With interest rates dipping as low as 4.25% to 4.75% on a 30 year fixed, the tax credit gone should not make much of a difference in the minds of home-buyers. However, that has not been the case.  So far the mortgage application volumes since the tax credit ending has been very low.  Most borrowers have not yet realized that due to the low interest rates that the long term benefits of owning a home is more beneficial today than the customer who bought their home 3 to 6 months ago.  The reason for this phenomena is due to interest rates creeping down to all time low levels between 4% to 5%.  Most homeowners who took advantage of the first time home-buyer tax credit paid for mortgage rates in the ranges of 5.25% to 5.75% range.

So let me give you 2 great examples using a $90,000.00 loan and a $180,000.00 loan of the benefits today buying a home versus the tax credit of yesteryear.

Example #1:

First Time Home-buyer bought a $100,000.00 home and put 10% down during the first time home-buyer tax credit.
The loan was for $90,000.00 at a rate of 5.5%.  That Principal and Interest payment is $511.01.  This borrower earned the $8,000.00 tax credit.

vs.

The same First Time Home-buyer bought a home today at $100,000.00 and put 10% down.  The loan was for $90,000.00 but now the estimated rate is 4.75%.  That Principal and Interest payment is $469.08.  The borrower did not earn $8,000.00 but
is now saving $41.93 a month.  over 360 payment or 30 years, this total:  360 payments X 41.93 =  $15094.80 in payment
savings.

This is basically 2 times more beneficial than the first time home-buyer tax credit.

Example #2:

First Time Home-buyer bought a $200,000.00 home and put 10% down during the first time home-buyer tax credit.  The loan was for $180,000.00 at a rate of 5.5%.  That Principal and Interest payment is $$1022.02. This borrower earned the $8,000.00 tax credit.

vs.

The same First Time Home-buyer bought a home today at $200,000.00 and put 10% down.  The loan was for $180,000.00 but now the estimated rate is 4.75%.  That Principal and Interest payment is $938.97.  The borrower did not earn the $8,000.00 but is now saving $83.05 a month.  Over 360 payments or 30 years, this total:  360 payments X $83.05 = $29,898.00 in payment savings.

This is basically 4 times more beneficial than the first time home-buyer tax credit.

The hard part is predicting the interest rates, and these rates will not stay this low forever. If you felt you missed out on the tax credit, quit kicking yourself.  You can still get that home and get the same benefit.  Yes it is not instant money, but it also does not come with tax consequences if you sell your home early (please seek CPA about that).

The reason I shared this is because I feel we all got sucked into believing all the gimmicks and tax credits as a sole reason to buy a home. The real reasons are right in front of you.  With prices and interest rates at all time lows now is the time to act.

Gary Miljour- Mortgage Lending for Tempe Arizona

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Gary Miljour Licensed Loan Originator NMLS#207208

I am sure in no time the real estate industry will be on the evening news again and not in a good way. Consumers will again have a legitimate gripe from getting bad advice from their real estate professional.  Some real estate professionals were giving customers advice on the $8,000.00 first time home buyer tax credit.  Some agents were advising their clients that as long as they had a short sale contract signed by both the buyer and seller that this binding contract would be suffice for meeting the eligibility of the tax credit.  The last time I checked, I was not a Certified Public Accountant or worked for the Internal Revenue Service.  I made the choice to advise my clients to get a CPA opinion or call the IRS to verify for themselves this issue.

One of my clients actually took me up on my advise and called the IRS himself. My client was buying a home on a short sale.  The listing agent told my buyer straight up that he would be 100% eligible for this $8,000.00 tax credit because the seller signed the contract.  Now we did NOT have bank approval so I heard through very credible sources that the IRS was not considering this a binding contract since the banks who hold the notes for the seller have not agreed yet.  Here is the  answer my client got from the IRS.

Per IRS- “In the matter of Short Sales, pursuant to the short sale addendum, contracts are considered “not binding” unless
there is bank acceptance on or before April 30, 2010.  We suggest that banks involved with short sales have the ability to
make the contract binding prior to acceptance.  The bank would need to offer the client documentation in writing stating
the contract is a binding contract but that full acceptance is not yet available and the client would need to open escrow
on the contract”

Bottom-line, Some in our industry gave bad advice to get a short run closing to fatten their pockets.  I am very curious to see how this fiasco will play out.

Gary Miljour- Mortgage Lending for Tempe Arizona

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Gary Miljour Licensed Loan Originator NMLS#207208

The $8,000 first time homebuyer tax credit of 2009 has been extended until April 30th, 2010. By the deadline you must be in a written binding contract, but will have until July 1^st, 2010 to actually close on a home.  A first time homebuyer is someone who has not owned a home in the last three years.

There are some changes to eligibility and limitations in this provision that were not part of the 2009 bill.   The maximum amount of the purchased home cannot exceed $800,000, where previously there was no max.  Also, the income levels have increased from $75,000 to $125,000 annual income for singles and from $150,000 to $225,000 for married couples.

The provision for the extension also included a $6,500 tax credit for current homebuyer’s purchasing a new home, that was not in the original bill.  This includes homebuyer’s who have lived in their home five consecutive years out of the last eight.  In purchasing a new home, the home does not need to cost more than the old house.  If you move from a high cost area to a lower cost area, you are still eligible.  Also, if you sold your home two years ago, and plan to buy a home between now and April 30^th 2010, you are eligible if you lived in that home for five consecutive years.

The changes made have opened the tax credit to a lot more individuals than before.  Take advantage of low home prices and this tax credit before it goes away for good!

Gary Miljour- Mortgage Lending for Tempe Arizona

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Gary Miljour Licensed Loan Originator NMLS#207208