Posts Tagged ‘tax credit’

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Jobless Claims Help Mortgage Bonds

Thursday, January 14th, 2010

Well after a pretty rough day for mortgage bonds yesterday, we are seeing a little rebound after this morning Jobless Claims. The figure came in higher than expected at 444k.

Also had the Retail Sales report this morning, and while it was expected to come in at 0.4%, it actually came in alot below that at -0.3%.

The FNMA 4.5% coupon has been approaching the 25 Day Moving Average the past few days, it has not gone above it, so that’s what’s basically being used to test mortgage bond resistance.

Folks, tax credit is going to be over soon and what that means is that everyone is going to be piling in wanting to close YESTERDAY.

With this being said, you have the almighty Capitol Hill lobbyists that have royally “boinked” the Real Estate Industry by implementing the new RESPA rules.

Have you ever seen 2 trains collide before?

Well that’s what’s going to happen if everyone waits until last minute.

Make sure to get everything in early, get with a good lender that understand all the new changes, and get your home closed on time (or as close as you can to it).

Don’t be behind the 8 Ball when you have a chance to cash in on a new home AND 8k! You’ll regret it later!

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How to Save to Buy a Home

Friday, November 27th, 2009
by Phoebe Chongchua

It can be one of the hardest things to do — save money for your first home. But now, more than ever, there’s incentive to buy. Government housing tax credits have been extended and that’s sparking buyers’ interest.


Reports show that U.S. homes sales increased 10 percent in October to the highest level since February 2007. The tax credit, less expensive homes, and lower mortgage rates are being credited. However, while the government is helping to support the purchasing of a home, many Americans still can’t afford to buy one.

“Most Americans are spoiled. Most Americans spend a lot of money on discretionary items,” says Eric Tyson, co-author of Home Buying for Dummies, 4th Edition. “What it really comes down to is you have to be motivated to look at where are you currently spending money and what discretionary spending can you cut off,” says Tyson.

So how do you get in a position to buy a home? For some the process can seem nearly impossible. First-time homebuyers are often fearful they’ll never be able to accumulate a down payment now that stricter guidelines are being enforced for taking out home loans.

Tyson says to look over your finances and see where things can be cut back a little. For instance, maybe you have a gym membership that you really use only a few times a month; does that justify having it? Another big area to find savings, especially for single people, is the dining out category. “Some people spend an enormous amount of money eating out,” says Tyson. Tyson says if you really want to save, take a look at the car you’re driving. “I argued 15 years ago that you should only pay cash for a car and that you should not take out an auto loan or a lease. My first publisher argued that’s not realistic. … Well, if you’re trying to save for your retirement or trying to save for a house and you go out and buy a $30,000 car by taking out an auto loan, that’s insane—you can’t afford it,” says Tyson. Still, he says most Americans continue to take out auto loans, “and they do it because they can’t afford the car and that’s just crazy. What you’re doing is borrowing against future income to be able to drive a car that’s more expensive than what you can really afford.”

“A severe recession as we’ve been through recently is a wake-up call and it forces people to realize that they can’t continue to spend this way,” says Tyson.

Tyson says he sees people who spend an enormous amount of money on things like sporting events and while he understands their passion, if they’re trying to save for a home, something must go. “I’m not saying to cut it all out but how about cutting half of it out. It comes down to trade-offs.” Another trade-off might be to watch some of the events on TV rather than go to them. This brings us to the point of seeking savings in your utility bills by bundling cable, Internet, phone or maybe even cutting down to the bare essentials of channels. “Shop anew for services and see if you can combine them under one company and get discounts for doing so,” says Tyson.

Have you checked your cell phone bill lately? A lot of times those charges add up very quickly. “People are wasting an enormous amount of money [in this area] because of the Web surfing, the downloads, and the text messaging,” says Tyson.

The bottom line is saving for a home is a very personal experience—what one person is willing to give up another person may not. If you keep your goal set on purchasing that home then you’ll find the effort to get there is not nearly as difficult and you’re likely to find that there are more places to cut costs than you realize.

