Show Me the Money

Posted on July 8, 2009 by hankbailey

The Federal Housing Administration has added another component to the temporary $8,000 first-time home buyer tax credit. Qualified FHA buyers now have the option of monetizing the funds. Through short-term bridge loans, buyers can access the money immediately instead of amending their 2008 tax return or waiting to file in 2009.

These buyers then have the option of adding it to their FHA-required 3.5 percent down payment, covering closing costs or buying down their interest rate. Realtors® believe this will meaningfully impact home sales and values.

A Bird in the Hand…

Now that buyers can use the $8,000 tax credit immediately, the question many have had is whether we have had a pickup in buyer activity. Are consumers aware of the tax credit? Do they understand the term ‘first-time buyer’ applies to anyone who hasn’t owned a home in three years?

The answer to-date is that they are aware, but the $8,000 is not motivating. It is not enough, and the deadline to qualify is still too far off to have this be motivation to buy when there is still concern about housing prices and whether or not they will continue to correct or fall. Couple this with current discussions in the Congress about the expansion of this credit also have just begun to stagnate activity more as people wait and wonder what additional benefits they might receive by possible future changes.

In addition to increasing the credit from $8,000 to $15,000, additional details are as follows;

• Extending the tax credit deadline into the middle of 2010.

• Making the benefit available to all home buyers

• A tax credit to $3,000 for borrowers who refinance.

These changes, I am told by buyers and real estate professionals alike, can add true stimulus or motivation when it comes to not only first time home buyers, but also”step up” buyers that were mysteriously missing in May. It is too bad the Republican Senator from Georgia, Johnny Isakson, came up with this idea in February, the concept passed the Senate, and had the House kill it where it stood. Now the controlling party can take credit I suppose. We could have had this stimulus 6-8 months ago, but it like many other good ideas got squashed because of political reasons.

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