Federal stimulus homebuyer tax credit just got better
Are you participating in the economic recovery yet? Large amounts of money are available for huge public projects and companies that are too big too fail. But the stimulus package has something for working individuals and families as well. The only catch is that you must act now.
First time homebuyers can participate in the economic recovery by buying a home before the end of November 2009 and claiming a tax credit - 10 percent of the purchase price for qualified buyers. What's the rush? The law says you must close before Nov. 30, and purchasing a home takes time.
First time buyers, anyone who has not owned a home for at least three years, can get up to $8,000 back on their 2008 or 2009 tax return. There is an income limitation - $75,000 for single individuals and $150,000 per couple. But if you qualify, it means money in your pocket to help pay for that home or for whatever else you want to use it for. The only string attached is that you must live in your new home for three years to avoid an obligation to repay part of the credit.
This good news just got better. Housing and Urban Development Department and FHA have now come up with a way for buyers to apply their credit to the purchase immediately, rather than waiting for a tax refund. FHA buyers will still have to make the required 3.5 percent down payment, but applying the tax credit can reduce the monthly payment.
To help new buyers take advantage of the credit, Colorado Housing Finance Authority is offering buyers who qualify for the credit a JumpStart Loan. This is a second mortgage of up to 3.5 percent of the purchase price (maximum loan amount is $6,000) at 0 percent interest through June 2010. This means you can use the CHFA loan to help pay for the house and repay the loan when you get your tax credit money. (Interest starts to accrue at 8 percent on July 1, 2010, and the loan can be repaid over 120 months if you choose that route.)
Financial conditions for buying a new home have never been better. Home prices are the lowest they have been in years. If there was a bubble it has burst; builders and sellers are making terrific deals. In fact, if you want to buy a new home, perhaps a custom built home, lumber and other building materials are also at the lowest prices they have been in years.
What about financing you ask? There is good news there as well. Interest rates are the lowest they have been for five decades, but that could change soon. Lenders really are making loans and they are making them at very favorable rates for qualified buyers.
This really is a unique time in real estate, but buyers should act quickly to take advantage of it. No one is smart enough to predict when home prices will start to rebound - or how fast. No one can accurately predict how long mortgage rates will remain low. If nothing else says buy now, that federal credit should.
The one certainty is that the federal tax credit goes away on Dec. 1. If you close in December it's too late.
It takes time to buy a house. You have to find the right house, enter into a contract, secure financing and get the title work done. That can take weeks or even months. If you want a custom built home, and there are some great opportunities there as well, you must factor in the time for designing the home, getting permits and completing construction.
For the economy to turn the corner, we all must take action and make prudent spending choices on durable goods, such as homes, automobiles, appliances, etc. For more information about the First Time Home Buyers Tax Credit, go to the National Association of Home Builders Web site, www.nahb.org/, for more information and a link to the federal government site.
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Weets, owner of the G.J. Gardner Custom Homes franchise in Falcon, has been in home construction in the Colorado Springs area for more than 30 years. Contact him at dennis.weets@gjgardner.com.