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Find a home in Houston and get a VA or FHA Approved Mortgage in Houston

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Buying A Home on a Deadline

Monday, November 23rd, 2009

By Amy Hoak, MarketWatch

CHICAGO (MarketWatch) — House shopping usually slows down in the winter, as people put their home searches on hold to trim the tree, buy presents to put under it and avoid the chilly weather.

This winter, however, might be different, thanks to the extended — and expanded — first-time home-buyer tax credit.

“We’re going to see far more interest in the fourth quarter than we generally do because of the tax credit,” said Heather Fernandez, vice president of Trulia.com, a real estate search engine. Traffic surged on the site on Nov. 5, the day Congress approved the credit extension, she said.

The new law extends the tax credit for first-time home buyers and opens it up to some existing homeowners as well: The credit is now 10% of the home price, up to $8,000 for first-time buyers and up to $6,500 for repeat buyers. Read more about the home-buyer tax credit on the Internal Revenue Service’s Web site.

All buyers must have a binding contract on a house in place on or before April 30. The sale must close on or before June 30.

To be considered a first-time home buyer, an individual must not have owned a home in the past three years. And to be eligible, existing homeowners need to have lived in the same principal residence for five consecutive years during the eight-year period that ends when the new home is purchased. The credit is only for principal residences.

Income limits have risen as well. According to the IRS, the home-buyer tax credit now phases out for individuals with modified adjusted gross incomes between $125,000 and $145,000, and between $225,000 and $245,000 for people filing joint returns.

Will credit spur more buyers?

The inclusion of move-up buyers might inspire homeowners to take action and list their house if they’ve been putting it off, said Carolyn Warren, a Seattle, Wash.-based mortgage broker and banker and author of the book “Homebuyers Beware.”

“If somebody loves their home, it’s not going to entice them to sell. If they’ve had it on the back of their minds and really would like to move up, it might push them into doing it sooner than later,” Warren said.

The credit isn’t expected to have as large of an effect on move-up buyers as it has on first-time buyers, according to the Campbell/Inside Mortgage Finance Monthly Survey of Real Estate Market Conditions. The maximum tax credit is about 4% of the average purchase price for first-time buyers, but about 2% of the average purchase price for move-up buyers.

“We estimate that the first-time home-buyer tax credit will result in a 10% increase in home sales from March through November of 2009,” said Thomas Popik, research director for Campbell Surveys, in a news release. “We’d expect the effect of the proposed tax credit for current homeowners to be about half as large — from December until the tax credit expiration in the spring of next year, it might be 5% of 3 million transactions, or about 150,000 incremental home sales. Incremental sales to first-time home buyers could be an additional 300,000, for a total of 450,000 incremental sales due to the tax credit extension.”

Tips for buyers

Interested in buying a home and claiming the home-buyer tax credit? Below are five tips:

1. Don’t procrastinate

Get searching now. Getting an early start will give you a better chance of finding the right house before the credit deadline.

“Go out and start as soon as possible. There will be people waiting until the end,” said Pat Lashinsky, chief executive of ZipRealty, a residential real-estate brokerage firm.

When first-time buyers thought the credit would expire Nov. 30, people scrambled to find properties in September and October, he said. In some cases, “there wasn’t inventory that fit people’s needs,” he said. In Phoenix, Chicago and parts of California, for example, some properties even had multiple bidders, Lashinsky said.

Before you start house hunting, get preapproved for a mortgage, said Eddie Fadel, a Miami-based mortgage banker and author of the book “Don’t Rent, Buy!” And do a realistic assessment of what you can afford.

Buyers who have to sell an existing home should price it aggressively from the beginning to drum up interest and get a buyer as soon as possible, Fernandez said.

2. Don’t count on another extension

The credit won’t be available forever, Fadel said. If you want to take advantage, be sure to make that spring deadline.

“This is a medication for the housing crisis. Once the patient — which is the housing market — cures, there will be no medication needed,” he said.

3. Mind the interest rates

Mortgage interest rates are low right now, but will likely rise next year, Warren said. Higher rates will affect your monthly mortgage payments, thus the affordability of the house you are buying.

