We are living in unprecedented times. Not since World War II when our government enacted a special loan program for the returning soldiers through the Veteran’s Administration have we seen such a sweet plum for first time home buyers. Last year, the Housing Recovery Act of 2007 offered first time home buyers a $7500 tax credit if they bought a home after April 8, 2008 and before January 1, 2009. However, the credit was not a true credit; it was an interest free loan. If you claimed the credit, you needed to repay it $500 a year over 15 years.
This year, in the Housing Recovery Act of 2008, Congress sweetened the pot. The tax credit was increased to $8000 and the repayment provision was dropped. Yes, that’s right. If you are a first-time homebuyer and you buy a home after January 1, 2009 but before December 1, 2009, you can claim the tax credit of $8000 or 10% of the purchase price of the home, whichever is less.
I had a student attending our seminar for First-Time Homebuyers ask if I thought this provision would be extended yet one more year. It depends. The provision was an attempt to put a stop to the rapid drop in home prices and create a new “floor” for the housing market. In our area, the tax credit has accelerated home purchases. Home sellers, however, are still hesitant to list their home for sale because of the huge price drops of the last three years. So slowly, houses are being taken off the market and inventory is dropping. If there is not a glut of low cost housing on the market in November, my guess is the tax provision will not be extended.
However, there it is, right now. TAKE ADVANTAGE OF IT. Never before have low prices, low mortgage rates and a great tax credit come together to make this the best time to buy a first home in the last 50 years.
For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs. “Simple answers to home ownership questions”.