Whether a 1st time home buyer, or a move-up buyer, it’s very important not to waste precious time. To be sure to qualify for the tax credit, you won’t want to be scrambling at the deadline.
According to a RISMEDIA article dated November 24, 2009, 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.
The tax credit for first-time home buyers has been extended, plus a credit is opened up to some existing homeowners: The credit is equal to 10% of the home price, up to $8,000 for first-time buyers and up to $6,500 for repeat buyers. All buyers must have a binding contract on a house in place on or before April 30, 2010. The sale must close on or before June 30. 2010.
To be qualify for the credit, a first-time home buyer must not have owned a home in the past three years, and 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: 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.
Tips for buyers
Interested in buying a home and claiming the home-buyer tax credit? Below are five tips:
1. Don’t procrastinate. Start searching for a home now. Getting an early start will give you a better chance of finding the right house before the credit deadline. Before you start house hunting, get preapproved for a mortgage, said Eddie Fadel, a Miami-based mortgage banker, 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.
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. Higher rates will affect your monthly mortgage payments, thus the affordability of the house you are buying. 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.
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.
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. Skipping steps could cost you in the long run.
I can help make it all happen for you, without wasting time or skipping any steps! Give me a call today.
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