Weddington

Mortgage interest rates are jumping faster than gas prices. Everyone who was waiting on the “bottom” to buy a home has now missed that window. Rates have increased nearly 3/4% in the last three weeks. And they will continue to increase, so anyone planning on buying a home in the near future should begin looking now.

So why are the rates increasing so quickly? The answer is both complex – and simple. The money for mortgages is a supply-and-demand function of the bond market. When investors become more confident in the stock market, and expect better returns from stocks, they cash out the money they have in bonds and move it to stocks. In order to compete for “investor dollars,” the bond market has to increase the interest rates that they pay to bond investors. Since mortgages are directly funded through bonds, an increase in the interest paid by bonds passes directly through to lenders – and eventually to buyers – in the interest rates paid for mortgages.

Compounding this problem is the amount of mortgage dollars funded in May. There are a lot of mortgages available in the marketplace for investors – and not enough investment dollars available to buy them all up.

So if you are on the fence about buying a new home, it is time to make a decision. Interest rates will continue to increase – they may be over 6% by July 1st. And home prices are starting to creep upwards in the lower price segment of the market place – homes under $250,000. The longer a buyer waits, the more expensive the purchase will become.

Those of us in the Real Estate business commonly assume that buyers are well-informed about the First Time Buyers tax credit program. But as I deal with new buyers, I am constantly amazed at the number of buyers who would qualify for this program that are totally unaware of its existence.

The First Time Home Buyers Tax Credit is a very simple program for new buyers. The basics of it are:

• Buyers who have not owned a home in the last three years qualify.
• The credit is 15% of the purchase price of a home, with a maximum of $8,000. (so a home that costs more than $80,000 qualifies for the maximum credit)
• Income limits for buyers are $75,000 for a single buyer or $150,000 for married couples filing a joint return.
• New homes and re-sale homes both qualify. The sale of the home MUST close no later than November 30, 2009

It is extremely important to understand that this is a TAX CREDIT, and not just a tax deduction. A credit means that the buyer will get the full amount of the tax credit, regardless of the taxes they paid or owe.

It is also very important to know that anyone buying a home in 2009 can actually file for this tax credit on their 2008 taxes – even if they have already filed their 2008 taxes.

One last note – there has been a lot of talk about buyers being able to use the tax credit as their down payment. There has been proposed, but it is not a reality at this time.

I have added a couple of very informative links below, for anyone wanting to get more information about it.