First Time Home Buyer Federal Tax Credit Extended…and Expanded

The government has extended the first-time home buyer federal tax credit as well as expanded to include many existing home owners. First-time home buyers now have until April 30, 2010 to sign a contract and qualify for a tax credit up to $8,000. And starting November 7, many existing home owners may qualify for a tax credit of up to $6,500.

For more information, check out this flyer provided by the Virginia Association of REALTORS(R):

Information on extended and expanded first time home buyer federal tax credit –

You can also get more information on the extended first-time home buyer tax credit by clicking here.

How The First-Time Home Buyer Federal Tax Credit Works

Bob and Sally show us how the first-time home buyer federal tax credit works (click here if you can’t see the video below)…

Hat tip to NRVLiving.com and NVAR.com

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Time’s a Tickin’ On the First-Time Home Buyer Federal Tax Credit

Time’s a Tickin’ on the First-Time Home Buyer Federal Tax Credit

If you would like to take advantage of the first-time home buyer Federal tax credit, you’ll need to act soon because time is running out. The tax credit expires December 1, 2009, which means that you have to settle on your new home no later than November 30, 2009.

What does this mean practically speaking?

Despite November 30 being the deadline, you should aim to settle by November 15th to help leave room for any delays on your or the sellers’ end. Also, settlement companies will be swamped with settlements the last two weeks of November and may be delayed themselves. And don’t forget that the Thanksgiving holiday takes away at least one, if not two business days at the end of November.

At this point, short-sales are pretty much out of the picture as far as settling in time to take advantage of the first-time home buyer federal tax credit. It takes an average of 90 days to get a response from a bank(s) on short-sale approval and then you will need another 3 to 4 weeks after that to settle. This puts you way past the November 30 deadline.

If you are a home buyer going after a traditional resale or foreclosure, you should ratify a contract no later than about October 1 to 15 depending on the type of financing (conventional vs FHA vs VA). Conventional financing takes about 30 days from date of ratification to process and fun. FHA financing takes 30 to 45 days. VA financing takes closer to 45 days. (These are general numbers – the lenders I work with closely are awesome and get everything done within 30 days no matter what type of financing you go with)

If you are a home buyer who wants to take advantage of the first-time home buyer federal tax credit, you need to start actively searching for a property to purchase immediately. This will give you about a month to search for a property, submit and ratify an offer with enough time to settle before the deadline.

Wondering how to get started in home buying process?

First - click here to read my post, “The Home Buying Timeline”

Second – Click here to contact me so we can chat more about your specific situation and see what’s best for you.

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“Move fast to take advantage of first-time homebuyer federal tax credit” – Washington, DC Examiner

Information on first-time home buyer federal tax credit from the Internal Revenue Service (IRS)

If My Iraq War Veteran Home Buyers Just Got a 3.875% Interest Rate, Why Can’t You?

My Iraq War Veteran first-time home buyers (that’s them in the photo) and I thought we were hearing things when the lender said, “You qualify for a VA loan at an interest rate of 3.875 percent.” But we heard correctly! Qualified Veterans can get an interest rate as low as 3.875 percent on a VA (Veterans Affairs) loan.

Here’s the deal my Iraq War Veteran first-time home buyer clients got just last week:

• 3.875 percent interest rate for first 5 years
• No points
• The rate adjusts according to the Treasury ARM Rate (which is better than the LIBOR ARM Rate)
• The interest rate can’t increase more than 1 percent per year (only after the first 5 years)
• The maximum interest rate they can ever have is 8.875 percent regardless of how high future rates are
• No prepayment penalty

They are not planning on staying in their home for more than 5 to 7 years so this loan is perfect for them. A 30 year fixed rate VA loan is currently in the 5.25 percent range so they are saving about 1.5 percent on the interest rate. That comes out to a savings of $209.02 per month based on the amount they financed.

By the time they move, their rate will be between 3.875 percent and 5.875 percent. I think it’s safe to say that either of those rates will be lower than what the 30-year fixed rates will be in 5 to 7 years.

Besides saving money, why else is the low rate and cap so important?

Because the loan is assumable. This means that rather than a buyer having to go out and get their own financing/loan to buy this home, if they qualify, they can assume the existing loan and it’s terms (aka interest rate).

Let’s say rates are at 10 percent in 7 years. A qualified buyer could purchase their home and assume the loan at no more than 5.875 percent with the cap being at 8.875 percent.

And also because they’re building equity in their home more quickly. The lower the interest rate, the more of the monthly payment goes towards principal rather than interest. This means they will have paid down more principal and they will have more equity in their home than had they gone with a 30-year fixed rate loan at 5.25 percent.

How fast do you think they will be able to sell their house in 7 years when rates are 10 percent with “Current 3.875 to 5.875 percent interest rate assumable loan”?!

Can you say, “FAST!” No matter what the housing market conditions are like in 7 years, this property will stand out above the rest for the assumable low-rate financing alone.

Let’s do the math and see why.

Let’s say the property is worth $350K and rates are at 10 percent 7 years from now…

• If the buyer finances $350K at 10 percent, their Principal and Interest comes out to $3,071,50
• If the buyer assumes the current loan at 5.875 percent (the most it can be in 7 years), their Principal and Interest comes out to $2,070.38

That’s a savings of $1,001.12 per month.

In addition to saving $1K per month, the buyer will be building equity in the home much faster at the lower interest rate than they would at a higher interest rate because more their monthly payment will be applied to Principal rather than Interest.

Now you see why buyers will be all over this property like white on rice!

It’s a “win now and win later” situation for my Veteran first-time home buyers, as well as all Veteran home buyers.

If you are a Veteran and thinking about buying a home, email or call me and I will put you in touch with the loan officer that my clients worked with.

When Does the $8000 First Time Home Buyer Credit Expire?

You’ve probably heard about the $8000 first time home buyer credit (click here if you haven’t or would like more information about it). But do you know exactly how long you have before it expires?

IMPORTANT: This is how long you have until it expires, but you must settle/close on the purchase of your home by this date. That means you should be starting your home search in the near future especially if you’re considering purchasing a short-sale property (click here to find out how much time each type of transaction takes to close).

H/T to Ken Brand for sharing about the widget

What’s Up With the $8K Homebuyer Tax Credit Being “Monetized”?

On May13, HUD Secretary Shaun Donovan said that the Federal Housing Administration (FHA) is going to permit its lenders to allow first time home buyers to use the $8000 tax credit as a down payment (aka “monetize” the tax credit).

The next day, May 14, the Office of Management & Budget told the FHA to hold off on implementing the program because it was only a “proposal” (aka “sike!”).

Since then, consumers, agents, lenders and others have been waiting (impatiently) for a final and real answer to if/when the first time home buyer tax credit will be “monetized”.

Well, here’s the latest. According to an article in the Wall Street Journal,

“The FHA says that the rumors about the program’s demise were flat-out wrong and that the program will be rolled out soon. Some industry analysts say that the memo may have been pulled because the program, which uses a tax credit established in February’s stimulus package, needed an OK from the White House budget office.”

If the program is approved, it would only be available through November of this year so time is a ticking…

I’ll keep you posted as more becomes available.