Wednesday, October 7, 2009

Time is Running out for your $8,000 Tax Credit

The days are numbered for the $8,000 federal tax credit for first-time homebuyers.
The credit expires on November 30 - a deadline that's putting pressure on would-be homeowners trying to take advantage of a real-estate market on the mend.
Most first-time homebuyers understand that time is running out. Now they need to understand how little time is left to get into the action.
In the current housing market, it takes about 45 to 60 days to close on a home from the time you have an accepted offer. So buyers should have their offer accepted no later than mid-October if they are trying to make the November 30 deadline.
Several bills have been introduced in Congress to extend the credit by six months to give the real-estate market another boost, though they are still up for debate. The National Association of Realtors estimates that the credit has generated 350,000 homes sales this year.
The process of buying a home is neither quick nor easy. Compiling your financial paperwork, applying for a loan, negotiating an offer and signing contracts can take months. And that's if everything goes smoothly. There are many ways homebuyers, especially novices can get tripped up by the process.
Here are four strategies that can expedite a closing:
1. Make sure you're liquid
When it's time to make a down payment, homebuyers should make sure they have enough cash available. Their funds should not be tied up in a stock portfolio, 401(k) plan or other investment that could delay the money by days.
2. Forget about short sales
A short sale occurs when a homeowner is no longer able to make his mortgage payments and owes more on his home loan than what it can fetch in the current market. They are attractive from a price point, but they can take months to close.
3. Don't go on a shopping spree before you close
Refrain from making big purchases on a credit card before closing on the home and completing the transaction. Big buys can trigger concerns because a buyer's debt-to-income ratio is usually the most important factor lenders use to determine how much they can borrow. This ratio compares the amount you earn to the amount you owe. Once you enter into the loan application process, that ratio is set.
4. Be aware of closing costs
Each state has its own closing requirements, and first-time buyers should know in advance what and how much they're reqired to cover. In most states, the buyer and seller share the costs.
Information reprinted from