“It’s pretty universally accepted that rates will be higher next year. What is unknown is how fast and by how much,” Warren said.

Average rates on the 30-year fixed-rate mortgage have been hovering around 5%, but when the government stops buying large amounts of mortgage-backed securities, rates could rise, she said. The Federal Reserve plans to end its purchase program in March.

4. Communicate with your lender

Throughout the process, make sure you’re communicating with your lender regularly; if there’s a piece of documentation you’re asked for, get it turned in as soon as possible, said Doug Heddings, a New York-based real estate agent with Charles Rutenberg Realty. Good communication is important in making sure the loan closes on time.

And think twice before pursuing a short sale if you want to make the credit deadline. That’s where someone sells a home for less than what he or she owes on a mortgage, with permission of the lender. The process can be lengthy and unpredictable because the homeowner’s lender has to approve any deal, and can be complicated when there is a second mortgage associated with the property, Warren said.

5. Don’t take shortcuts

Don’t forgo any of the steps you would normally take just to make the tax-credit deadline. Make sure the house is a good fit for your needs and get a home inspection, Lashinsky said. Skipping steps could cost you in the long run.

“Don’t let the tax credit get you to make a decision to buy a house that you wouldn’t otherwise want to buy,” he said. “Don’t shortcut the process to get the tax credit.”

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If you have any questions regarding the revised tax credit, feel free to call the best Houston mortgage lender for details.

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Tax Credit Extended!!!!

Thursday, November 5th, 2009

Published: Oct. 29, 2009
By Steve Cook Real Estate Economy Watch

Senate Majority Leader Harry Reid (D-NV) and Chairman of the Senate Finance Committee Max Baucus (D-MT), engineered the deal to include move-up buyers in the homebuyer tax credit.

A deal struck among key senators last night to extend the homebuyer tax credit will broaden the benefit to include existing homeowners who are buying a new home as well as first-time homebuyers.

Tax credit for move-up buyers will be less than for first-time buyers, but still significant. They will qualify for a credit of up to $6,500 and must have owned their current homes at least five years. Under the current program and the new one for 2010, first-time buyers qualify for up to $8,000 and cannot have owned a home for the past three years.

Income limits would rise under the new proposal. Individuals would have to make less than $125,000 a year and couples $225,000 per year to qualify. Under the current program, limits are $75,000 for individuals and $150,000 for couples. Move-up buyers will be subject to the same income limits as first-time buyers.

For a consice summary of the current tax credit, visit http://www.federalhousingtaxcredit.com/2009/faq.php or contact your current FHA, VA, USDA, Jumbo Lender in Texas.

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Existing Homes Sales Benefit from Tax Credit

Sunday, October 25th, 2009

by Adam Quinones

The National Association of Realtors released Existing Home Sales data this morning.

Think about the materials that go into building and maintaining a home….WOOD, STEEL, PLASTICS, WIRING, PIPING, CONCRETE, GLASS, ELECTRICITY, FURNITURE, CARPETING ,ELECTRONICS, APPLIANCES….LABOR.

How about the commissions earned by Realtors and mortgage originators who help the borrowers close on their home? What about the home sellers? They are either moving into a bigger house, which implies they will be spending to furnish their bigger home, or downsizing, which would imply a lower payment and therefore more disposable income to spend.

The point is, when homes are selling, money moves around the economy more efficiently. The size of the housing market combined with the broad influences it has over the economy make the real estate sector a reliable leading indicator of economic activity. Real estate is one of the first sectors to contract when a recession is looming and one of the first to show signs of recovery when economic activity begins to improve.

A caveat regarding Existing Home Sales: because existing home sales data is only reported at the time of closing, when the deed is transferred to the new owner, this report is considered less “forward looking” than other housing indicators like Pending Home Sales, Housing Starts, and Building Permits. This is because it can take up to three months for a purchase transaction to close. This problem has been more relevant in recent months as lender turn times have slowed and other roadblocks like HVCC, new RESPA rules, and market volatility have delayed closings. Pending Home Sales data helps provide more timely market data because it reports on the number of contracts that have been signed, not actual closing, therefore giving economists and traders a more timely read on the health of housing.

