Frequently Asked Questions about the Homebuyer Tax Credit

NAR Frequently Asked Questions

Homebuyer Tax Credit Changes

National Association of REALTORS ® Government Affairs Division

500 New Jersey Avenue, NW, Washington DC, 20001

Here are some of the most frequently asked questions on the changes to the Homebuyer Tax Credit

Question: Existing homeowner credit: Must the new house cost more than the old house?

Answer: No. Thus, for example, individuals who move from a high cost area to a lower cost area who

meet all eligibility requirements will qualify for the $6500 credit.

 

Question: I am an existing homeowner. On October 25, 2009, I signed a contract to purchase a

new home. I have lived in my current home for more than 5 consecutive years and

am within the new income limits. I will go to settlement on November 20. If

President Obama has signed the bill by the time I go to settlement, will I qualify for

the new $6500 tax credit?

Answer: Yes. The existing homeowner credit goes into effect for purchases after the date of enactment

(when the bill is signed). There is no reference to the date of contract for the new credit. The

provision looks solely to the date of purchase, which is generally the date of settlement.

 

Question: I am a firsttime

homebuyer but was not within the prior income limits at the time I

entered into my contract to purchase on October 30, 2009. I will be covered,

however, by the new income limits. If the new rules have been signed into law by the

time I go to settlement, will I be eligible for a credit?

Answer: Yes. The new income limitations go into effect as soon as the President has signed the bill.

The income limit and other eligibility rules will look to your status as of the date of purchase,

which is the settlement date. So if the new rules have been signed when you go to settlement,

you should be eligible for the credit (or a portion of the credit if you’re within the phaseout

range).

 

Question: I am an eligible existing homeowner. I have a fair amount of equity in my home. I

have found a home with a nonnegotiable

price of $825,000. Will I be able to use any

of the $6500 tax credit?

Answer: No. The $800,000 cap on the cost of the purchased home is firm at $800,000. Any amount

above $800,000 makes the home ineligible for any portion of the credit. The $800,000 is an

absolute ceiling.

 

Question: I owned my home for 10 years, but sold it two years ago year and have been renting

since. If I purchase a home, will I be eligible for the $6500 tax credit if I meet all the

other eligibility tests?

Answer: Yes. Because you lived in the home for more than 5 consecutive years of the previous 8, you

will qualify for the $6500 credit. For example, Say John and his wife bought a home in 2000

and lived there until 2008 when he got a divorce. Whether John has been renting or bought in

the interim, he WOULD INDEED be eligible for the credit because he owned a home and

occupied it as his principal residence for 5 consecutive years out of the last 8 years. The

keyword here is “consecutive.” As long as he lived in that house for 5 years straight what he

did since 3 years doesn’t impact eligibility.

 

Question: I am an eligible firsttime

homebuyer. I entered into a contract to purchase on

November 1, 2009. Do I have to go to closing before December 1? How does the

extension date affect me?

Answer: You do not have to close before December 1. Once the legislation has been signed, it will be as

if the Nov 30 date had never existed. Therefore, so long as the contract settles before April 30

(or July 1, worst case), the purchaser will be eligible for the credit.

Tax Credit Extension…Are You Eligible?

 As you know, the tax credit has now been extended and now includes the opportunity to enable more buyers to take advantage of this government stimulus plan.     Below, is a brief summary of what is included in the plan.

  • The $8,000 tax credit for first-time buyers has been extended through April 30, 2010.   Time has been alotted to allow on settling on your new home.   Buyers must have a ratified contract by April 30, 2010, and will have until June  30, 2010 to settle.  

  • If you are a current homeowner and want to buy, you could also be eligible for a $6,500 tax credit through April 30, as long as you have lived in the home that you are selling as a principal residence for five consecutive years out of the last eight years.

   

  • Income limits for buyers who qualify were also increased.   ($125,000 for single buyers and $225,000 for couples)

First-Time Homebuyer Tax Credit will be Extended = Great News for Buyers and Sellers!

Today, the House of Representatives voted 403-12 in favor of extendingthe first-time home-buyer tax credit.   It will be extended through April 30, 2010. Yesterday the Senate voted  98 to 0 in favor of the extension.  

