Yes, our good Uncle Sam has once more come through for us and you can benefit from Congress’s largesse.  The $8000 tax credit for first-time homebuyers has been extended through April 30, 2010.  If you have been shopping and missed the first deadline of November 30, 2009, your impulse will be to kick back and enjoy the reprieve.  If you haven’t started shopping yet, your impulse may be to say “hey, I have a lot of time now”.

But let’s face a few facts.  First of all, spring is the busiest time of the year for real estate sales.  In Minnesota, the snow, the cold, the short days and the holidays conspire to distract home buyers in November and December.  These are usually slow shopping months.  But the pace picks up in February and March.   The Parade of Homes, sponsored by the Builder’s Association, runs through mid-March.  This gets homebuyer’s out shopping. The days become longer, the snow starts to melt, spring is in the air and first time homebuyers, like Monarch butterflies, swarm around the good homes.

The deadline for the first-time homebuyer tax credit will fall right towards the end of the spring real estate market.  Spring is always a busy time, even in this down economy.  This year it will be doubly busy because of the tax credit and good homes will be in short supply. 

If I were a first-time homebuyer, I would start shopping now.  November and December are slow months without much competition from other buyers.  There will be good deals out there.  Also, the mortgage interest rates tend to drop during these months due to less demand so you will pay less for your monthly house payment.  Finally, you will have plenty of time to get it all done before the tax credit disappears and you won’t have to worry about making the deadline.

Be smart.  Plan ahead.  Beat the crowd.  Get a great house and a great mortgage.

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”.

The mind boggles!!  $8000 in free cash, very few strings attached, from my favorite uncle, Uncle Sam.  I’m sure you’ve already spent this money in your mind but here area a few more suggestions related to home ownership.

Let’s say you are short of cash for the down payment but you have a blood relative who would “gift” you the money if you promised to repay them some time in the future.  If you were buying a home on an FHA mortgage, you would need 3.5% of the purchase price in down payment money.  For $8000, you could buy up to a $230,000 home (assuming you qualified for that much monthly payment) and take a loan from uncle/aunt/grandma/mom.  You could then collect your $8000 tax credit from Uncle Sam and pay them back this year.    If you’ve read some of our other blogs, you know that the closing costs can be paid by the seller.  You could get into that lovely home for FREE.

Or let’s say you are interested in a home but it needs some redecorating such as new carpet or flooring throughout ($4000), new paint in all the rooms ($300) and some new appliances in the kitchen ($3000).  None of these fixes would make it hard for you to get mortgage approval but they might make it hard for you to LOVE your home.  Buy the home, claim your $8000 tax credit and use the cash to create a home you LOVE.  Put in the carpet, repaint the rooms in custom colors and buy those stainless steel kitchen appliances.  Then sit back and enjoy.

Or let’s say the home is pretty darn nice but the yard isn’t.  It’s been neglected, never had any landscaping or fencing for the kids and the dog, and the deck needs to be removed and rebuilt.  Let’s plan a new deck ($5000) and let’s get some landscapers out there to put in the perennials, replace sod and add a tree or shrub or two ($3000).  From ugly to lovely.  There’s lots more ideas too but these should get you thinking of the POSSIBILITIES for that lovely $8000 First-Time Homebuyer Tax Credit.

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”.

On November 6, 2009, President Obama signed into law an extension and expansion of the First Time HomeBuyer Tax Credit which has been in effect since January 1, 2009.  Briefly, the law extends the $8000 tax credit which was due to expire on November 30, 2009.  The new law extends the credit into 2010.  The rules state that the home purchase agreement must be written and signed by April 30, 2010 and closed by June 30, 2010.  The former requirement that the buyers not have owned a home in the past three years is still in effect.  The credit is limited to 10% of the purchase price of the home or $8000, whichever is less.  Income requirements have been increased.  The law is effective immediately.

The law is also expanded to include homeowners who have owned their home at least five years of the last eight years.  If these homeowners sell their current home and buy a new home before April 30, 2010 and close both transactions by June 30, 2010, they can take a tax credit of $6500.  This law goes into effect immediately and will affect any closings occurring between November 6, 2009 and the end of the program on June 30 of 2010.

Both first-timers and repeat buyers will have a price ceiling for the new home of $800,000.  The real estate lobby worked hard and long to encourage lawmakers to sign this program extension.  There was concern that if the program ended in November, 2009, the housing market would take a nose dive.  Timing the program ending for next April is better because the real estate market is typically the strongest over the spring and summer months.

If you have questions, come to our homebuyers class where we have the answers as well as  special handouts covering program rules and your questions.

When people come to our class and ask me this question, we discuss three important issues about buying your Grandma/Mom and Dad/Brother or Sister’s home.

First, most people who are thinking of purchasing a relative’s home expect to get a “deal”.  They think that because they are related to the seller, they should be given some type of discount, especially if a Realtor will not be involved in the transaction.  I think it’s important for all parties to lay their cards on the table.  The seller should frankly discuss how much they think the house is worth and why.  The buyer should explain how much of a discount from market price they are expecting.  If the two parties are too far apart (more than $10,000 is probably too far apart), the deal probably will never come together. It’s better to find this out immediately.

Second, condition issues will come up.  If you were buying a home from a seller you didn’t know, and there were broken or cracked windows, you would ask to have them fixed before closing.  You may hesitate to do this with a relative.  People are often afraid of hurting the relationship or hurting someone’s feelings.  If there are lots of condition issues with your relative’s home, put together a budget of the money you would have to spend to make the house acceptable to you.  If that budget exceeds the discount you are getting on the price, you may want to rethink your decision to purchase this fixer-upper.  Be frank with your relative about why you are rethinking the home purchase.

Third, how you plan on financing the purchase may become an issue.  If your credit isn’t great, you might not qualify for a mortgage.  You may want your relative to carry a contract for deed instead.  They, on the other hand, may not want to lend you the money.  They may want to cash out the house so they can move on or purchase another home.  A contract for deed keeps them on the hook for the home.  This should all be discussed in advance. 

One overall piece of advice is to encourage both parties to treat this purchase as they would any other sale or purchase.  Keep it business-like. Don’t get personal. Work out the big issues in advance.  If it appears necessary, get a Realtor involved to help you out.

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”.