Tax credit extended

The Senate voted Wednesday to give homebuyers another three months to settle on their contracts and take advantage of a popular tax credit that sparked a rush of activity in the housing market.

The Senate, with a vote of 60-37, accepted an amendment by Democratic Leader Harry Reid that extends the closing deadline to Sept. 30 for buyers who met the April 30 deadline to have a signed contract.

The current deadline requires buyers to close by June 30 to get the $8,000 tax credit for first-time homebuyers.

Existing homeowners buying a new primary residence are eligible for a $6,500 credit.

Reid offered the measure as an amendment to a bill that would extend some popular business tax breaks and extend unemployment insurance benefits for jobless workers.

The proposal would not have a significant impact on future home sales as the extension would be only for home buyers who already had a contract in hand by April 30.

The popularity of the tax credit has caused some anxiety because settlement offices are inundated with buyers trying to close on transactions by the end of this month to get the tax break.

Copyright 2010 Reuters.

Tax credit extension details

Homebuyer Tax Credit

The House and Senate have sent the bill extending the Homebuyer’s Tax Credit to the president for signature.  Here are some of the highlights:

Tax credit: Ten percent of the purchase price of a primary residence, up to a maximum of $8,000 for first-time homebuyers and $6,500 for repeat buyers. First-time homebuyers are defined as people who have not owned a home in the previous three years. Repeat buyers must have owned their current home at least five years. The credit cannot be used for houses costing more than $800,000.  

Deadline for qualifying: Purchase agreements must be signed by April 30, 2010, and closings must be final by June 30.

Military deadline: The deadline is extended by a year for members of the military who have served outside the U.S. for at least 90 days from Jan. 1, 2009, to May 1, 2010.

Income limits: Individuals with annual incomes up to $125,000 and joint filers with incomes up to $225,000 qualify for the full credit. Individuals with incomes up to $145,000 and joint filers with incomes up to $245,000 qualify for reduced credits.

Use your $8000 tax credit for your down payment!

I had a conversation with my friend Bob Linz, a real estate investor, on the ferry Friday night. He predicted the rise of foreclosures three years ago. He thinks the real estate market won't hit bottom for another three years.

Nobody is right 100% of the time, any more than any hitter can bat 1.000 for very long. I think Bob's pessimistic. The following story about how first-time homebuyers can now use their $8000 credit bodes well. As the story points out, the credit won't be enough to "reinflate the market," but it will help to put the needle in the valve, at least.

At Tuesday’s National Association of Realtors Real Estate Summit held in Washington, D.C. [May 12], Housing and Urban Development Secretary Shaun Donovan tipped his hand at some changes to the original $8,000 tax credit proposal for first-time home buyers that the Obama Administration announced in February.

Here’s the buzz: The feds may allow the $8000 tax credit to be used now — perhaps as a down payment on a house — rather than waiting months for a refund on a tax return. This is considered a huge plus since most first-time home buyers have difficulty coming up with a down payment and this could help motivate buyers.

Here’s a key excerpt from Donovan on the $8000 tax proposal:

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 down payment. 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. FHA will be publishing the details shortly.

Loan officer Justin McHood wrote about the possible tax credit changes on Mortgages Unzipped, warning that this is not in place yet, but details will emerge soon and the Seattle PI’s Aubrey Cohen reported that buyers would repay the loan after getting their tax refunds. Builder Online quotes Rob Dietz, director of tax issues at the National Association of Home Builders (NAHB) is less optimistic, saying:

“There’s no doubt that the purpose of the tax credit is to stimulate housing demand. We estimate new and existing home sales will increase by 160,000. But it’s not a tax credit that is in anyway large enough to reinflate the market—it’s just a useful and limited tool to smooth out the market,” he said. “As for causing sales to return to 2005 levels or push prices up, this tax credit is not capable of doing that.” Many more details to be worked out. Stay tuned.

Thanks to Diane Tuman at Zillow Blog

Americans still eager to buy!

Our friend Jim Tolas of Landover Mortgage passed this along. Thanks, Jim!

Nearly 25 percent of adults say they plan to purchase a home in the next five years and half of those (53.5 percent) will be first-time home buyers, according to a survey commissioned by Move Inc., operator of Realtor.com.

More than 18 percent cite the $8,000 tax credit as a motivating factor. Potential home buyers with higher incomes are more interested in the tax credit than those in lower income brackets, with 43.4 percent of potential first-time buyers who earn $50,000 or more saying they plan to use the tax credit.

When presented with a list of amenities, home owners wanted it all–with more space leading the list (about 10 percent chose that option). Other amenities that were high on many shoppers’ lists included energy saving features (6.8 percent), bigger or nicer yard (6.1 percent), a better location (4.2 percent), or updated amenities (3.4 percent).

The Move survey also found that 18 percent plan to take advantage of the Obama administrations program to prevent foreclosures.

Would you like $8000?

Do I have your attention? Your free money comes in the form of the 2009 First-Time Homebuyer Tax Credit; you can receive up to $8,000.

Here are some of the criteria to qualify:

In order to be a recipient of this tax credit, you may not have owned a home within the last three years.

If you owned a home prior to three years ago, you are considered a first time homebuyer under the definition of this credit.

If you file your income taxes as a “single” filer, the income limit is $95,000 and for married purchasers, the income limit is $170,000.

You must purchase your home in 2009, and it must be your principal residence, the residence that you occupy more than 50% of your time. You must keep the home for a minimum of three years or the credit must be repaid.

The formula for the $8,000 credit is based on 10% of the purchase price up to $8,000. If you purchase a home for $200,000, 10% would be $20,000. You would receive the maximum credit of $8,000.

This tax credit is applied towards your total 2009 tax liability. If your 2009 tax due to the IRS is less than the $8,000 earned credit, you would receive a refund for the difference.

Let’s see: reduced home prices, unbelievably low interest rates and now there is free money just waiting for you. I'm waiting for email with your phone number--I'll call you right back.

Good news for first-time homebuyers

Just in case you haven't heard, first-time homebuyers will be given a $7500 tax credit if they purchase before July 1, 2009. Some good news in a bad economic year, at least if you're a first-time homebuyer!