It has been reported that President Obama  will sign the Dodd-Lieberman-Isakson amendment which includes the  bill’s extension   and expands the federal tax credit for first-time home-buyers. The amendment extends the tax credit through April 30, 2010.

The President  is planning on signing  the amendment as soon as tomorrow.  

I will have more information on this bill in the coming days.  

Carriage Home Coming Soon! It is a traditional sale in Braemarl!!

We get calls everyday from buyers looking for traditional sales in the Bristow area!   Braemar is one of many incredible neighborhoods in Bristow.   If you have any interest in a traditional sell, carriage home, in Braemar, please let me know.   There will be one coming on the market very soon at an incredible price, and yes it is a traditional sale.

Is it still a good time to buy? YOU BET!

It continues to be an excellent time to purchase a home. There are many factors that work in favor of homebuyers, both those looking to make their first home purchase and those seeking to move up into a larger home.In recent weeks, there have been many indicators pointing to an improving real estate market, so buyers should act now while conditions remain ideal.Consider these reasons why now is a good time to buy a home:

  • Housing affordability remains high.This allows buyers to purchase a bigger home, or one in a better location, than they might have in the past.
  • The number of homes on the market has started to decrease. Yet, homebuyers still have a wide variety of homes to choose from, making it more likely they will find their dream home.
  • Mortgages are at historically low levels, and some buyers are even able to get 30-year fixed rates below 5 percent. Low mortgage rates also positively impact affordability and allow buyers to enjoy lower mortgage payments for the lifetime of their loan. This may be of particular interest to renters whose rent payments typically rise each year.

Market Conditions

Our market is still holding strong.     Inventory is way down!   Our buyers are scrambling to find a home that is a traditional sell or even a foreclosure!   There are still plenty of short-sales, but as you  know by now, they can be a huge risk!  

Consumers are busy buying houses, according to the National Association of Realtors (NAR), which announced this week that its Pending Home Sales Index rose 6.4 percent in August to its highest level since March 2007. The uptick in pending home sales marked the seventh consecutive monthly increase, the longest in the series of the index which began in 2001.A forward-looking indicator based on contracts signed to purchase a home, the Pending Home Sales Index in the Northeast jumped 8.2 percent from July and is 12 percent higher than August 2008.  

Conditions remain ideal for purchasing a home. Freddie Mac’s Primary Mortgage Market Survey showed that rates on 30-year fixed-rate mortgages are averaging less than 5 percent and nearing the all-time low set in March. In addition, first-time buyers still have a few weeks to get under contract in time to take advantage of the $8,000 buyer tax credit.

Market Conditions

Our market is still holding strong.     Inventory is way down!   Our buyers are scrambling to find a home that is a traditional sell or even a foreclosure!   There are still plenty of short-sales, but as you  know by now, they can be a huge risk!  

Consumers are busy buying houses, according to the National Association of Realtors (NAR), which announced this week that its Pending Home Sales Index rose 6.4 percent in August to its highest level since March 2007. The uptick in pending home sales marked the seventh consecutive monthly increase, the longest in the series of the index which began in 2001.A forward-looking indicator based on contracts signed to purchase a home, the Pending Home Sales Index in the Northeast jumped 8.2 percent from July and is 12 percent higher than August 2008.  

Conditions remain ideal for purchasing a home. Freddie Mac’s Primary Mortgage Market Survey showed that rates on 30-year fixed-rate mortgages are averaging less than 5 percent and nearing the all-time low set in March. In addition, first-time buyers still have a few weeks to get under contract in time to take advantage of the $8,000 buyer tax credit.

Latest Market News From Weichert

The economy continues to show signs of stabilization. In fact, Federal Reserve Chairman Ben Bernanke announced this week that the recession is probably over and that the economy is likely growing at this point. Famed investor Warren Buffet also said the economy appears to have leveled off.In addition, the number of newly laid off workers applying for unemployment benefits has declined in three of the last four weeks. Consumers also seem to be more comfortable spending money. The government reported that retail sales rose 2.7 percent in August, the most in more than three years.

The positive news also extends to the real estate industry:

  • Rates on 30-year fixed mortgages are at their lowest level since the end of May, making homes more affordable.
  • Housing construction rose in August to the highest level in nine months, and applications for building permits — an indicator of future activity — rose 2.7 percent. Regionally, construction rose 23.8 percent in the Northeast.
  • The National Association of Home Builders’ housing market index rose in September, reflecting growing optimism in the industry.