READ HOW THE NAR COMPILES DATA AND GAIN A BETTER UNDERSTANDING OF SEASONAL INFLUENCES

Last month, the NAR reported that Existing Home Sales in August gave back a portion of their their strong July gains. Existing Home Sales, including single-family, townhomes, condominiums and co-ops, declined 2.7 percent to a seasonally adjusted annual rate of 5.10 million units in August from a pace of 5.24 million in July. This was 3.4 percent above the 4.93 million unit level in August 2008. In the previous four months, sales had risen a total of 15.2 percent.

This month the NAR reported the following:

From the NAR press release…

Existing-home sales bounced back strongly in September with first-time buyers driving much of the activity, marking five gains in the past six months, according to the National Association of Realtors®.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – jumped 9.4 percent to a seasonally adjusted annual rate of 5.57 million units in September from a level of 5.10 million in August, and are 9.2 percent higher than the 5.10 million-unit pace in September 2008.

Sales activity is at the highest level in over two years, since it hit 5.73 million in July 2007.

Total housing inventory at the end of September fell 7.5 percent to 3.63 million existing homes available for sale, which represents an 7.8-month supply at the current sales pace, down from an 9.3-month supply in August. Unsold inventory totals are 15.0 percent below a year ago.

“The current housing supply is the lowest we’ve seen in two and a half years,” Yun said. “If we could continue to absorb inventory at this pace, home prices would return to normal, modest appreciation patterns next year.

The national median existing-home price for all housing types was $174,900 in September, which is 8.5 percent lower than September 2008. Distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes in the same area.

Single-family home sales rose 9.4 percent to a seasonally adjusted annual rate of 4.89 million in September from a pace of 4.47 million in August, and are 7.7 percent above the 4.54 million-unit level in September 2008.

The median existing single-family home price was $174,900 in September, which is 8.1 percent below a year ago.

Existing condominium and co-op sales jumped 9.7 percent to a seasonally adjusted annual rate of 680,000 units in September from 620,000 in August, and are 9.7 percent above the 561,000-unit pace a year ago. The median existing condo price was $175,100 in September, down 11.7 percent from September 2008.

Regionally, existing-home sales in the Northeast increased 4.4 percent to an annual level of 950,000 in September, and are 11.8 percent higher than September 2008. The median price in the Northeast was $234,700, down 7.0 percent from a year ago.

Existing-home sales in the Midwest jumped 9.6 percent in September to a pace of 1.25 million and are 7.8 percent above a year ago. The median price in the Midwest was $147,600, which is 1.0 percent below September 2008.

In the South, existing-home sales rose 9.0 percent to an annual level of 2.06 million in September and are 10.8 percent higher than September 2008. The median price in the South was $153,500, down 7.6 percent from a year ago.

Existing-home sales in the West surged 13.0 percent to an annual rate of 1.30 million in September and are 5.7 percent above a year ago. The median price in the West was $219,000, which is 15.0 percent below September 2008.
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Overall, today’s release indicated continued progress in the stabilization of the housing market. However we are troubled by the forward looking statements Yun made regarding the variables that must continue to improve if housing it to undergo further stabilization and recovery.

“We’re getting early indications of price stabilization, but we need a steady supply of qualified buyers to meaningfully bring inventories down and return us to a period of normal, steady price growth and to fully remove consumer fears, which would then revive the broader economy. Without a firm foundation for middle-class wealth recovery, the post-recession economic growth likely will be one of the weakest in U.S. history.”

Given our in-depth involvement in the primary mortgage market, we are not encouraged by Yun’s outlook. Specifically the comment on QUALIFIED BORROWERS. The continual contraction of the labor market and ongoing tightening of lender underwriting guidelines is already having a direct impact on Yun’s recovery assumptions, and we expect these issues to continue to impact the stabilization process.

