If you’ve been holding off buying that first great or second move-up home, hoping that the market would drop in price, now’s the time to act.  There is absolutely no activity on Capitol Hill that would lead me to believe this tax credit will be extended.  In addition, there are some other things happening that may affect the how much home you can afford.

As you know, the tax credit is a refundable credit of $8000 for first-time homebuyers and $6500 for move up buyers who have owned another primary residence for at least 5 years.  In order to qualify for the credit in 2010, you must write a purchase agreement on a home by April 30^th, 2010.  You must then close on that home by June 30, 2010.  Tick tock.  Tick tock.  The clock is running out.

And as if that isn’t bad news enough, at the end of March, a Federal program which has been purchasing mortgaged backed securities will end.  This program has put an artificial price on these securities, insuring lower mortgage rates.  Most analysts are expecting mortgage rates to rise at the end of this program.  In other words, when the government stops buying these securities, the analysts don’t expect that the private investor market will pick up the slack.

This will mean an increase in the monthly mortgage payment for the home buyer.  For example, a payment on a $200,000 mortgage, principal and interest fixed over 30 years at 5% interest is $1074.  At 6%, it is $1200 or roughly another $125 per month. 

So get out there and buy now.  With the Federal buying program in place , you can lock in a lower interest rate and you will avoid the price increases that always accompany the brisk spring market.

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”.

Home-buying as a couple is likely to be more fun than home-buying on your own.  For one thing, you now have two incomes.  Mortgage consultants will look at your combined monthly gross income to find out “how much house” you can buy.

As a single person with an income of $40,000 a year and no debt, you could afford a home that costs about $120,000.  As an engaged or married couple with two incomes totaling $80,000 a year and no debt, you could now afford a home of about $250,000 a year.

Whether your goal is to live inexpensively the first several years together and save money, or spend more money to get a “dream home” for your first home together, the point is you have choices now that you didn’t have as a single person.

This answer may differ from state to state so I am talking about my experience in Minnesota in this response.  Condominiums or “condos” as they are called look a lot like an apartment.  The typical condo unit is in a building with a centralized entrance, often a security entrance.  Once you are admitted to the building, each floor of the building will have hallways with condo unit entrances off of the hallway.  A condo unit can be on the second or third or seventeenth floor of the building.  Thus, it has no land under it.  This is unusual in real estate and when condos were first introduced, it took awhile for people to accept the idea. 

When you buy a condo, you get two things.  You get private ownership interest in the condo unit and shared interest in the parts of the building and grounds that are shared with all the other homeowners.   The homeowners’ association, of which you are now a member, manages this shared property.   You can do whatever you want to your unit as long as it doesn’t impact any other homeowner and it follows association rules.  You can’t do anything you want to the shared space unless you obtain permission from the other homeowners.  For example, you can’t change the outside of your door which faces the shared hallway.  Most homeowner associations develop a list of rules and regulations to make sure that all owners respect each other’s rights.  Usually, the heat in a condo building is central and the costs of heat are included in your homeowner association dues.  Some other utilities might be centralized as well such as garbage removal or water and sewer services.

A townhome most typically will have its own front door.  Usually, that front door faces the outside rather than a hallway.  It will stand on a small piece of ground or on its own small lot.  The townhome will typically have its own furnace and hot water heater so you will pay these bills and replace these utilities when they wear out.  There still is a homeowners’ association and you still cannot make changes to the outside of the unit without association approval.   Many first-time homebuyers purchase a condo or a townhome first because they tend to be less expensive and less work than owning a single family home.

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”.

If you bought or are buying your first home between January 1, 2008 and June 30, 2010, you will qualify for a refundable credit from the IRS.  There are two types of tax credit.  The non-refundable credits reduce your tax but only can reduce your tax to zero.  Refundable credits mean that once your tax is at zero, the rest of the credit will be mailed to you as a check.

For example, let’s say your taxes are $5000 this year and you have already paid $4500 towards those taxes in withholding from your paychecks.  So you would owe $500 to the IRS.  However, you bought your first home this year (2009) so when you file your taxes in 2010 for 2009, you claim the first time homebuyer credit.  The IRS would send you a refund check for $7500.  They would take $500 from the credit to pay the balance of the taxes you owed to them.  The rest would be refunded to you.

Now there are some differences in the tax credits available for first-time homebuyers.   If you bought between January 1, 2008 and December 31, 2008, the credit is $7500 and must be repaid over 15 years starting the second year after receiving the credit at $500 per year.  If you bought between January 1, 2009 and June 30, 2010, the credit is $8000 and doesn’t have to be repaid if you live in that home you bought for 3 or more years.  If you bought between January 1, 2009 and November 6, 2009, the credit is $8000 and you can e-file to claim the credit.  If you bought your first home after November 7, 2009 but before June 30, 2010, you cannot e-file your return to claim the $8000 credit as the IRS now requires you to attach proof of home purchase to your return.

