With the current financial situation, many people are asking themselves whether now is a good time to buy a home. This is actually a very personal question and there is no stock answer that will be right for everyone. Instead, it is important to evaluate your individual financial situation and personal needs, before making what is for many the biggest single investment of their life.
With that said, there are a few silver linings to the current economic situation, making buying a home a very attractive decision, especially for first time home buyers.
The number of foreclosures is still on the rise and while this is quite sad for those who are facing foreclosures, it means that there is an increased number of homes available on the market, which are priced significantly below what would have been considered fair market value even just a few years ago.
With many banks wanting to get the bad debt off their books, there are numerous opportunities for someone to buy a foreclosed home at significant savings. This is not reserved to only homes in poor neighborhoods or in bad condition either, as millions of homes all over the country are currently empty.
An increase in foreclosures also has an impact on the price of other homes, as with so many options available, home values across the country are dropping.
With that said, it is important to consider what this means about the generally accepted value of a home. Many of the root causes of the current financial situation can be traced back to the commonly held belief that “home values will always rise,” leading many to become involved in homes they can not afford. It is commonly held thought that home values are not actually at an all time low, but are instead reverting back to their actual value.
Interest rates are at an all time low, in part because the FED, which regulates interest rates on borrowed money, have set the interest rate at basically zero. While the FED interest rate is not the same one that lenders offer, mortgage banks base their interest rate off of the FED rate, which is why we are seeing historically low interest rates.
Where even just a few years ago, getting a fixed rate below 6% was all but unheard of, many lenders are now offering rates that are closer to 4% or even lower. This low interest rate can save thousands and thousands of dollars in interest.
Last year, President Obama initiated the First Time Home Buyers Tax Credit, which offered up to $8,000 in the form of a tax credit that did not need to be paid back. The first time home buyers tax credit was intended only for those who had not owned a home in the last three years and was considerably different than the previous credit, which was a no-interest loan.
This tax credit was set to expire in December of 2009, but congress voted to not only extend it, but also offer a slightly reduced tax credit to people who have owned a home in the last three years.
These new tax credits for homeowners can significantly reduce costs and since it does not need to be paid back, it is a very attractive offer making buying a home in 2010 much more affordable. Those that can afford it can significantly reduce their interest payments by applying it towards the principal of the home or simply using it to help cover their bills.
This week, the Senate passed a bill that would extend the first time home buyers incentive program, as well as offering a different tax credit for existing homeowners.
The bill that was passed on Wednesday may give the first time homebuyers tax credit a second life, as it is currently set to expire on on December 01, 2009.
The Current 2009 tax credit, which does not need to be repaid, is only available to those who have not owned a home for at least three years and offers up to $8000 to those who qualify.
Under the new law, these benefits would not only be maintained, but also extended to those who have owned a home for five years or more. However, for existing homeowners, only $6500 would be available. Those buying a home would have until June to close on the home, but would have to have singed a sales agreement by April 2010.
In addition to addressing the housing market, the bill also includes provisions to federally fund unemployment benefits for an additional 20 weeks.
Of course, this bill has a long way to go before it becomes law, as it must still pass the House and then it must be signed by President Obama. This is also not the first bill aimed at extending the homeowners stimulus program, with a $15,000 tax credit for homeowners never gaining much momentum.
Before its passage in the Senate, Republicans had wanted to include a provision requiring that those on unemployment be checked using E-Verify, which is a an online service that checks immigration status, before receiving unemployment benefits. They also wanted the stimulus bill to include an amendment prohibiting Acorn from receiving federal aid.
Both of these requests were refuted by the Democratically held senate, but the bill still needs to be passed by the House, so there may still be more changes made to it.
Today, there are many incentives to purchase a new home, namely historically low interest rates and a surplus in empty homes, which has reduced the overall cost of a new home. Together, these incentives can make it much more affordable to own a new home and it is possible to end up paying much less than you would in rent. The government is also currently offering an incentive for first time home buyers in the form of a tax credit of up to $8,000 towards the purchase price of the home. While this tax credit can be applied to either your 2008 or 2009 tax return, it is probably in your best interest to file an amended 2008 tax return, so the first time home buyers credit can be received sooner rather than later.
The 2009 First Time Home Buyers Tax Credit is part of the American Recovery and Reinvestment Act, which is designed to help stimulate the economy. President Obama signed this bill into law in February and it includes a number of tax incentives for both consumers and corporations. All told, the American Recovery and Reinvestment Act includes $288 Billion in tax relief, which represents about a third of the American Recovery and Reinvestment Act’s budget.
Of the $288 Billion in tax relief, $6.6 Billion has been set aside for first time home buyers. There are several requirements to receive the first time home buyers credit, including that the individual has not owned a home in the last three years and that their income is less than $75,000. For those that meet the requirements up to $8,000 is offered in the form of a tax credit that does not need to be repaid.
Obama’s First Time Homebuyers tax credit can be claimed on either ones 2008 or 2009 tax return, but rather than waiting, it is generally in your best interest to file an amended tax return, so that the funds can be received right away. Filing an amended tax return is very easy and it is only necessary to resubmit a 1040X IRS Form and include a form 5405, which is required as part of the First Time Home Buyers Tax Credit. After the amended tax return has been submitted and received by the IRS, it usually takes between 8 and 12 weeks to process.
By filing an amended tax return, it is possible to get your stimulus check much quicker than if you were to wait until 2009. This means you get the money right away and can reinvest it in your home, simultaneously increasing equity and reducing mortgage rates. It can also be spent on home improvements or to help with bills.