The market seems to be moving in the right direction — up.

What Will Happen to Our Real Estate Market on December 1st?

As you might already know…If you’re planning on taking advantage of the government’s $8,000 tax credit, you must close on your home by November 30th, 2009.  

Our real estate market in Northern Virginia has definitely felt a positive impact from the tax credit.   Home prices on pre-owned homes and new homes  are continuing to rise.   In addition to this, the Nation Association of Home Builders reported that its Housing Market Index rose last month, and has reached its highest level since May of 2008.  

The  National Association of Realtors has reported that the tax credit has brought 1.2 million new buyers to the national real estate market.   They went on to say that  350,000 of these buyers  would not have purchased a home without the credit.

The biggest question I get as an agent is… Will the tax credit be extended?  

Earlier this week, the Obama administration reported that it is evaluating how the tax credit  has impacted home sales   and could recommend that the President extend it.

Recent Changes in Disclosure Rules….Can this cause problems getting to Settlement?

Starting July 30, 2009,the Federal Reserve Board has adopted new guidelines that will directly impact mortgage lenders and disclosure requirements.  

The Mortgage Disclosure Improvement Act of 2008  has  changed  Regulation Z of the Truth in Lending Act. In short, MDIA makes  new requirements regarding loan disclosures. These rules apply to federally-related mortgages under RESPA and will apply  to purchases and refinances.

 Key Changes:

*Borrowers must be provided with a GFE.   (Good Faith Estimate)   within 3 business days of receiving a written loan application. No fees, except for a credit report, may be taken until then.

*If the final APR at loan consummation varies more that 0.125%, which is 1/8 of 1 percent, from the initial APR on the earlier disclosure, then the lender MUST give the borrower a new disclosure at least 3 BUSINESS DAYS BEFORE CLOSING.

These regulations have been set up to protect you, the consumer,  when making, what might be  one of the biggest financial investments of your lifetime.

Please let me know if you have any further questions on this topic.

What is HOME and How Will it Help Buyers!

In short, The Home Ownership Move the Economy Act of 2009, also known as HOME, would expand the first-time home purchaser credit.

This Act, if passed, would amend the Internal Revenue Code by:

-Extending the first-time home buyer tax credit to all individuals.   (The buyer would have to be purchasing a principal residence.)  

-The Act would extend the credit through 2010.  

-Finally, it would repeal the limits on such credits based on modified adjusted gross income.  

**  I am also hearing that the tax credit may be increased.**

As I receive more information, I will pass it on to you.  

New Home Builders and Customer Service

Recently, I have been asked  more and more about new home builders in our area.    While so many of our buyers are tired of going the short-sale/foreclosure route and  can’t find a traditional sale, they are turning to  new homes.       My clients can  tell you how crucial it is to have an agent on your side to represent you and your interests.    

In our area Richmond American Homes has opened a brand new model in  Glenkirk Estates.    This gorgeous neighborhood is located in Gainesville.  My clients who have worked with Richmond American Homes, have had all positive reviews.    I have to tell you they have incredible customer service.  

If you have question about  building a new home, let me know.    

Do You Feel that the Square Footage in New Homes is Shrinking?

Statistics from the National Association of Homebuilders show that the square footage of homes has shrunk in recent years. This is a trend that is likely to continue given the current economy.This may be an opportune time for owners of smaller homes to sell, according to a recent article published in Realty Times, which provided these tips for giving a small home big appeal to buyers:

  • Accentuate storage space. A buyer must sense that a smaller home has enough storage space to accommodate their everyday needs. Clear out the attic and/or basement if the home has them. In addition, built-in furniture or custom closets also provide convenient, hidden storage.
  • Create an office niche. Home offices are very popular, but a smaller home might not have an extra room to use for this purpose. Using a decorative screen around a small desk or tucking one away beneath a staircase shows buyers how they can still have a home office in a small space.
  • Make the most of space. In the kitchen, clear appliances from the counters and mount them under the cabinets for a clutter-free look. Avoid crowding a small living room with an oversized couch, and instead consider several comfortable chairs that may fit better and open up the room.