---

Under a new bill passed by the Senate, Americans would see the payroll tax cut extended into next year, a tax cut paid for by homebuyers and homeowners refinancing their mortgage through higher rates. While not a done deal, there is bi-partisan support around extending the payroll tax cut, a 2% reduction in the “FICA” taxes paid by virtually every worker in Houston, The Woodlands, Conroe, Tomball, and Spring, TX. This tax is set at 6.2% of wages, but the currently reduced rate of 4.2% is set to expire in January unless Congress takes action.

Unfortunately, in its infinite wisdom, the White House and Senate decided to pay for the tax cut by levying an additional fee on all mortgage loans sold to or guaranteed by the government through Fannie Mae and Freddie Mac. This means that effective January 1^st anyone buying a home using conventional or FHA financing would be paying this fee through a higher interest rate. Current homeowners looking to refinance and take advantage of near record low mortgage rates would also be subject to the fee if they lock in their rate after January 1^st. This creates a bit of a sense of urgency for rate locks in the last two weeks of the year as the increased rate equates to a $17/month increase on a $200,000 mortgage.

The best advice for a homebuyer considering a new home is to take action now to lock in lower rates on their purchase. Current homeowners would also be wise to use the holidays as an opportunity to get their financial information together and submit application for a refinance before year-end. For many, the combined savings of lower rates and the avoidance of an additional rate increase in 2012 can mean thousands of dollars in savings.