Early reports about the massive Stimulus Bill due to be passed today indicate that home buyers will get a bit of a boost.
FIRST-TIME HOME BUYER CREDIT First-time home buyers are eligible for a refundable tax credit equal to 10 percent of the purchase price of their home, up to $8,000, if they made the purchase after Jan. 1, 2009, but before Dec. 1, 2009. A first-time home buyer is traditionally defined as someone who has not owned a home in the past 3 years, no matter how many homes owned before that date.
Unlike a similar credit that Congress provided last year, buyers don’t have to pay this one back over 15 years. The new credit, however, does phase out for individuals with incomes over $75,000. Also, you forfeit the credit if you sell the house within three years. In other words, no home flippers, please. Of course, this credit is for owner-occupied homes only.
Coupled with the now-permanent rise in the cap rate of FHA loans to $625,000, this does propel buyers into the market. FHA loans offer a variety of options for the home buyer, and, prime among them is that 3.9% down payment. Some of the savor there is reduced by the high mortgage insurance amounts necessary for these federally-backed loans, but FHA allows sellers to contribute up to 6% of the loan amount for these and other costs.
Today, mortgage rates for 30-year fixed, are hovering around 5%, among the lowest in 50 years, and home prices are still declining, albeit more slowly.
If all this doesn’t point qualified buyers in the right direction–what will? Today’s buyer, especially in Southern California, is unlikely to get a better deal in his or her lifetime.