Tax credit puts homebuyers on deadline
CHICAGO – House shopping usually slows down in the winter, as people put their home searches on hold to trim the tree, buy presents to put under it and avoid the chilly weather.
This winter, however, might be different, thanks to the extended – and expanded – first-time homebuyer tax credit.
The new law extends the tax credit for first-time homebuyers and opens it up to some existing homeowners as well: The credit is now 10 percent of the home price, up to $8,000 for first-time buyers and up to $6,500 for repeat buyers.
All buyers must have a binding contract on a house in place on or before April 30. The sale must close on or before June 30.
To be considered a first-time homebuyer, an individual must not have owned a home in the past three years. And to be eligible, existing homeowners need to have lived in the same principal residence for five consecutive years during the eight-year period that ends when the new home is purchased. The credit is only for principal residences.
Tips for buyers
1. Don’t procrastinate. Search now. Getting an early start will give you a better chance of finding the right house before the credit deadline. Before you start hunting, get preapproved for a mortgage.
2. Don’t count on another extension. The credit won’t be available forever. If you want to take advantage, be sure to make that spring deadline.
3. Mind the interest rates. Mortgage interest rates are low right now but likely will rise next year. Higher rates will affect your monthly mortgage payments, thus the affordability of the house you are buying.
The Federal Reserve plans to end its purchase program in March.
4. Communicate with your lender. Throughout the process, make sure you’re communicating with your lender regularly; if there’s a piece of documentation you’re asked for, get it turned in as soon as possible.
5. Don’t take shortcuts. Don’t forgo any of the steps you would normally take just to make the tax-credit deadline. Make sure the house is a good fit for your needs