Those that decide to file for the 2009 First Time Homebuyers tax credit return on their 2009 taxes will have to wait much longer to receive their stimulus check. It also could mean that the budget could be expended, which has already happened with the Cash for Clunkers incentive program. However, in order for the first time Homebuyers tax credit’s budget to be expended, 825,000 people would have to submit an application.
While it is possible to file an amended tax return to receive your funds right away, it is also possible to change your number of deductions, so that you pay less, or even nothing, towards your federal taxes in your paychecks. At the end of the year, the First Time Home Buyers Tax Credit will be applied to what you owe to the IRS and the difference will be refunded.
**Update November 6, 2009: President Obama has just signed a new law extending this tax credit until April 2010. Under the new law, most of the requirements remain the same, but the income cap has been raised to $125,000 or $225,000 for couples and the home must be priced under $800,000 to qualify. An additional $6,500 tax credit was also added for existing home owners, providing they have owned the home for at least five years. **
Today, there are many incentives for new home buyers. It is possible to get some great deals on homes, as home values are at a historic low. There are many foreclosures as well, which can be a great way to save money, and mortgage interest rates are also the lowest they have been for many years. There is also an $8,000 first time home buyer tax credit available to Americans, which does not have to be repaid.
The First Time Home Buyers Tax Credit is part of Obama’s American Recovery and Reinvestment Act, which was passed in 2009. This tax incentive is designed to help jump start the economy and help make homes more affordable for first time home owners. This is not the first time a tax incentive has been offered to new home owners, however the Obama housing tax credit is different because it will not need to be repaid.
*Under the extension, as long as you have a binding sales contract in place before April 30, 2010, you have until June 30, 2010 to actually close on the home.
The Obama First Time Buyers Tax Incentive can be applied towards many types of homes, including mobile homes, manufactured homes, single family homes, condominiums, house boats, multi-family homes, and even new constructions.
The Federal housing tax credit for first time home buyers provides for 10% of the value of the home, up to $8,000.
The $8,000 stimulus check does not need to repaid, providing you live in the home for at least three years. If the home is sold or is no longer used as your primary residence in the first three years, the $8,000 will need to be repaid.
The 2009 First Time Home Buyers Tax Credit can be claimed on either your 2008 or 2009 tax return. It is necessary to complete an IRS Form 5405 and submit it with your regular tax return.
If you have already submitted your 2008 tax return to the IRS, it is possible to file an amended tax return, to receive your money early. An amended tax return usually takes between 6 to 8 weeks for the IRS to process and will mean you can receive your stimulus check early, without having to wait.
If you owe the IRS money, then the stimulus check will be used towards this balance, with the remaining funds returned to the first time home owner.
Those that do not owe the IRS any money will receive the full balance of the stimulus check. This is true even of those who do not pay any income tax.
You would not qualify for Obama’s First Time Home Buyers Tax Credit, but there is a different tax credit available.
For those who purchase a home between April 8, 2008, and Dec. 1, 2009, an $8,000 no interest loan is available. This loan is provided as part of the Housing and Economic Recovery Act of 2008 and will need to be repaid starting in 2010.
The First Time Homebuyers Credit has most of the same requirements as Obama’s Tax Incentive.
Over the past few months, it seems that congress and President Obama have passed a great number bills to help stimulate the economy. While many of these bills are viewed mainly as a bailout to some of the very people who got us into this mess in the first place, the First Time Home Buyers Tax Credit can actually help the people who need it the most.
The First Time Home Buyers Tax Credit is part of the American Recovery and Reinvestment Act of 2009, which is an economic stimulus packaged passed signed into law by President Obama on February 17, 2009.
The American Recovery and Reinvestment Act is intended to help jump start the economy and contains a number of provisions, including expanded unemployment benefits, tax relief, as well as the first time home buyers tax credit. Of the $787 Billion Dollars allotted for the American Recovery and Reinvestment Act $237 Billion is slated for individual tax relief, $51 Billion for Corporate Tax Relief, and almost $148 Billion has been set aside for healthcare. Other funds will goto housing, HUD, scientific research, Energy, and Infrastructure.
$6.6 Billion dollars has been allotted for the first time home buyers tax credit, which provides up to $8,000 towards the purchase of a home for qualified citizens. In order to be eligible to receive the tax credit, the buyer, and their spouse, muse not have owned a primary residence in the last 3 years and must make less than $75,000 a year, or $150,000 for couples. The tax credit is figured off of 10% of the value of the home up to $8,000.
The first time home owners tax credit can be used on almost any type of home, including houseboats, mobile homes, new construction, single family homes, manufactured homes, and condominiums. In order to qualify, the home must be purchased between January 1, 2009 and December 1, 2009.
This is not the first time that the Federal Government has offered an incentive to new home buyers. In fact last year, with the passage of the Housing and Economic Recovery Act of 2008, an $8,000 no interest loan was made available for those who purchased a home between April 8, 2008 and December 1, 2009. However, this loan had to be paid back by the homeowner.
The First Time Home Buyers Tax Credit of 2009, on the other hand, does not need to be paid back. However, it is necessary to live in the home for at least 3 years. Those that sell the home before then will have to return the money, although some exceptions may be made, such as in the case of divorce.
The 2009 Home Buyers Tax Credit can be claimed on either 2008 or 2009 tax returns. People who have already filed their 2008 taxes can file an amended tax return, which is usually processed within 8 weeks, allowing them to receive their tax credit early. While the full amount of the tax credit will be sent to those who owe nothing in taxes, including those with no income, if you have an outstanding debt with the IRS, the money will be used to pay this debt first.
When you look at the big picture, the First Time Home Buyers Tax Credit of 2009 makes up less than 1% of the $787 Billion American Recovery and Reinvestment Act Stimulus Package. However, this tax credit can be a big help to those who are buying a home for the first time.