Not all Bones are Worth Barking at

The Home Buyer’s Tax Credit program has not only received much attention, but also much success among buyers who were able to take advantage of the incentive to receive up to $8,000 in tax credits.  The program was so successful that it was granted two extensions.  The first extension happened this past winter allowing more time and more buyers to get in on the action.  And thousands did!  The second extension was signed into action just 11 days ago by President Obama.  This second extension moves the deadline to close on these home loans from June 30 to September 30, 2010. 

While this may sound good on paper, did it even help anyone?  Were home buyers just thrown the proverbial dog bone?  The second extension affects home loans for purchase agreements that were finalized by April 30 of this year.  That means these contracts are now over 60 days old with most written to close within that time frame.  If a buyer takes another 90 days to close on their home loan, it will have taken 5 months to close their loan!  Are sellers even willing to wait that long to close on the sale of their home?  What affect with that long of a wait have on a sellers next purchase?

Perhaps the underlying question is why didn’t the home loan close in the first place?  You can make the argument that with all the home buyers flooding the market, lenders, appraisers, title companies, etc were suddenly backlogged with so much business they could not possibly keep up.  For some this is probably true, but is the extension too late?  Remember that the extension only changes the closing date.  The binding purchase contract still needs to be dated on or before April 30, 2010.  If the contract was written to close by June 30, 2010 and it did not, that contract is now void.  A written addendum to change the closing date changes the purchase agreement and while the buyer and seller may agree, it also means a final binding agreement was not in place by April 30.

The other challenge we have heard is that buyers were not properly qualified before they even made an offer on the home.  Unfortunately, many lenders only pre-qualify a borrower which means you have only verbally discussed your financial situation for purchasing a home.  A stronger case is when a borrower is pre-approved.  This means actual documentation on income, assets and debt load has been reviewed and verified.  Pre-approved borrowers have fewer surprises when their home loan is processed. (Awareness Home Funding always prepares our clients.)  Unfortunately, many home buyers wanting to take advantage of the Home Buyers Tax Credit are failing to close due to challenges that should have been addressed before they even began to shop for a new home.

The Home Buyers Tax Credit program was a good program that really worked, really helped buyers and really moved home sales.  This last extension just helps very few and was put into affect way too late.  But let’s not leave this post on a down note.  There is still a home buyer’s incentive program in place, one that has been there for some time – the Mortgage Credit Certificate (MCC) program.

The MCC program is a Federal tax credit on the mortgage interest you pay on your home loan over a calendar year.  While this does not reduce your monthly mortgage payment, it is a dollar for dollar reduction from the amount of your Federal Income Tax liability.  Not every state offers the MCC since it is state run and funded despite being a federal program.  However, for states that do, it effectively reduces your annual interest rate.  Awareness Home Funding is committed to using the MCC program wherever available in the states we are licensed to conduct business.

The main point is this, while the Home Buyers Tax Credit program has ended, help is available for home buyers.  Call us today (866-982-9273) to see how we can help you.

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