On a regular basis we are contacted by consumers who complain of higher cost loans and loan denial due to an unexplained drop in their FICO score. We ask the same question each time we hear these outcrys: Did your credit card limits fall? The answer is almost always YES, my credit card limit was cut.  Next we ask, have you missed a payment on your car loan or even a credit card? If the answer is yes…credit scores have been drastically effected, which has resulted in outright loan denial or a higher mortgage rate.

Adding to our relatively negative outlook is the soon to expire first time home buyer tax credit. Yun says the tax credit has played a role in the stabilization so far:

“Much of the momentum is from people responding to the first-time buyer tax credit, which is freeing many sellers to make a trade and buy another home,” he said. “We are hopeful the tax credit will be extended and possibly expanded to more buyers, at least through the middle of next year, because the rising sales momentum needs to continue for a few additional quarters until we reach a point of a self-sustaining recovery.”

We could go on and on about the industry, lender, and borrower specific problems limiting the housing recovery, however we believe the general big picture economic environment is providing enough roadblocks to recovery on its own. Thus, we will continue to state that until the labor market stabilizes and jobs start being created, the housing market will undergo a slow, frustrating recovery process (for mortgage and real estate professionals especially).

Consumers: Have you found the loan qualification process difficult?

Mortgage and Real Estate Professionals: Are you turning down more applicants? Are less deals closing? Are lending regs still tightening?

Are we being too bearish here?

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Vital Information for First-Time Buyers

Friday, October 16th, 2009

by Phoebe Chongchua

The first-time homebuyer Federal tax credit for $8000, record-low interest rates, and nationwide median home prices dropping to the lowest point in five years, makes this an enticing time to consider buying a home. By the way, that tax incentive isn’t truly just for first-time buyers — it’s defined as those not having owned a home in the last three years. Research and knowing your options are critical. Check with your tax accountant for more details. Note that the deadline is rapidly approaching to cash-in on this tax incentive, which runs out November 30th.

According to an article in August in the Raleigh News & Observer, 10.8 percent of buyers are motivated to buy due to Federal and state tax incentives. So far only 1.14 million buyers have filed for the credit but many more are expected to file for it on their 2010 returns. However, the National Association of Realtors reports that the first-time homebuyer figure in July was still about 10 percent below the average for the past six years.

There are many aspects to consider when buying your first home. Your price point, location, lifestyle, expert help, mortgage programs, inspections, how quickly you want/need to move, the list goes on. It can seem like an overwhelming process for first-time buyers. In fact, some shy away and continue to rent simply because they don’t know who to turn to or where to begin. Today there are more resources than ever available with just the click of a mouse; however, that can create information overload! But if you take a breath and relax, I’ll sort through some important factors for home buying. And even if you’re a seller, it’s good to review this material because it helps to remind you where first-time buyers’ mindsets are when they make an offer on your home.

Give yourself more time than you think you need. Due to the housing crisis and credit crunch, the mortgage process can take even longer than it did previously. Searching for a home is averaging about 12 weeks while getting the mortgage process wrapped up can take up to 60 days, according to information released by National Association of REALTORS 2008 Profile of Buyers and Sellers.

Give yourself plenty of time to understand how much home you can afford, what kind of loan is most suitable for your needs, and, of course, plenty of time to select the home that fits your lifestyle. First-time homebuyers often don’t have a lot of comparison shopping experience. Frequently they’re just getting started. What is acceptable for a rental is likely different from what first-time buyers expect and accept when purchasing their first home. However, first-time buyers must understand that shopping for a home is akin to shopping for a mate … there are always some compromises that are necessary. If you don’t allow enough time, you’ll find that it will lead to headaches, rushed decisions, and, in the end, you may feel pressured to buy something that you have not had enough time to completely consider—maybe because you have to relocate and start your job.

Never skip an inspection. You simply can’t spot everything that could be wrong with the home. While not all sellers do it, some hire an inspector to inspect the home when they list it on the market. However, the burden of the inspection typically falls on the buyer to pay for it. And the information you receive is invaluable. Hiring a certified inspector to give the home a once-over will help you discover problem areas that your agent can then negotiate for repair work or price adjustment. Also, note that the home inspections (yours and the sellers) may differ; examine both, this way you’ll learn more about your potential home.

