$8,000 First-time Homebuyer Tax Credit Ends Soon — Better Get Moving!

It’s been a boon for first-time homebuyers, but the $8,000 first-time homebuyer tax credit is set to expire in less than three months. The tax credit is part of a larger economic stimulus package designed to get the economy’s wheels turning again and the months of excess housing inventory off of the market.

With time running short, what should those who want to buy a home and get the credit know?

To qualify as a first-time homebuyer and get the most out of the tax credit you’ll need to meet the definition of a first-time buyer, fall under maximum income qualifications and meet purchase price standards. A first-time homebuyer is defined as someone who has not owned a primary residence within the past three years. If married, this also applies to the spouse.

To receive the maximum credit, a single buyer’s income must be below $75,000 and married couples must have a combined income of less than $150,000. Finally, the maximum credit available is $8,000 – or 10% of the home’s value, whichever is less.

The hard deadline for the credit is Dec. 1, 2009, meaning you must have completed the purchase of the home before that day — specifically, Nov. 30, 2009. Completing the purchase even one day later will mean you won’t qualify for the credit.

If you are a first-time homebuyer, it can be difficult to gauge how long the home buying process can take, but the bottom line is: Start now or it may be too late to take advantage of the credit. Here is why:

• Escrow: Escrow can take anywhere from one week to several months. Escrow is the process of transferring the deed from one owner to another. The time it takes to do this depends on variables such as: buying a home from a bank rather than a private seller; undiscovered liens against the property; if the escrow company is backlogged, and so on.
• Pre-approval: Pre-approval by a lender can take one to several days. Pre-approval is often required by banks when making an offer on a foreclosure re-sale or short sale to void out any unqualified potential buyers. When not buying a distressed sale, just having a pre-approval letter from your bank shows potential home sellers that you are a serious and ready buyer. Keep in mind that a pre-approval is different from a pre-qualification. A pre-qualification is a quick overview of your finances to give you a guide as to how much you can spend while a pre-approval is a deeper review or your debt /income and a more secure approval from the bank.
• Negotiations: Negotiations can take up to a week or more depending on what the buyer and seller haggle over. On the other hand, if the seller agrees to the initial offer, it may only take 24-48 hours. If you are negotiating with a bank on a bank-owned home, or a short sale, it could take months.

Aside from the above-mentioned standard practices when buying a home, there can be other road blocks such as a failed inspection or a loss of funding that can slow down or derail the process.

Just looking at the three main steps, it could take anywhere from two weeks to more than three months to close on a home (distressed sales can take much longer) and this doesn’t include the process of actually finding the home of your dreams.

Here are a few resources on Zillow that can help with the process:

To find a mortgage lender/broker try Zillow Mortgage Marketplace.

To find homes for sale check out our expansive database of over 3.6 million homes for sale across the country.

To get more information on real estate statistics in your future neighborhood or to see a profile of a neighborhood try the Local Pages.

Do you qualify for the $8,000 First-Time Home Buyer Tax Credit?

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