$8,000 Home Buyer Tax Credit Extended to June 2010

The $8,000 home buyer tax credit, part of the economic stimulus package, has been extended into Summer 2010 and has been expanded -- the tax credit will now also be available to higher income buyers and those who are not first-time home buyers, but want to "trade up" or "move up" to a new home. Analysts believe that including these two groups will help to further stimulate the ailing housing market.

In order to take advantage of the renewed $8,000 tax credit, home buyers must sign a contract by April 30, 2010 and close on the house by June 30. Eligible home buyers now include single persons who earn up to $125,000 and married couples who jointly earn up to $225,000.

$6500 Tax Credit for "Move Up" Buyers

The new home buyer tax credit bill allows even more homeowners to claim the credit on their tax return. In addition to first-time home buyers, The bill also makes more homeowners eligible to claim the credit on their taxes. People who have lived in their homes for at least five years can claim a $6,500 tax credit, though first-time buyers -- people who haven't owned a home in three years or more -- can still claim the full $8,000 rebate.

Experts predict that the addition of the $6,500 tax credit for move-up buyers will help to further improve home prices and continue the housing market turnaround. Move-up buyers may be considering buying a newer home than the one they own, but the $6,500 credit will persuade many to move their plans forward and "buy now."

Will the Home Buyer Tax Credit Work Long-Term?

The first phase of the $8,000 home buyer tax credit -- like the "Cash for Clunkers" automotive stimulus program -- seems to have helped home prices to stabilize and even move up slightly in recent months, according to major home price indexes... But have we become dependent on the tax credit?

What will happen when the tax credit program ends after June 2010? Some believe that the housing market will continue to decline after the short lift it is now receiving from the home buyer tax credit. Maybe the program's effect on the overall economy due to increased consumer spending -- home buyers spending their tax rebate on consumer goods -- will help to drive the economy upward and the housing market will follow suit. We will have to wait and see.

What do you think?

Please comment below and share your thoughts on the $8000/$6500 home buyer tax credit program.

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$8000 First Time Home Buyer Tax Credit Extended to 2010?

$8000 Tax Credit Extended for First Time Home Buyers?

The $8,000 Tax Credit Available Now

Under the Obama Administration's housing plan -- part of the huge government stimulus package -- first-time home buyers can claim an $8,000 tax credit (or 10% of the home's value if the home is under $80,000) on their 2008 or 2009 income taxes.

The tax credit is refundable -- taxpayers who receive the credit will get a refund check or deposit for the full $8,000 even if their total taxes for the year totaled less than that.  $8,000 in the bank can be a massive help for someone just getting started with a new home.

For a home buyer to qualify for the credit, the purchase must be made between Jan. 1, 2009 and Nov. 30, 2009. Buyers must not have owned a home for the past three years to qualify as "first time" buyer. They must also live in the house for at least three years, or they will be obligated to pay back the credit.

Home buyers must also earn less than $75,000 (individually) or $150,000 (as a couple) to qualify for the existing $8,000 first-time home buyer tax credit.

Will the First-Time Home Buyer Tax Credit Be Extended?

Many people have taken advantage of the tax credit, but time is now running out as December approaches and the deadline nears -- unless Congress votes to extend the $8,000 tax credit program well into 2010.  The real estate industry is lobbying for an extended and expanded home buyer tax credit that would help to keep home sales going.

The U.S. real estate industry wants the home buyer tax credit to be extended at least halfway into 2010, and expanded from $8,000 to a lofty $15,000.  The industry also wants the credit to be offered to all buyers -- not just first-time home buyers (or those who haven't owned a home in 3 years or more).

The Senator who originally backed the bill which provided the first-time buyer tax credit, Johnny Isakson (R) of Georgia, now says that the housing market may see another downturn if the current tax credit plan ends this year.  Isakson is sponsoring a new bill that would continue to provide an $8,000 tax credit to first-time home buyers and up to $6,500 to those who have lived in the same home for at least 5 years.  For a home purchase to qualify under the extended plan, it would have to close by June 30th, 2010.

The bill moved to a final vote, with 85 Senators voting in favor and only 2 against.  Members of Congress expect the bill to pass this week.

Check back on The Mortgage Loan Zone for updates on this and other issues.

What Are Closing Costs? Home Loan Closing Costs Explained

Home Loan Closing Costs Explained

As many of us know, buying a house costs a lot of money and it takes research and hard work to get the best deal while making sure that you are buying the right house.  Once you have your mortgage chosen and are ready to buy, you discover that you have to pay closing costs on top of the other thousands and thousands you'll be spending.  What are closing costs, why do we have them, what do they cover and which ones will you have to pay?

