by Amy Lillard
Sept 17, 2009 - The deadline for using the first-time buyer tax credit isn't for two months, but agents and brokers are recommending starting the process as soon as possible.
First-time homeowners can take advantage of a tax credit for 10% of the purchase price, up to $8,000, until Nov. 30. To ensure the paperwork is completed in time, many in the industry are recommending these borrowers close no later than the week before Thanksgiving. But with the recent information from the National Association of Realtors (NAR) reporting that most home sales are currently taking two months to complete, some agents and brokers are suggesting that the ideal time to go under contract, and ensure closing on time, is no later than the first or second week of October.
All this means that first-time home buyers may be facing a time crunch if the deadline is not extended. Several proposals exist in Washington to extend the deadline and even expand the tax credit to larger amounts and homebuyers. But the chance that the deadline may come and go is a major motivation for first-time mortgage borrowers to act now.
The good news for first-time buyers down to the wire? This is an enticing atmosphere for getting a loan, with increasingly attractive mortgage rates. Thirty-year fixed rates are at their lowest since May, according to this week's report from Freddie Mac. The average rate for a 30-year fixed-rate loan has dropped to 5.04 percent, and the average rate for a 15-year fixed loan is now at 4.47 percent.
Analysts attribute the drop in mortgage rates to recent signs that the recession may be ending, as well as reports that indicate the housing market may be stabilizing. Housing prices are still falling, but demand is growing, in part due to the first-time home buyer tax credit.
NAR has estimated that up to 2 million first-time buyers will take advantage of the tax credit this year, and is making home ownership possible for many new borrowers.
So why do first-time buyers need to act now for the tax credit? With the housing market implosion over the past few years, and the recession over the last year, loans and appraisals have been scrutinized more by lenders. That means it's taking longer for loans to go through, borrowers to be approved, and the closing process that end. Since NAR estimates this entire process to last 2 months, the time for prospective homebuyers to make their move may be now.
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