Frank Schulte-Ladbeck, a licensed home inspector says that when you get your home inspection be certain to have everything turned on. In one case, “The water valve to the house was turned to almost off. When you turned it on to regular pressure… [the seller] had water spurting out of almost all of the faucets because all of the O-rings, the seals, had all dried so much that they were just allowing water to spill right out of them,” said Schulte-Ladbeck.

Use experts to help prepare. Having a team of experts who can expedite your search by finding the most suitable properties for you will save you endless hours of looking. Also, the right mortgage expert simplifies the loan process. You’ll be guided through the home-buying process instead of becoming overwhelmed by the options, paperwork, and tasks. Using the best specialists can truly make buying your first home a wonderful experience.

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Don't Cheat Home-Buyer's Tax Credit

Friday, September 4th, 2009

By Kenneth R. Harney

The IRS has an urgent message for would-be home purchasers: Make the most of the $8,000 first-time-buyer tax credit before it disappears Dec. 1 — if you qualify.

But if you don’t truly qualify, don’t try to play games with the credit. The IRS already has 24 criminal investigations of suspected fraud underway around the country. It has executed seven search warrants, and last month a tax preparer in Florida entered a guilty plea on federal charges of fraud in connection with the first-time-buyer credit. He’s awaiting sentencing and faces up to three years in prison, a $250,000 fine or both.

Congress’s two versions of the first-time-buyer credit — a repayable $7,500 credit in 2008, and this year’s more generous $8,000 credit that does not have to be repaid — have stimulated home sales nationwide. But they’ve also become irresistible temptations for dishonest taxpayers to cash in and claim bogus refunds.

Claiming the credit looks so easy: You just fill out IRS form 5405, list the address of the house you bought, mail it in and wait a month or two for your money. Who’s going to check on whether you really qualify under the definition of first-time buyer — someone who hasn’t owned a principal residence in the previous three years — and that you’re eligible on income and other factors?

With thousands of people buying houses and claiming tax credits, who’s going to be able to check all those filings? The answer from the IRS: We are. The agency said it uses “sophisticated computer screening tools to quickly identify returns that may contain fraudulent claims for the first-time homebuyer credit.”

The IRS won’t discuss the nature of its screening, but it’s clear from the number of ongoing investigations that claims for the credit are getting special scrutiny.

In the case of the Florida tax preparer, one tip-off evidently was the sheer number of clients who claimed credits as first-time buyers. James Otto Price III of Jacksonville entered a plea of guilty to charges that he fraudulently submitted returns claiming tax credits for 15 clients, some of whom apparently did not understand what he was doing.

According to a summary of the facts agreed to by Price as part of his plea agreement, he admitted that in February he met with a client who told Price that she didn’t want to buy a house. But Price insisted that she qualified for the credit because “she had two jobs.” He then wrote in a house address on the form 5405, claiming the client closed on the purchase Jan. 5. When she received her $7,500 credit, Price took $1,000 of it for himself.

In the plea agreement, Price admitted following a similar pattern in 14 other tax returns.

IRS spokesman Terry Lemons declined to discuss the ongoing criminal investigations of taxpayers claiming the home-buyer credit. He said the investigations involve individuals as well as tax-return preparers.

The IRS doesn’t “want to discourage people from taking advantage of the credit,” Lemons said, but it wants them to be certain that they’ve read through the eligibility rules so they don’t end up with audits, back taxes and late penalties. On the list of things that can disqualify buyers:

– Purchasing your house from a “related person.” That’s a broad category of people and entities, ranging from immediate family members — a spouse, parents, children, grandparents, grandchildren — to a corporation or partnership in which you have more than a 50 percent ownership stake.

– Buying a home with a spouse who is ineligible, even if you are eligible individually.

– Acquiring a house through an inheritance or gift.

– Financing the house through a tax-exempt mortgage bond program.

