UTAH REAL ESTATE INVESTOR

reprint: Realty Times

Realtors, home builders and consumers hoping not just for an extension of the $8,000 tax credit, but an expansion to all buyers in 2010, shouldn’t hold their breath.

That’s because it’s looking more likely that Congress will only agree to a continuation of the current credit beyond its scheduled November 30 termination date.

But that’s not bad news. Just a few weeks back the key question was: will Congress extend the credit at all? Now that looks like a pretty safe bet.

When it comes to tax issues, you’ve got to follow what New York Congressman Charlie Rangel is saying. He’s the chairman of the Ways and Means committee, and no tax legislation has even a chance of getting anywhere without his say-so.

On the other hand, bills he supports, they just about always make it at least to the House floor, and usually beyond.

Here’s what Rangel told reporters last week about the housing tax credit: “There’s no question I think it should be extended,” he said. How long, I haven’t discussed.” Rangel also said he doesn’t thing that “eligibility should be expanded beyond the first-time home buyers,” according to Dow Jones Newswires.

That’s probably the kiss of death for lobbyists pushing for an increase in the maximum credit to $15,000, and expansion of coverage to nearly all buyers of homes in 2010, and an increase in the income limits for eligible purchasers.

The National Association of Realtors and the National Association of Home Builders have been the most outspoken advocates of a year long extension and expansion of the credit, up to a maximum $15,000.

Informed of Rangel’s comments, home builders president Jerry Howard said he’s no longer as “optimistic about expansion” as he once was.

But, on the other hand, chairman Rangel’s endorsement of an extension of the credit — for a yet-to-be specified period of months — has got be a lifesaver for thousands of buyers who’ve been worried they’d miss out on this year’s credit because they can’t close their transactions by November 30.

The politics of the tax credit, and the likely rejection of a bigger credit, are all about the budget deficit. Lawmakers on both sides of the aisle are looking for ways to cover the multi-billion-dollar revenue costs of an extension of the credit. Some estimates go as high as $15 billion.

One idea advanced by Georgia Republican Sen. Johnny Isakson: tap into some of the unspent economic stimulus bill money still sitting in the $800 billion economic stimulus bill.

“On Friday, the U.S. Department of Housing and Urban Development (HUD) announced that first-time home buyers using FHA-approved lenders can now get an advance on the $8,000 tax credit created by the stimulus package and apply it toward their down payments or closing costs.” (CNNMoney.com)

First time home buyers can now utilize their tax credit toward the purchase of their homes. But this money comes with some stipulations. FHA still requires that the buyer bring 3.5% of the purchase price as a down payments, however, the tax credit can be used to lower their principal balance, closing costs, buy-downs, etc.

The tax credit money is utilized through a bridge loan (a short term loan). Some other states have already implemented plans to help these first-time home buyers to utilize their tax credits. These states include Colorado, Missouri, New Jersey, Pennsylvania, Tennessee and Washington. Each of these states has created a different plan for utilizing the credit but it has allowed many new homeowner buy their homes without completely depleting their cash reserves.

President Obama’s administration has helped to create an $8,000 tax credit for first time home buyers. Eager lenders are trying to capitalize on this tax credit by creating a “bridge loan” based upon the buyer’s eligibility to receive the credit. Essentially the buyer would borrow 100% of the money to purchase their home. The lender would provide a short-term $8,000 loan to the buyer for their down-payment which would be repaid as soon as the buyer received their $8,000 tax refund the next year. This would provide first-time home owners a great way to get into a home today (at record low fixed-rate mortgages) using their tax credit from next year. However, there have been some issues with the bridge financing and HUD.

According to a recent news article in The Arizona Republic, “HUD says bridge-loan program hasn’t been killed.” There are still some details to be worked out before this program becomes official but it will be a fantastic program to help first-time home owners utilize their tax credit to buy their first home and capitalize on the record low interest rates of today’s market.

• make less than $75,000/year ($150,000/year if a married couple)
• it’s the buyer’s primary residence
• financing is a fixed rate 30-year (or less) mortgage
• and apply before the grant money has run out

There are some other requirements for the grant. Please check the official website for more information. As of this posting only 520 grants remain (of the original 1,600 grants available).

The chances of nabbing a grant from the state worth $6,000 aimed at those buying new homes in Utah are dwindling.

Since mid-March more than 1,000 Utahns have qualified for a grant under the state’s Home Run program, which originally had 1,600 grants available.

The remaining 600 are expected to go quickly.
(Read more)