Incentives for home ownership extended and expanded

<p>Government programs to spur the real estate market have been hugely successful. The Federal Reserve’s mortgage-backed securities purchase program, the first-time homebuyer tax credit and higher Fannie Mae loan limits along with record low home prices, have created a tremendous real estate market. All of these programs were set to expire soon, but for fear that their expiration would cause the real estate market to falter, the government has extended and expanded some of the these programs into 2010.</p><!-- Nothing to do. The paragraph has already been output --><h3>Tax credit for homebuyers extended and expanded</h3> <p>First-time homebuyers or people who have not owned a home within the last three years may be eligible for the tax credit. The credit for first-time homebuyers is 10 percent of the purchase price of the home, with a maximum available credit of $8,000. </p><p>The program was expanded to current homeowners giving some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.</p><p>In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.</p><p>It’s important to remember that the tax credit is just that — a tax credit. The benefit of a tax credit is that it’s a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a first-time homebuyer were to owe $8,000 in income taxes and would qualify for a tax credit of $8,000, she would owe nothing.</p><p>Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little income tax liability. For example, if a first-time homebuyer is eligible for a tax credit of $8,000 but is liable for $4,000 in income tax, she can still receive a check for the remaining $4,000!</p><p>The amount of income someone can earn and qualify for the full amount of the credit has been increased. Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible.</p><p>Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.</p><p>The maximum purchase price to qualify for the credit is $8,000.</p><h3>Mortgage-backed securities purchase program extended</h3> <p>In an effort to encourage homeownership and make it easier for the purchase of new homes, in November 2008, the Fed announced a new program to artificially lower mortgage rates for a temporary period of time, set to expire Dec. 31, 2009. </p><p>Initially, $750 billion was allocated for the program and a few months later, it was increased to $1.25 trillion. In a measure to ensure a smooth landing rather than a spike in mortgage rates, in October, the Fed decided to extend the program through the first quarter of 2010. They did not increase the budget, but instead increased the timeframe and slowed down the purchase of mortgage-backed securities so as to slowly wind down the program. For instance, instead of buying $25 billion a week in mortgage-backed securities, the Fed is now purchasing approximately $15 billion. They will still use up the allocated $1.25 trillion, but they are spreading it over a longer period of time in an order to wind it down gradually. The hope is that interest rates will increase gradually over the next six months, rather than a spike at the end of the year.</p><h3>Temporary conforming-jumbo limits extended</h3> <p>The general loan limits for 2010 have been extended and remain unchanged from 2009. They were set to expire at the end of 2009. For high-cost areas (including California), there are no differences between the 2010 and 2009 high-cost area loan limits. The conforming loan maximum is $417,000 and the conforming-jumbo limit for Sonoma County is $662,500. Interest rates for conforming-jumbo usually are about .25 percent higher than standard conforming. </p><p>Once again, the government has stepped in to encourage the real estate market. Their programs have been hugely successful here in Sonoma County. The real estate market is highly competitive in the entry level price range ($250,000-$500,000). Even homes in the higher range are experiencing multiple offers. </p><p>With these government programs extended for a limited time and home prices at record lows, now is a great time to consider a real estate purchase. Whether you’re a first-time home buyer or an investor, it’s never been a better time to buy.</p><p>(Brent Blaustein is a loan agent with Princeton Capital. He can be reached at 769-4327.)</p>