– Making too much money — in excess of $95,000 of modified adjusted gross income for singles, $170,000 or more for married joint filers.

What are the downsides if you claim the credit erroneously and do not intentionally defraud the government? If you are audited, the IRS most likely will ask for the full credit amount back, plus interest and a late-payment penalty.

Bottom line: Don’t let this year’s tax credit pass you by if you meet the criteria. And if you don’t, beware of slick-talking professional tax preparers who tell you that you do.

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Don’t Cheat Home-Buyer’s Tax Credit

Friday, September 4th, 2009

By Kenneth R. Harney

The IRS has an urgent message for would-be home purchasers: Make the most of the $8,000 first-time-buyer tax credit before it disappears Dec. 1 — if you qualify.

But if you don’t truly qualify, don’t try to play games with the credit. The IRS already has 24 criminal investigations of suspected fraud underway around the country. It has executed seven search warrants, and last month a tax preparer in Florida entered a guilty plea on federal charges of fraud in connection with the first-time-buyer credit. He’s awaiting sentencing and faces up to three years in prison, a $250,000 fine or both.

Congress’s two versions of the first-time-buyer credit — a repayable $7,500 credit in 2008, and this year’s more generous $8,000 credit that does not have to be repaid — have stimulated home sales nationwide. But they’ve also become irresistible temptations for dishonest taxpayers to cash in and claim bogus refunds.

Claiming the credit looks so easy: You just fill out IRS form 5405, list the address of the house you bought, mail it in and wait a month or two for your money. Who’s going to check on whether you really qualify under the definition of first-time buyer — someone who hasn’t owned a principal residence in the previous three years — and that you’re eligible on income and other factors?

With thousands of people buying houses and claiming tax credits, who’s going to be able to check all those filings? The answer from the IRS: We are. The agency said it uses “sophisticated computer screening tools to quickly identify returns that may contain fraudulent claims for the first-time homebuyer credit.”

The IRS won’t discuss the nature of its screening, but it’s clear from the number of ongoing investigations that claims for the credit are getting special scrutiny.

In the case of the Florida tax preparer, one tip-off evidently was the sheer number of clients who claimed credits as first-time buyers. James Otto Price III of Jacksonville entered a plea of guilty to charges that he fraudulently submitted returns claiming tax credits for 15 clients, some of whom apparently did not understand what he was doing.

According to a summary of the facts agreed to by Price as part of his plea agreement, he admitted that in February he met with a client who told Price that she didn’t want to buy a house. But Price insisted that she qualified for the credit because “she had two jobs.” He then wrote in a house address on the form 5405, claiming the client closed on the purchase Jan. 5. When she received her $7,500 credit, Price took $1,000 of it for himself.

In the plea agreement, Price admitted following a similar pattern in 14 other tax returns.

IRS spokesman Terry Lemons declined to discuss the ongoing criminal investigations of taxpayers claiming the home-buyer credit. He said the investigations involve individuals as well as tax-return preparers.

The IRS doesn’t “want to discourage people from taking advantage of the credit,” Lemons said, but it wants them to be certain that they’ve read through the eligibility rules so they don’t end up with audits, back taxes and late penalties. On the list of things that can disqualify buyers:

– Purchasing your house from a “related person.” That’s a broad category of people and entities, ranging from immediate family members — a spouse, parents, children, grandparents, grandchildren — to a corporation or partnership in which you have more than a 50 percent ownership stake.

– Buying a home with a spouse who is ineligible, even if you are eligible individually.

– Acquiring a house through an inheritance or gift.

– Financing the house through a tax-exempt mortgage bond program.

– Making too much money — in excess of $95,000 of modified adjusted gross income for singles, $170,000 or more for married joint filers.

What are the downsides if you claim the credit erroneously and do not intentionally defraud the government? If you are audited, the IRS most likely will ask for the full credit amount back, plus interest and a late-payment penalty.

Bottom line: Don’t let this year’s tax credit pass you by if you meet the criteria. And if you don’t, beware of slick-talking professional tax preparers who tell you that you do.

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