If you have filed taxes for 2008 but bought your first home after you filed, you can file an amended return this year to claim the credit.  You don’t have to wait to file your tax return for 2009.  This is a great benefit for first time buyers, defined by the IRS as folks who haven’t owned a home for the three years prior to closing on their new home.  Good luck in buying that first great home!!

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”.

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”.

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.

The first-time homebuyer tax credit has been getting a lot of publicity lately.  Although it’s pretty easy to qualify, there are still some guidelines which must be followed.

First, and probably the most important, you must be a FIRST-TIME HOMEBUYER.  So if you married recently and your spouse owned a home previously, you can’t qualify for the credit.  BOTH of you must be first-time homebuyers.  How the Federal government defines this is someone who hasn’t owned a home in the previous three years.  This must be calculated to the date of the sale of the previous home.  For example, if you are buying a home and closing the home purchase on March 31, 2009 but you sold a previous home in April of 2006, you wouldn’t qualify.  You’d have to wait till after the three year anniversary of the home sale.

Let’s say that you are a first-time homebuyer but you want to buy the house as an investment and rent it out.  Sorry, once again, you don’t qualify.  The tax credit goes to those who are buying the home as their own residence.

Once you purchase the home and claim your $8000 tax credit, you must live in the home for a full three years in order to keep the credit.  If you sell before the three year anniversary of the purchase, you will have to repay the credit.

The credit is a once in a lifetime opportunity.  There has never been a credit like this before and there likely will not be one again, at least in our lifetimes.  Take full advantage of it and buy a home before December 1^st of this year.  Free money.  $8000 to spend on the home or on a great vacation.  Hurry.  It’s too good to pass up.

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”.

We cover this pretty thoroughly in our First Time Home Buyer Seminar.  There are several mistakes Home Buyers may make when they decide to purchase their first home. 

Probably the biggest mistake that Home  Buyers make is tackling this complicated purchase without proper education or information.  Buying a home is a lot more risky than buying a car or a boat.  There are a lot more things that can go wrong or be wrong.  Go out and take a class or two.  Work only with real estate professionals who have been in the business awhile and know how to prevent the biggest mistakes.  Education, information and a great Realtor consultant can save you tens of thousands of dollars on a home purchase.

A second mistake Home Buyers  make  is not knowing how much house they  can afford.  Before you even think of starting to shop for a home, you should meet with a mortgage consultant.  Work with a reputable mortgage broker and someone who has been in the business at least 5 years and offers VA, FHA and conventional mortgages.  Let them tell you if you are ready to buy and how much house you can afford.  And then listen to them and don’t overbuy and make yourself “house poor”.

A third mistake is not using a home inspector to carefully review and check the house on your behalf.  Once you have found the home you want to buy, pay the dollars necessary to hire the best homebuyer inspector in the business.  One good inspector can save you thousands of dollars and hundreds of hours in repairs and replacement costs.  You can use their report to negotiate seller paid replacements and repairs.  Read all the documents you can get on that home including the Seller’s Disclosure and the required city inspections.  After you have paid for the home, if you find something wrong with it, it will be MUCH HARDER to get it repaired at the seller’s cost.

A fourth mistake Home Buyers make is not realizing how credit mistakes can affect their ability to qualify for a mortgage.  If your credit is shaky, especially in the current tight credit environment, you may not qualify for a home loan.  Meet with a mortgage consultant to find out where you stand and take the steps necessary to improve your credit rating.  You’ll have to do this sooner or later, if you really want to buy a home.  DO IT SOONER.

Can you see a theme in these four mistakes?  They all have to do with choosing ignorance over education.  An educated buyer is a happy buyer, one who is walking into a home purchase with their eyes wide open.  And a successful home buyer too!!

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”.

If you are a first time homebuyer and you wanted to take advantage of the 2009 first time home buyer tax credit, pay attention!!   As of this moment, there has been no extension of the $8000 tax credit by Congress.  It will expire on November 30, 2009.  That means that you have to purchase your first home and close on it BEFORE November 30^th. 

I have some advice for you.  Forget “short sales”.  They aren’t short and it can take as long as three or four months to hear from the seller’s bank, which needs to approve the sale.  You don’t have that kind of time.  Focus instead on foreclosed homes or seller owned homes.  The bank will respond to any offer usually within the week.  With a seller owned home, no short sale, you could hear in 24 hours.

Don’t wait till the last minute.  In this turbulent market, loans are more complicated, houses have more issues, and foreclosures add a whole level of complexity.  Plan to close by the end of October or middle of November.  If anything goes wrong, you’ll still have a cushion of time to make the deal happen.

Remember, it’s about the home.  It’s great to get a refund of $8000, but you still have to live in that home for 3 years or more for the refund to be permanent.  Don’t buy a home just to buy a home.  Make sure it’s the right one for you.  Don’t wait till the last minute and buy in a panic.  Homes in the lower price ranges are moving briskly.  Start shopping now and keep an eye out for new listings coming on the market.  They are more likely to contain “stars” rather than the “dogs” than have been on the market for months.

Shop smart.  Shop now.  Get the credit. Get a great home. Good luck.

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”.