I just listened to a great call with an eye towards what we can expect in the year 2010 in the housing and rate market.  A great point was brought up about the cost of waiting.  Right now the government has pushed some major incentives into the market.  In December of 2008 the government announced a purchasing program that pushed rates roughly 1% lower than where they were the previous month, and had been for almost a year.

The Government is also allowing for a TRUE TAX CREDIT of $8000 for first time home buyers that is set to expire in April.  These 2 things can make a huge difference for a first time home buyer.  If you wait to buy and rates go up the roughly 1% that most experts are forecasting, you would be looking at a cost of about 5% of your loan amount upfront to buy down your mortgage rate back down to current levels, on a $200,000 loan that is $10,000.  Add to that the loss of the tax rebate, that is nearly $20,000, or about 10% of the purchase amount.  A more impressive number is the lifetime cost of a mortgage that is 1% higher than the available rate today.  The 30 year cost of a $200,000 loan with a 1% rate increase is $45,000.

This is a call to action, if you are debating buying your first house, or moving up to a larger home, please consider the cost of waiting.

By now you’ve probably heard: The $8,000 Tax Credit has been extended!

And you’re thinking, “I’ve been wanting to buy a home… maybe there’s something to this procrastination thing, after all.” In this case, you’d be right; The last go-round provided up to $8,000 to homebuyers who had not owned a home in the past 3 years, and whose income was $75,000 for single taxpayers and $150,000 for married taxpayers filing joint returns.

In recognition of your patience and wisdom, you are now eligible for the Sweetened Deal: For home purchases occurring after November 6, 2009, the new income limits are $125,000 for single taxpayers and $225,000 for married couples filing jointly.

Be prepared to prove it!

Due to the very real potential for fraud, you will be required to prove that you have not owned a home in the last 3 years, however, the credit can be allocated to the person who has not owned previously, in cases where parents are assisting with a purchase, or where one member of an unmarried couple has previously owned.

Saving for a downpayment?

Another element of the new version is that it allows prospective home buyers who believe they qualify for the tax credit to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment.

Keep the Cabin!

Also of note is that ownership of a vacation home, or rental property that was not used as a primary residence, does not disqualify a buyer as a first-time home buyer.

Upgrade your digs.

The most significant change to the ‘bonus round’ homebuyer tax credit is the addition of a ‘move-up buyer’ credit. This provision allows for a tax credit of up to $6,500 to homebuyers who have lived in the same residence for 5 of the last 8 years, on purchases up to $800,000.

You’re Not from Around Here?

Anyone who is not a nonresident alien (as defined by the IRS) and who has owned and resided in a principal residence in the United States for at least five consecutive years of the eight years prior to the purchase date can claim the tax credit if they meet the income limits.

Get Educated.

The income limits for move-up buyers are the same as for first-timers, and the allowable credit amount is graduated at the same rate, so please speak with your accountant for details on how your specific situation may be affected.

Some Restrictions Apply.

In order to qualify, all purchases- both first-time and move-up, must be completed on or before April 30, 2010 (or purchased by June 30, 2010 with a binding sales contract signed by April 30, 2010).

The Fine Print.

If you’re considering purchasing a home, and want to take a look at the tax credit qualification and application process, here’s a link to download the IRS Form 5405

The First Time Homebuyer Tax Credit Expires November 30, 2009 That means you have limited time to find a home before it’s too late. It is recommended that you enter into contract prior to October 15 if you wish to close before the tax credit expires. With closing timelines stretching anywhere from 30-50 days, if you want to take advantage of the $8,000 tax credit and low interest rate environment, you should take action soon!.

What is the Definition of a First Time Homebuyer?
The law defines “first time homebuyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homebuyership history of both the home buyer and his/her spouse.

Who is Eligible?
First time homebuyers purchasing any kind of home–new or resale–are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and before December 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner.
Income limitations of $75,000 for single taxpayers and $150,000 for married taxpayers who file a joint tax return apply to this tax credit. However, taxpayers who earn slightly more than the limits can apply for a reduced tax credit.

What Type of Home Qualifies?
Any home purchase qualifies, including single-family homes, townhouses, condominiums, manufactured homes and houseboats. Qualifying homes may be an existing home, new home or a home the owner contracted to build. Those who own a vacation home or rental homes that are not their principal residence are also eligible for the tax credit if they buy a principal residence.

Buy Now and Take Advantage of This Tax Credit
Now is the time to buy a home you might otherwise have not been able to purchase. Contact Cody Touchette at Mortgage Advisory Group today for free professional advice on this program and for fast, easy loan qualification. Need a referral to a great Mortgage Advisor? Call 425-317-8000 and we will ensure you get the help you need. Your Future is Our Focus.