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Get $8,000 when you buy a new home

Many of you have asked me about the new credit for first time home buyers. Here’s the gist, brought to you by my mortgage professionals, Leah Odom and Joel Greer.  For more info, give me a call.

First Time Homebuyer’s tax credit has increased to $8,000! 

First time homebuyers couldn’t ask for more when it comes to the housing market. Mortgage rates remain at historic lows. Prices have dropped dramatically. There are many homes to choose from on the market. And now, the First Time Homebuyer’s tax credit has increased to $8,000.

Back in July, 2008, the tax credit was based on 10% of the home purchase price up to $7,500 and it had to be paid back over time.  Today, thanks to the Stimulus legislation, the maximum home buyer tax credit was increased to $8,000 and requires no repayment. The tax credit reduces the amount of taxes owed. A home buyer may go from owing money to Uncle Sam to receiving a substantial refund.

For example, if a homebuyer owes $3,000 in taxes, but qualifies for the full $8,000 tax credit, it would cancel the entire amount owed and $5,000 would be received as a tax refund instead.

The extra cash can be used by home buyers to make improvements to the new home, replenish savings, purchase furniture… it’s up to them.

Who qualifies for the credit?

A first time home buyer is broadly defined as anyone who hasn’t owned a primary residence in the past three years.  Single taxpayers with incomes of $75,000 or less and married couples with combined incomes less than $150,000 qualify for the full tax credit, but even those with greater incomes may receive a portion. The 8,000 tax credit is limited to home purchases that close in 2009.

If you know of someone who may benefit from this program, please pass this along.  Given all of the other economic junk out there, I would appreciate it if you helped me spread some good news.

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Why now is a good time to buy

If the financial predictions are correct, 2009 will be a tumultuous year for our economy.  Duh! Who doesn’t know that. But here’s what you may not know. Analysts predict that prices will continue to fall slightly but interest rates are slated to increase. 

From my personal analysis and from those who are smarter than me, it’s better for the average buyer to buy before the rates go up.  Let me give you an example. 

You fall in love with a 3 bedroom, 2 bath home in West Ashley, currently priced at $200,000.00. With your good credit (720 and up) you qualify for an interest rate of 5.5%.  On a standard 30-year fixed mortgage (don’t even get me started on Interest Onlys or ARMs) your mortgage would be $1135.58 per month.

When that house price drops 10% as predicted to $180,000.00, the interest rates may be inversely effected and go up at least 1 point to 6.5%, meaning you would be paying $1137.72 for something that’s marketably less equitable.  Sure, maybe it’s only a few dollars a month more, but those few dollars aren’t buying you anything real.  You’re simply giving the mortgage company more profit.

Plus, you have to weigh the risk of waiting.  When houses sit on the market, they have a nasty tendency of still including appliances that break down, need maintenance, etc.  Just like a car, the longer they sit the more deferred maintenance they will experience. 

I”ve gotten a lot of feedback from buyers about waiting out the process.  If you’re doing it to increase your downpayment then by all means go for it.  But if you’re doing it just to get a better deal, think again.  The deal you get won’t be as sweet as it seems.

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