tornows & Associates, Inc.
Utah County Real Estate

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