Time Running Out on $8,000 Tax Credit
- Peter King - MortgageLoan.com
The $8,000 tax credit for first-time homebuyers is a great deal for those looking to buy their first home. But time is running out on the program, which expires Nov. 30.
That may sound like a long time - after all, that's nearly winter and it's still summer, right? But if you're still studying real estate listings, time is shorter than you may think.
To begin with, remember that you typically want to spend several weeks looking at homes and getting to know the housing market before making an offer. On top of that, credit requirements are tighter than they were before, so it takes longer to get a loan approved. In addition, new rules for obtaining property appraisals recently went into effect, and can also drag out the home purchase process. The end result? If you're just starting to house-hunt in earnest right now, you may have to hustle to be sure of getting the house you want by Nov. 30.
No guarantee credit will be extended
The good news is that Congress may extend the program, and there appears to be considerable support for doing so. However, there's no guarantee that the extension will offer the same terms as the current program, particularly if economic signs keep pointing upward and Congress gets more concerned about reining in the deficit than stimulating the economy.
Generally, the main thing to focus on right now is finding a home you want and getting prequalified for funding. Once you do that, figure on at least six weeks to negotiate the sale, complete the inspections, obtain financing and close on the house.
Allow enough time to close
Obtaining the mortgage is often seen as one of the biggest hurdles in buying a home these days. Earlier this year, many buyers were reporting delays of 45 - 60 days due to high demand, stringent credit checks and challenges involved in the new regulations on getting appraisals. However, most buyers these days should be able to get their loan wrapped up within a month, according to David Kittle, chairman of the Mortgage Bankers Association, although that could be cutting it tight.
"You can get a loan closed in 30 days, but I would not encourage anybody to wait until Nov. 1," he said.
Tuttle said buyers should allow another two weeks to make an offer and negotiate a purchase agreement, meaning buyers will probably need to have their house picked out by mid-October in order to make the deadline.
"If you're not out by then, you're probably not going to be able to take advantage of this as it stands today," he said.
Support for extension
Although the current program is due to expire on Nov. 30, there is a fair amount of support in Congress for at least extending the credit another year, including from Sen. Majority Leader Harry Reid (D-Nev.). The MBA and other mortgage and real estate groups are pushing to have the credit expanded to $15,000 and made available to all home buyers, and have at least a dozen senators lined up in support of the measure. Such a proposal may have a difficult time in the House, however; the current program also started out as a $15,000 credit, but was scaled back in the House to its current level.
Given that history, potential first-time homebuyers may be well advised to do their home shopping now, rather than count on the current program being continued in its present form past the current expiration.