Tax Credit Expiration and Even More Important Dates for Home Buyers in Montgomery County, Pennsylvania!

I have been getting more and more questions about the tax credit lately so I figured I would list some updated information for those looking to take advantage of the tax credit prior to its pending expiration.

As most of you know, all buyers must have a fully executed agreement of sale on a property by April 30, 2010 and close by June 30,2010 to be eligible for either of the tax credits. These dates are extremely important but there are a few other pending changes that are creating an even greater sense of urgency for people looking to buy homes right now.

Right now may be one of the shortest and most predictable windows of opportunity for those looking to buy soon. Here are the reasons:

1. The expiration of the tax credit. If someone is not under agreement by the end of April then they will not qualify. There are no signs pointing to an extension of the tax credit at this point.

2. The Fed will stop buying mortgage backed securities at the end of March. For those of you who have read my previous emails about this subject, you know that the Fed is the single largest investor in the Mortgage Backed Securities(MBS) that are used to set Mortgage rates. Once they pull out of that market at the end of March there is an expectation that we will see rates rise.

3. For borrowers looking to purchase a home using an FHA mortgage, the Department of Housing and Urban Development (HUD) are looking at ways to help financially support the program. This means that they will be raising the costs for FHA borrowers in a number of ways. The most imminent of these cost increases is set to go into effect on April 5, 2010 and will raise the Up-Front Mortgage Insurance Premium from the typical 1.75% to 2.25%. More changes are slated to follow (i.e. lowering the maximum allowable seller assist from 6% to 3% and increasing the monthly mortgage insurance premium) however, some of these will require congressional approval and/or hearings before being implemented.

So it appears that, although many are targeting April 30th as an important date, the savvy buyers looking for a way to maximize all of the benefits that the government has to offer should really be targeting March 30th. This doesn’t mean there should be panic or that those unable to find a home by the end of March will lose out terribly. This really serves as a planning tool to get buyers out and about to start looking for properties in earnest if they are seeking all of the benefits available to them now.

Additionally, this should signify to sellers that they should work very closely with their Realtor to determine the most aggressive price they can set for their home. This will be important as the pool of buyers will probably peak over the next few weeks and then dwindle considerably as these dates start to hit the calendar.

For the safest approach to buyers: Look soon, get under contract as early as possible, get your rate locked in before the Fed’s MBS purchase program expires but most importantly – look for the right house for yourselves! All of these benefits are great but you should set your sights and goals on a home that you will enjoy for years to come. There is no reason to panic if you miss any of these dates and you shouldn’t feel like you have to settle on a home just because you are afraid of losing some of these benefits. Take the search seriously and get out there ASAP. Chances are great you will find a home to fall in love with AND be able to take advantage of all the government has to offer these days!

The safest approach to sellers: Prepare your home so it shows in the best possible light. Don’t wait to replace carpet or paint, don’t wait to take the advice of your Realtor regarding a more aggressive price. Make the changes NOW!! You have a limited window of opportunity to grasp the buyers looking to benefit from the tax credit and low rates. After the initial tax credit expired last November, the market slowed for two full months before it started to pick up again. If you want or need to sell your home quickly, make sure to speak with your Realtor about the best way to prepare it and price it for sale.

Happy House Hunting!!!