Time Running Out for First-Time Home Buyers Credit

Chances are you have read recently about the bill before Congress to extend the First-Time Home Buyers Credit. Part of the American Recovery and Reinvestment Act of 2009, this opportunity may be gone very soon.

The $8,000 tax credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009, and is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.

Some people have said that stimulus money given out since the beginning of the year has caused problems in the economy. As a full-time Realtor for the last ten years, I can assure you that the $8,000 first-time homebuyer tax credit has definitely been a success. Homebuyer interest and housing sales increased almost as soon the availability of this program became news.

Today's lower prices and interest rates appeal to consumers, but it's been the tax credit that has attracted people to open houses and to homeownership. Demand from first-time homebuyers helped drive a 9.4% increase in sales of existing homes from August to September according to the National Association of Realtors, continuing a trend of increasing sales in five out of the last six months.

This tax incentive is a true tax credit. The $8,000 home buyer tax credit is tangible cash, not a deduction from taxable income. This is not a loan and does not have to be repaid as long as you live in the house for the next three years.

A ‘first-time home buyer’ is defined as someone who has not owned a home in the last three years. There are other restrictions in the qualifications such as income caps, and the home must be your principal residence.

I explain to people that this program has had a ‘trickle up’ effect. Home owners in the lower-priced market have been able to sell to buyers eligible for this credit which has given those sellers the opportunity to move up into more expensive homes.

In my business in 2009, 40% of my transactions have involved buyers who qualify for and intend to apply for this credit. As the November 30th deadline looms I have seen a slump in my buyers’ activity. It’s close to being too late to enter into a sales agreement with any hope of closing by that date.

Uncertainty about the future of the credit will dampen consumer demand nationwide. There’s a strong lobby in Washington among realtors, lenders and builders urging Congress to extend this opportunity. The progress that has been made in the recovery of the real estate market could grind to a halt unless Congress acts now to extend the credit through 2010. Let’s hope they are listening!

Condominium Financing is A Challenge

This post is courtesy of Sally Lapides, Owner and CEO of Residential Properties Ltd.


HUD issued Mortgagee Letter 2009-19 with important changes to the guidelines for Condo financing. The guidelines were originally scheduled to take effect on October 1st, but are now scheduled to take effect November 2nd. One of the major changes has to do with the Approved Condo list. Currently, FHA has a list of Approved Condo’s. If a project is on the approved list then FHA financing is allowed, but only if the project meets the other requirements. Spot Approval provided a way to close FHA loans in projects that were not approved; now, spot approval will no longer be allowed. According to the new guidelines, any project not approved in the past 12 months will be taken off the FHA Condo Approval list and new projects currently approved will have 12 months to re-certify, so basically the entire list of approved condo’s is being redone.

Here are some more proposed guidelines to be mindful of:• 4+ units can have 30% maximum FHA financed units, (which might change to 50%).• No more than 15 % of the units can be in arrears of the condo association fee.• No more than 10% of the units can be owned by a single investor.• 2 and 3 units are now allowed, but HUD will only insure one of the units.• Right of First refusal considered on a case by case basis, (as long as you can prove it is not discriminatory).

Real Estate Insight tip:
If you are thinking about buying a Condo with FHA financing, do yourself a favor and look for HUD approved units. If you are selling a unit that is not HUD approved, understand that the pool of buyers is smaller, and non HUD approved Condos are going down in value, you might have to price below market to compete. If you live in a non-approved building, strongly suggest to your Condo Board that they go about the approval process. To find out if a condo project is FHA approved, click here for the HUD webpage: FHA condo approval search

Calling All Buyers

There's never been a better time to buy a home. Let me say that again.....There's NEVER been a better time to buy a home.

The Mortgage Bankers Association (MBAA) reported last week the average interest rate on new 30-year fixed-rate loans nationwide was 4.97%, nearing the lowest level in decades. And on Thursday, Freddie Mac reported that the average fixed rate on a 15-year home loan had dropped to 4.46%, the lowest level on record.

Not surprisingly, loan applications jumped 13% last week and are up 50% from late June. Aside from the holy grail rumor of 4.5% last summer, 5% seems to be the magic number that really spurs mortgage activity. Most of the activity has been for refinancing, but applications for new homes are growing as well, according to the MBAA.

That coupled with the amazing real estate values that are available in so many areas make this the time to buy.

And if you are a first time buyer or have not owned a home in the last three years, you may be eligible to receive an $8000 tax credit the next time you file your income taxes.

If you have been waiting to buy a home, the time is NOW!