Houston Real Estate and Mortgage Blog

In 2009, almost 2 million people took advantage of the $8,000 First Time Homebuyer Tax Credit, which has helped to stabilize the housing market and provide attractive incentives to potential home buyers. The timing for buyers couldn't have been better with cheap home prices and record low mortgage rates combining to drive housing affordability to it's highest level since the mid-1970's. Unfortunately, many home buyers who did not qualify as first tim buyers, did not get to partake.

Fortunately, the expanded version of the tax credit now allows many more buyers to take advantage of these generous government tax incentives. In addition to increasing the income thresholds to $125,000 for individual taxpayers and $225,000 for joint filers, existing home owners can also now qualify for the credit. Previously, only buyers who had not had an ownership interest in a home for the previous three years qualified. The new credit allows "move up" or "repeat" home buyers to claim a credit up to $6,500 as long as they have lived in their home as a primary residence for five consecutive years out of the past eight.

Robert Dietz, economist for the National Association of Home Builders, estimates that up to 70 percent of American households may qualify for the expanded homebuyer tax credit, however, the National Association of Realtors expects that only an addiitonal 900,000 first-time homebuyers and 1.5 million repeat buyers will take advantage of the expanded tax credit in 2010. While those numbers are certainly not insignificant, they barely scratch the surface of the potential of this financial incentive.

Certainly, any buyer would need to have a reason to buy a new home, and a tax credit shouldn't be one of them. However, for buyers who plan to reside in the same area for a number of years, expect to have stable income and employment, have lifestyle needs that can be met through homeownership, the financial incentives both short- and long-term are extremely attractive.

To take advantage of the credit, home buyers must enter a purchase contract by April 30th 2010 on a home with a sales price of no more than $800,000, and close on that home by July 1st, 2010. The tax credit can be requested by filing IRS Form 5405.

The home buying process all starts with getting pre-approved for a mortgage. Credit terms today are likely different than they were when you received your current mortgage, so you want to make sure you can qualify before you go spending hours online and in the car looking at new homes. Once your lender approves you, you can then enlist the assistance of a local real estate agent to provide you with a listing of homes that meet your needs.

By now, you may have heard about the proposed changes to FHA policies that affect down payment requirements, up-front mortgage insurance premiums, allowable seller contributions, and stepped-up enforcement of FHA lenders. These policies are now set to go into effect fo borrowers making formal application April 5th and later. This means that if you are a first-time homebuyer who plans to take advantage of the $8,000 tax credit or even a moveup buyrer, you should't wait until the end of April to get a house under contract because it will likely cost you more.

What you may not have heard is that FHA just announced their proposal to increase the monthly mortgage insurance premium from .55% to .85%. This means a $37.50 higher payment on a $150,000 FHA loan. This can easily push a borrwer over the required debt ratios and cause a purchase to fall apart. It also means you likely won't qualify for as much home.The reduced allowable seller contributions could mean $4,500 in extra costs at closing that a seller might normally be willing to conribute. Needless to say, this is further motivation to act soon and avoid the higher premiums.

To avoid these added expenses, be sure you go under contract by April 5th and immediately make application with your mortgage lender. You can apply online at http://www.hlstx.com/PreQualification