I think we can all agree the housing market needs a little kick in the pants right now! Well, your Federal Government to the rescue. This week congress passed a Housing Rescue Bill which will attempt to do a number of different things from foreclosure avoidance assistance, tax credits to some home buyers and financial assistance to neighborhoods to buy and rehabilitate foreclosed homes among other things. The bill is expected to be signed by President Bush and if so it will be become law.
What I would like to focus on in this writing is the aid for home buyers. The bill offers first time home buyers a refundable $7,500 tax credit (or 10% of the homes purchase price, whichever is less) for homes bought between April 9, 2008 and April 1, 2009. There is an income limit of $75,000 for single filers and $150,000 for couples filing jointly. The tax credit is reduced or eliminated for home buyers whose earnings exceed these limits.
This is significant! If you buy a house for $150,000, and your income qualifies you for the full benefit, then you would get a tax credit of $7,500! A full 5% of the purchase price is given right back to you at tax time. Wow, that should get some buyers who are sitting on the fence something to think about. Housing sales rely heavily on the domino effect; when one person sells their home they go out and buy another house and then that seller can buy something new and so on. More buyers in the market could really relieve some of the pressures and expand home buying exponentially! This is a step that could really help to get things back on track.
Wait, there’s more . . . . . . Fannie Mae and Freddie Mac (everybody knows who they are now) recently announced that they will buy loans in “stressed markets” (Southeast Michigan falls into this category) with only a 5% down payment! Formerly, you had to put at least 10% down. Now, to get 5% down you have to be a pretty solid borrower – at least a 680 credit score and 45% debt to income ratios, stable job and at least 5% of your own money for the down payment.
So, a first time homebuyer can get a massive tax credit and buy a place with only 5% down with conventional financing! Get your megaphone out and start trumpeting this around town. If you know anyone who has been considering buying their first home now there are even more reasons why it’s the perfect time to make the move. Home prices haven’t been this low in about a decade; mortgage rates are still great, first time buyers get a big tax credit and can get conventional financing with only 5% down!!