FIRST-TIME HOME BUYERS ARE RUNNING OUT OF TIME
August 13, 2009---- Now that summer has flown by, we are at the end of August believe it or not. Before too long pools will be closed, trees will be changing colors and first-time home buyers looking to take advantage of the $8,000 tax credit will be out of luck.
The $8,000 tax credit being offered to first-time home buyers and people who have not owned a home within the last three years WILL RUN OUT. Like the saying goes, "All good things must come to an end". The end for the tax credit is December 1, 2009. Sounds like plenty of time, right? Wrong! Being at the end of August as we are now, if someone was to get out and start looking right NOW......say they find "THE HOME" in a month, put in an offer and negotiate with the sellers until acceptance, we are looking at about a month and a half. After the offer is accepted, it takes approximately 40 to 50 days to get all contingency's cleared up in the contract and give the loan officer enough time to complete the paperwork for the loan before all parties can meet at the closing table. So, with my example situation, the closing day would be mid-November.
Basic Tax Credit Facts
1. The home must be closed on PRIOR TO December 1, 2009.
2. Eligible if you have not owned a home in the past three years or are a first-time home buyer.
3. Does NOT have to be re-paid.
4. Single tax payers making $75,000 or less
5. Married tax payers making $150,000 or less
6. If taxes are owed to the IRS, that amount will be deducted from the $8,000 credit and the difference paid to you
7. Tax credit EQUAL to 10% of the homes purchase price up to $8,000
Examples:
Purchase Price: $150,000 Tax Credit Amount: $8,000
Purchase Price: $100,000 Tax Credit Amount: $8,000
Purchase Price: $95.000 Tax Credit Amount: $8,000
Purchase Price: $80,000 Tax Credit Amount: $8,000
Purchase Price: $72,000 Tax Credit Amount: $7,200
Purchase Price: $68,000 Tax Credit Amount: $6,800
I can't stress enough for those that are in fact eligible and thinking of buying a house to look into this opportunity. It's never happened in our past and is not likely to happen again in our future.
Maybe I Should Still Rent......
Who really want to pay rent?! Real estate always has been and always will be a great investment over time. Instead of paying $800 in rent a month to pay off someone else's property you could be paying about the same to pay off YOUR own property.
I have shown buyers what they are paying out in rent versus the equity they could be building if they owned. I'd say all that I have shown this too are shocked at the amount of money they are putting into someone else's pocket.
Example:
RENT
$800/month with a rent increase of 2%/year
Year 5: $9,600.00+
Year 10: $49,950.00+
Year 30: $389,000.00+
OWN
Purchase Price: $135,000
Mortgage Amount: $130,000
Mortgage Rate: 6% fixed/30 years
Appreciation Rate: 2% (Louisville rates averaging around 5.5%/year)
Priciple & Interest Payment on above: $780.00
Year 5:
Mortgage paid down to $120,971
Home appreciated to around $149,051
Year 10:
Mortgage paid down to $108,791
Home appreciated to around $164,564
Year 30:
Mortgage paid off
Home appreciated to around $244,534
So.....Would you rather pay someone else $389,000+ for a roof over your head OR would you rather get paid $244,534+ to have owned a home?
Regardless of what the economy is doing in the short term, real estate is ALWAYS a great investment.
Melissa Simms
Realtor
As you can see from the chart above, interest rates were at their peak in the 1980's ranging anywhere from 13% to 17%. Why? High interest rates were needed to counteract the rapid rise in inflation. In the current market, we are seeing interest rates around 6% for a 30 year fixed mortgage.
