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October 27, 2009 — Realty Times Feature Article by Bob Hunt

The clock is ticking. Time is running out. To be exact, time runs out midnight, November 30, 2009. Many readers will know what I am referring to. Under the American Recovery and Reinvestment Act of 2009, November 30 is the last day for a home purchased by a first-time home buyer to qualify for the $8,000 tax credit. The purchase must be closed and title transferred by that date. It will not be sufficient simply to be under contract or in escrow.

By way of a brief refresher:

1. The tax credit is for first-time home buyers only. For the program, the IRS defines a first-time home buyer as someone who has not owned a principal residence for the past three years.
2. The credit does not have to be repaid.
3. The tax credit is equal to 10% of the home’s purchase price, up to a maximum of $8,000.
4. The credit is available for homes purchased (closed) on or after January 1, 2009 and before December 1, 2009.
5. Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.
6. The credit can be taken for either 2008 or 2009 taxes. In the former case, an amended return can be filed.

By all accounts the program has been extremely popular – which is to say, successful. The National Association of Realtors® (NAR) estimated that, by September, about 1.1 million first time home buyers had used the program; and another 700,000 are expected to do so. Already, the Treasury Department has reported nearly 315,000 people have claimed the tax credit after filing an amended 2008 return.

As enacted, the program is set to expire at the end of November. A number of bills have been introduced to extend and/or expand it. Representative Eddie Johnson (D-Texas) introduced a bill to extend the program through 2010. Another would also expand it to all home buyers. In the Senate, a bill co-sponsored by Johnny Isakson (R-Georgia) and Chris Dodd (D-Conn.) would expand the tax credit to $15,000 and make it available to any buyer regardless of income.

One would think that at least the modest proposal for an extension would be a no-brainer. It is a government program that is working, for goodness sakes. But even that legislation is in doubt. Two obstacles are cited. One is the cost. Extending this program would result in reduced future revenues. The second problem is that such a bill will have a hard time receiving any attention while the Congress is – for the next foreseeable months – focused on considerably higher profile items such as health-care and Afghanistan.

The first so-called problem seems just crazy. Suppose an extension generated an extra 1 million sales. That would result in $8 billion in unrealized tax revenues. Now that is a lot of money; but it is chump change compared to the amounts that have been lavished on financial firms and auto makers, with yet to be determined beneficial effects. The tax credit program only costs money if it works. Its cost is proportional to its success. If it didn’t work at all, it wouldn’t cost a dime. Imagine that for a government program.

The second problem is realistic. There’s a lot of heavy-duty stuff going on. But, it would seem a simple extension of the program could be achieved with very little ado and virtually no distractions from the “big issues.”

Meanwhile, what should interested parties do?

1. If you are a first-time home buyer, you had better get off the dime. There’s certainly no guarantee the program will be extended.
2. If you are a real estate agent, pass #1 along to every potential first-time buyer that you know.
3. Whether you are a Realtor® or not, if you believe in extending the program, let your representatives know.
4. If you are a member of the Realtor® organization, respond to NAR’s call for action, supporting its lobbying efforts.

For more information, call Prudential Vision Properties at 573-449-6200 to speak with a real estate expert without any obligation or cost. You can also email your questions to info@PrudentialVision.com (email responses usually come back within the hour)

There are basically three mortgage categories employed in a home purchase: FHA, VA, and conventional. Within these categories, there are many variations. Your lender’s role is to counsel you regarding your mortgage options.

An FHA loan is a mortgage insured by the Federal Housing Administration (FHA), administered by the Federal Department of Housing and Urban Development (HUD). FHA will guarantee the lender against loss if the buyer does not pay the investor back.

Buyers find FHA loans attractive because they require as little as 3 percent down payment. FHA qualifying guidelines are also more lenient for the buyer. This makes them more attractive for a buyer who has a heavier debt load.

VA loans are mortgages offered only to veterans. To obtain a VA loan, the veteran must have a Certificate of Eligibility verifying the veteran’s active duty status since September 16, 1940 and discharge papers from the service. VA loans require no down payment, have limited closing costs, and sometimes have lower interest rates. The Veteran’s Administration (VA) will guarantee the lender against loss if the buyer does not make payments on the loan.

Conventional loans are mortgages which conform to standards set forth by the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac). Investors remain at risk up to 80 percent of the value of the property. The amount borrowed above 80 percent of the home value is insured against loss by private mortgage insurance.

There are many different mortgage products within these three categories. Learn more about the various mortgage products.

For more information, call Prudential Vision Properties at 573-449-6200 to speak with a real estate expert without any obligation or cost. You can also email your questions to info@PrudentialVision.com (email responses usually come back within the hour)

By Betsy Sabel
Prudential Vision Properties

It’s not surprising that two of the most popular rooms for home makeovers are the kitchen and bathroom. When potential homebuyers are searching for homes, they generally are more attracted to homes with updated kitchens and baths. These same rooms rank high in return on remodeling investment at resale, according to Remodeling Magazine’s Cost-vs-Value 2008-09 Study.

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