HUD News Release: Donovan Announces Recovery Act's Homebuyer Tax Credit; Can Immediately Help Thousands Of First-Time Homebuyers To Buy A Home
President Obama’s American Recovery and Reinvestment Act of 2009 offers first-time homebuyers a refundable tax credit of up to $8,000 for purchasing their first home. The way that the act was written, families could only access this credit after filing their tax returns with the Internal Revenue Service. This meant that taxpayers could only receive this benefit if they (1) amend their 2008 tax return, or (2) wait until they file their 2009 return. Either way, a home purchaser must bring their own savings to the closing table and wait for the government to reimburse them for their effort.
Until now.
On May 29, U.S. Housing and Urban Development Secretary Shaun Donovan announced that the Federal Housing Administration (FHA) will allow homebuyers to apply the first-time homebuyer tax credit toward the purchase costs. To apply for this treatment, the home purchaser must apply for an FHA-insured loan. The home purchaser must still bring sufficient funds to the closing to cover the required 3-1/2% down payment. However, the tax credit can be used to pay additional down payment amounts or the buyer’s closing costs. These additional closing costs can also be used to achieve a lower interest rate.
My Thoughts
Donovan’s proposal is a positive step to turn the housing market around. Many of my buyers are choosing to wait to enter the market for some reason. The only thing I can assume is that these buyers are waiting to time the market. Well, I think many of them have lost an incredible opportunity to save the most money. Housing prices is not the only aspect a buyer should focus on. Up until two weeks ago, interest rates were at the lowest in years (at or below 5%). Now, they are hovering around 5.75%.
Consumer confidence appears to be back. The stock markets appear to be stabilizing. A stable stock market generally means a stable loan market. Therefore, I don’t anticipate that we will be seeing interest rates back to 5% any time soon.
Timing, Timing, Timing
For those buyers who are choosing to wait, I caution you not to wait too long. In order to take advantage of the $8,000 first-time homebuyer credit, your transaction must close no later than December 1. Therefore, don’t wait until November 30 to write an acceptable offer as your transaction will not close in time. If you wish to wait until the last minute, you must have an accepted offer no later than October 31 to ensure that your deal will close within the stated timeframe. Now is the time to plan for your real estate purchase.
Click here to read the entire statement that was issued by Secretary Donovan>>>
If you have any additional questions or concerns regarding the tax credit or this news release, please e-mail me at dray@shorewest.com or call me at (414) 412-7980.
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Labels: Finance, Real Estate
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