Homebuyer Tax Credit to be Extended

Not only are home prices down, the federal government is about to throw in $6,500 to make a purchase an even better deal.

The intent is to stimulate sales of higher priced homes as well as entry level properties.  It also could help sellers in getting a slightly higher price for their homes.  However, further extensions of this tax credit are not likely, so those delaying a home purchase may lose out on a great source of financial assistance.

STEPHEN OHLEMACHER (AP) reports:

WASHINGTON — First-time homebuyers have been getting tax credits of up to $8,000 since January as part of the economic stimulus package enacted earlier this year. With the program scheduled to expire at the end of November, the Senate voted Wednesday, November 4 to extend and expand the tax credit to include many buyers who already own homes. The House is scheduled to vote on the bill Thursday, November 6.

Buyers who have owned their current homes at least five years would be eligible for tax credits of up to $6,500. First-time homebuyers — or anyone who hasn’t owned a home (including condo or co-op unit) in the last three years — would still get up to $8,000. To qualify, buyers in both groups have to sign a purchase agreement by April 30, 2010, and close by June 30.

“This is probably the last extension,” said Sen. Johnny Isakson, R-Ga., a former real estate executive who championed the credits.

The homebuyers’ tax credit is one of two tax breaks totaling more than $21 billion that the Senate included in a bill extending unemployment benefits for those without a job for more than a year. The other would let companies now losing money recoup taxes they paid on profits earned in the previous five years.

The real estate industry has been pushing to extend and expand the housing tax credit. About 1.4 million first-time homebuyers have qualified for the credit through August. The National Association of Realtors estimates that 350,000 of them would not have purchased their homes without the credit.

Extending and expanding the tax credit for homebuyers is projected to cost the government about $10.8 billion in lost taxes. The measure passed the Senate by a 98-0 vote.

Expanding the tax credit for money-losing companies is projected to cost $10.4 billion.

The tax break would help industries suffering losses in 2008 or 2009, including retailers, homebuilders and newspapers. The new tax break would be available to companies of any size, providing a quick source of cash.

The tax breaks would be paid for largely by delaying a tax break for multinational companies that pay foreign taxes. It was passed in 2004 and originally was to have taken effect this year, but would now be delayed until 2018.

Waterstone Mortgage Reports Great Rates

Despite the the looming threat of serious inflation and rising mortgage rates, as of early October,  Waterstone Mortgage was able to provide the lowest rates we have seen since Dwight D. Eisenhower was president.  It is important to note that the actual rates available to a particular borrower are based on a complex grid, including credit scores among other factors.

FHA ($180,000 and up, lower loan amounts adjust slightly):

4.5 – 1.5 Points

5.0 – No Points

5.25 – I pay $1,000 of closing costs

5.5% -I pay all closing costs

Same rates for VA

Conventional

5 year arm, 740 score, 20% equity, no escrow:

3.5% – 1 Point

4.0% – No Points

Rural Development, Zero Down Purchase, No Monthly MI:

5.5 – No Points

5.0 – 1 Point

Lead, Loans & Historic Properties

Attended training at the Realtors Association and discovered that buying historic and vintage properties potentially has become a lot more complicated in the past couple of months.  With conventional financing limited to those with substantial down payments and strong credit, many buyers are turning to FHA and Rural Development Loans (formerly Farmers Home Administration loans).  However, in order to issue a loan, FHA and Rural Development, require that all utilities be in working order, FHA requires at least 2 years of useful life remain on the roof, and both require that any peeling or chipping lead paint be corrected not only on the house but all outbuildings on the property, even on farm properties.  This can be a major barrier to obtaining a federal loan for properties requiring significant rehab.

However, such properties may be eligible for HUD Section 203(k)  Loans, (For Details on 203 Loans click here) whereby funds to accomplish the rehab work are escrowed at closing.  Keller Williams Realty is forming a national partnership with Home Depot to provide a team of federally certified building contractors to facilitate the work under such loans.  Nevertheless, this program is truly complex and is not suitable for everyone.

This market and the use of such complex programs requires a strong Realtor-Lender team such as we have with Waterstone Mortgage Corporation.   More than ever, this market requires a professional realtor who keeps up-to-date on the weekly developments, and can see all the way through the purchase process—from the initial identification of needs and desires, property search, financing, to occupancy and any needed rehab work— and be the champion of your vision.