• I am a first-time home buyer and purchased a home before the Home Buyer Tax Credit extension. Should I have closed before November 30, 2009?
• I have rented out my present home for the last 2 years and now I want to buy a condo and move into it. Do I qualify for the Tax Credit?
• I just got married! My wife and I want to buy a home with the tax credit and I have owned a home for the last few years. Are we eligible?
• What if I buy a house with the tax credit then move in 2 years?
• Can I use the tax credit for the down payment?

These were just a few of the questions asked at a recent session on the Home Buyer Tax Credit extension held at The Group Inc. real estate offices  on January 13. Like Cash for Clunkers for the auto industry, the extension of the Home Buyer Tax Credit extension is meant to encourage buyers to purchase a home sooner than later.

And it seems to be working. Originally, the tax credit extension ended on November 30, 2009 but the feds decided to extend it to April 30, 2010 which means that as long as you have a signed contract by April 30 and close by June 30, you are eligible for either the first-time home buyer credit of $8,000 or the long-time resident tax credit of $6500.

But there are restrictions and here are just a few:

• You have to have lived in your home at least 5 out of the last 8 years in order to qualify for the long-time resident tax credit and the house you buy must become your personal residence.
• If you buy a home with your new spouse, the two of you must meet the qualifications of a long-time resident by living in the same house if the both of you are looking to qualify as long-time residents.
• You can keep your present home as an investment if you want.
• In a few cases and possibly a higher interest rate, the buyer might be able use the money as part of a down payment.
• Members of the military serving overseas get an extra year.
• The buyer can’t buy the home of a relative.
• Plan on owning the property for at least 3 years.
• There are maximum income levels and minimum sales prices.
• Ask your Realtor how to claim your credit and what forms you will need.

Congress passed the tax credits in an effort to boost the struggling housing industry and fight recession. Indications are that it’s had an impact. The National Association of Realtors reported that November sales of existing homes were up 44 percent from a year earlier. Although new home sales dropped in November, figures from the Commerce Department show that they’re up 8 percent from the low in January 2009.

As a real estate agent, I’ve been spending much of my time fielding calls from clients asking if they are eligible and asking for advice as to their next step. Each situation is different and my answers need to be about each client’s financial state, the local market and the client’s potential price range. We also have to consider the stress and time and effort it takes to buy a house and meet a looming deadline.

Since the long-time resident tax credit can also be used to downsize, it can work for someone living in a home that no longer meets the needs of a smaller household. Sell your family home and buy a patio home or a condo. But I think the majority buyers using the tax credit will be the first-time home buyer who can use the money to make some changes to their new home or they can just tuck it away just like a bonus but without the tax ramifications.

So bottom line: with less than 5% interest rate (for buyers with great credit), some fantastic inventory, motivated sellers (though not all!!!), and free money, we haven’t seen such a good buyers market in awhile. However, with reasonable prices for homes that are in popular locations and well-maintained, we are seeing multiple offers again.

I called clients about two homes that I saw on a Realtor tour before it even hit our local MLS, but both were under contract before the end of the day. So, no matter what you hear in the national media about the state of real estate, everything really is local. Not just the northern Colorado market, but neighborhood by neighborhood, the sales are widely different.

A couple of caveats here. Changes in the lending market are forcing contract deadlines to go from 30 days to close to 45 days to close and with FHA loans it can be up to 60 days to close. If you’ve been ruminating about a possible sale or purchase, call your Realtor, pay attention to your neighborhood, drive around the neighborhood you would like to live in, go to Open Houses, look on the Internet, talk to a lender; do your homework. But check this market out. And time is truly of the essence.

There’s barely three months left before the $8,000 tax credit for first-time buyers ends…and it can take that long to close on your new home.

Passed earlier this year as part of the economic stimulus package, the credit is good for up to $8,000, or 10% of the purchase price, and applies to people who have not owned a home in the previous three years. (There are some income restrictions.) The best part: Unlike a similar program from 2008, the credit does not have to be repaid.

The bad part: It ends on Dec. 1.

Because it usually takes around 90 days to close on a house after a contract is signed, buyers have very little time left to act. As of Thurs., Aug. 27, there were only 96 days left before the credit ends.

Call a Group Realtor TODAY and we will help you make this happen!

Read this article in Money Magazine:

The Group Guaranteed Mortgage forwarded this information to Group Realtors this morning.
The attached article is an announcement that FHA will permit the $8,000 tax
credit to be used as a downpayment for new home buyers. This is very good news
for first-time homebuyers who lack downpayment money.
Click here to read the article.

Donovan Says FHA to Permit $8,000 Tax Credit as Downpayment

Secretary Shaun Donovan yesterday said FHA would permit lenders to allow
first-time borrowers to use the $8,000 tax credit recently put into law as all
or part of a downpayment on a home. Donovan’s remarks at the National Association of Realtors’
legislative meeting in Washington represented the second major news announcement for HUD this week;
earlier this week, Donovan announced that HUD had withdrawn its “required use”
provision in final Real Estate Settlement Procedures Act rules.

“We all want to enable FHA consumers to access the tax credit funds when they close on their home loans so
that the cash can be used as a downpayment,” Donovan said. “So FHA will permit trusted FHA-approved lenders
and HUD-approved nonprofits, as well as state and local governmental entities to ‘monetize’ the tax credit
through short-term bridge loans. We think the policy is a real win for everyone, ensuring that borrowers can
tap into the numerous organizations that are already part of the FHA network to receive this additional
benefit.

Donovan cited estimates by the National Association of Home Builders that the tax credit
could stimulate 160,000 home sales across the nation, of which 101,000 could be
first-time buyers using the tax credit. Another 59,000 existing homeowners could buy another home because
a first-time buyer purchased their home, he said.

Donovan said FHA will publish details of the plan shortly.

On January 9, the most emailed article on nytimes.com  was about the opportunity that exists for the first time home buyer.

Here are a couple of excerpts:

Five or 10 years from now, when the financial crisis has ended and housing prices are up smartly once more, we will look in the rearview mirror and realize that we missed a golden age for first-time home buyers.

Since prices generally soften in the winter, it may make sense to start looking seriously once the mercury bottoms out. “If you look at new developments next spring, you may not have the choice you thought you would have or be in the bargaining position you thought you would be,” Mr. Shepherdson said. Also, if you wait after June 30, you will miss out on a $7,500 federal tax credit for income-eligible first-time home buyers that works like an interest-free loan.

Since this article appeared, there have been new developments that affect first-time buyers.  We are seeing real signs of recovery in the lower price ranges in Northern Colorado which means the good deals will soon be gone.  Contact a Group Realtor for more information.  Don’t miss out on your window of opportunity!