House Closing: Buying a Home

The last stage of buying a house is the closing.  A house closing is the final real estate transaction during which the actual title to the property changes hands from seller to buyer.  The closing is the finalization of a real estate contract, which, unfortunately for us home buyers, involves closing costs that are added on to the final agreed-upon price of the house.  Though these closing costs are usually paid by the buyer (known as "buyer closing costs"), some costs are also paid by the seller (AKA "seller closing costs"), in many cases.  Which party pays these costs can be negotiated prior to the closing; sometimes, the seller will pick up some or all of the closing costs to make a better deal for the buyer and sell his/her property more quickly.

How Much are Closing Costs?

House closing costs can be as expensive as several thousand dollars, so it's a smart idea to plan ahead for them when shopping for your home.  Closing costs have to be paid up front, so you will need to save for them (or get a signature loan or something similar).

List of Closing Costs On a House

So what are all the different closing costs one might have to pay when buying a house?  Below is a list of closing costs and an explanation for each.  You will probably not have to pay ALL the fees in this list, but it is good to have an idea of the different possible closing costs to expect.  Remember, closing costs may be paid by the seller if they are eager to sell.  Try to negotiate and see where the seller stands on paying some or all of the closing costs.

Typical Closing Costs:

Appraisal Fees

A home should be appraised to determine its value before sale so that the seller gets a fair amount for their house and the buyer gets a fair deal.  An appraisal is usually required before a home can be sold, but not always.  The appraisal is not free -- an appraisal fee is usually paid by the buyer, though sometimes the seller pays for the appraisal.  If you are buying a home and no appraisal has been made, you should ask why and make sure that the home is appraised so you know the fair value.

Attorney Fees (AKA Lawyer Fees)

Attorney fees may be paid by either the buyer or seller (or both), for careful preparation of legal documents.  An attorney is usually required by lenders to make sure that legal documents are done correctly and officially.

Brokerage Fees (Brokerage Commission)

Brokerage fees are paid to the real estate broker to cover the broker's marketing, negotiation and sale assistance services.  This fee is usually a percentage of the home's final sale price; the seller and broker should agree on the percentage before the sale is made.  This may be a large closing cost.

Credit Report Fee

A credit report is usually required so that your lender can determine which interest rate to give out.  If your FICO credit score is low, you will likely have a higher interest rate.  This is done to protect the lender's investment against the likelihood of the loan defaulting.

Document Taxes

This is a government-required fee which may be paid by the buyer and/or the seller, depending on the location of the sale.

Down Payment

Not always considered a closing cost, the down payment is usually the biggest cost made at closing, though some down payments can be small or nothing at all, depending on the lender, credit score, mortgage agreement and other factors.  The down payment is made by the buyer and creates immediate equity, or value, in the home.

Home Inspection Fees

Inspection fees are most often paid by the home buyer and go to home, pest or other inspectors who check the quality and integrity of different parts of the home (such as the foundation, plumbing, electrical, etc.) before sale to ensure that the home is in good shape and not a "lemon."  The lender usually requires an approved inspection to assure good home value for the loan.

Loan Origination

The loan origination fee is very common and you will most likely be charged a loan origination fee at the time of closing.  It is typically paid by the buyer, but the seller may pay this if the deal is arranged as such.

Application Fee (Mortgage Processing Fee)

This fee is paid to the lender by the buyer and covers the lender's loan application processing (printing and completing paperwork, retrieving signatures, etc.).  The application fee may be paid at the time of the mortgage application or at the actual closing.

Points (Mortgage Points)

Points are generally only recommended for home buyers who plan to keep their homes for a long time.  Points are considered to be a type of pre-paid interest, a way for home buyers to keep interest costs down for a certain length of time at the beginning of the loan, or to make a lower down payment.  One point is equal to 1 percent of the loan principal.

Notary Fees

The notary fee is a simple legal fee paid to a notary public for notarizing the loan and/or sale documents at the time of sale.

Pre-Paid Property Insurance

A lender will usually require a buyer to keep property insurance on the home in question, and often will need the first year's insurance cost paid in advance.

Private Mortgage Insurance (PMI) Premium

PMI is optional for most mortgages, but required on some -- especially zero down payment home loans.  Private mortgage insurance is a form of insurance that covers the lender in case you are unable to repay your loan.

Recording Fees

An amount charged for officially recording the home sale transaction by a government entity.  Usually required during any real estate sale.

Surveying Fee

A survey of the land and buildings being traded is necessary for confirming the size of the land lot and building dimensions.  Many lenders require this before closing.

Title Fees

The title fees cover title services including search, insurance and closing, and may be required during a home sale.

Remember to Plan for Closing Costs and Save

So remember to set aside some money (usually thousands of dollars) for the various closing costs you are sure to encounter, as well as those which may surprise you at the last minute.  Good luck buying your new home!