$8,000 First-time Homebuyer Tax Credit Ends Soon — Better Get Moving!
By: Alison Paoli, Zillow PR Specialist | September 3, 2009
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.
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Comments
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DebtFree on September 3, 2009 12:05 pm
RE: “married couples must have a combined income of less than $150,000″
Therefore this $8,000 credit will only benefit home sales under $450,000 (3X $150,000 household income).
$8,000 is 1.8% of $450,000 (i.e., is completely irrelevant, especially when home prices are dropping in double-digits each year). It makes more sense to buy in 1 or 2 years, when home prices have dropped another 20% and there will be another 2 years of savings in the bank.
Additionally, housing prices in metros near New York, Los Angeles, etc, cost 50% to 100% more than $450,000.
Given the basic financial facts, this tax credit is utterly meaningless, and will only cloud the waters for naive and uninformed buyers.
Perhaps in areas where a house costs $100,000 it will help, but it’s useless everywhere else…
Charles in Las Vegas on September 3, 2009 2:52 pm
I totally disagree with “debtfree”. “useless everywhere else” Really? Every person I’ve met would be happy to take 8k off of their tax bill for buying a house. If someone is buying a $450,000 house, odds are they make too much money to qualify for the tax credit anyway. Yes prices are higher in those areas, but those are only a FEW areas of the country. When you consider the US as a whole, the tax credit has been hugely sucessful.
Tom on September 3, 2009 11:47 pm
We believe that owner financing is important to survive in the current market. The economy is not going to improve quickly and the banks are not going to lend to many people. Seller financed property can help.
This site is helpful. Lots of owner financed homes. http://www.ownercarryit.com
Take a look. Feel free to list, as it’s free to do so.
Thanks.
chris on September 4, 2009 5:55 am
Will the tax credit be allowed when private loans are used to make the purchase or will a bank loan be necessary?
DebtFree on September 4, 2009 8:11 am
RE: “Every person I’ve met would be happy to take 8k off of their tax bill for buying a house.”
Every person I’ve met would be happier paying 20% less in 2 years, rather than take a 1.8% tax credit today. In Las Vegas the declines will be closer to another 40% in 2 years. Additionally, the sellers know the buyer is getting a tax credit, and will negotiate that much less.
But as stated, few even qualify for the credit with such a low income requirement (a plumber and a teacher would make more than $150K annually, and therefore not qualify).
Carnival of Real Estate Labor Day Edition — miOaklandCounty.com on September 7, 2009 5:43 am
[...] for the $8k first time buyers tax credit. For those still on the fence, Alison Paoli presents $8,000 First-time Homebuyer Tax Credit Ends Soon — Better Get Moving! posted at Zillow Blog - Real Estate Market Stats, Celebrity Real Estate, and Zillow [...]
abe vigoda on September 9, 2009 9:38 am
Wouldn’t logic dictate that home prices are going to DROP after Dec. 1 due to the ending of this government giveaway of our tax money? You have newbie first timers with no savings or jobs out buying houses with government money. Let’s see the cure rates on these loans a year from now.
Notice the historic CONTRACTIONS in consumer credit reported yesterday of over 21 BILLION dollars last month? Deflation is here. House prices are going lower.
DebtFree on September 9, 2009 12:14 pm
Abe, did you see Citi’s default rate on their now-canceled Home Depot Rewards card? 52 percent.
More than half the accounts are delinquent!
Megan Jones on September 9, 2009 8:41 pm
My husband and I bought a 70s model mobile home on a rented lot (trailer park) in Decemner 2007 for which we took out a personal loan instead of a mortgage because purchase price was only 9000. Two days ago, we purchased our first home. Do we qualify since we technically did not own the previous property?
waiting2buy on September 21, 2009 5:05 pm
I actually agree with Debtfree and Abe. I recently had the opportunity to purchase a home to get this tax credit but I declined. For one thing,I didn’t have enough in savings. Therefore, I would have had to use most of the tax credit upfront for my closing costs. I would have had to get a loan from a state agency to cover me until I could pay them back via my tax credit. Which would have probably meant that I would be starting off with no cushion. Also, my payments would have been higher to begin with because of the low down payment. The agent I was working with thought this was the best time for me to buy. I however, felt differently. I sat down and did some soul searching and decided to come up with a one year savings plan. During which time I will put away enough money to cover closing costs and build up my credit. The tax credit is a good incentive for those who have a good amount of money in savings and are financially ready for the responsibility. The tax credit is meant to be a cushion to get you started. In my case it would have been a crutch. I had to evaluate my individual circumstances and decide what was best for me and although I might miss out on the tax credit. In the long run I think I will be better off.
Chris Dowell on September 22, 2009 4:46 pm
The first time home buyer tax credit should be extended. Here are my top seven reasons why: The Top 7 Reasons the $8,000 First
Time Homebuyer Tax Credit Should be Extended http://bit.ly/9FKNQ
Erin on October 9, 2009 1:45 pm
I don’t know if this info might help you, but maybe it would be good advice for someone reading.
Check out the website http://www.firsthomeexperience.com/main/
There is lots of good information for first time buyers –links to more on the tax credit, a free home buying guide, and lots more.
GL100 on November 3, 2009 6:26 am
The tax credit can help in the right circumstances but not all people unfortunately.