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House hunting usually slows down this time of year, as people put their searches on hold during the holidays.
This winter could be different, however, thanks to the extension and expansion of the home-buyer tax credit .
The new law extends the tax credit for first-time home buyers and opens it up to some existing homeowners as well: The credit is now 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 purchase must be for a principal residence and must close on or before June 30.
To be considered a first-time home buyer, 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.
Income limits have risen as well. According to the Internal Revenue Service's Web site, www.irs.gov, the home-buyer tax credit phases out for individuals with modified adjusted gross incomes between $125,000 and $145,000, and between $225,000 and $245,000 for people filing joint returns.
The inclusion of move-up buyers might inspire homeowners to take action and list their house if they've been putting it off. If they are happy in their current home, it is not likely to entice them to sell, but if they have been considering moving up or downsizing, it might cause them to go ahead and make the move.
If you're thinking of purchasing a home, here are five tips:
Don't procrastinate
Start your house search now. Getting an early start will give you a better chance of finding the right house before the credit deadline.
When first-time buyers thought that the credit would expire Nov. 30, people scrambled to find properties in September and October and in some cases there wasn’t inventory to fit their needs or they felt to rushed to make a decision. Before you start house hunting, get preapproved for a mortgage and do a realistic assessment of what you can afford.
Buyers who have to sell an existing home should price it aggressively from the beginning to drum up interest and get a buyer as soon as possible. Pricing the home to high will cause it to sit on the market and the homeowner may not get it sold in time to take advantage of the tax credit when purchasing their next home.
Don't count on another extension
Some people may think that because the tax credit was extended, it will be again, but that is not likely to happen. All the sources that I have talked to seem to feel that when this tax credit ends, it will not be extended again.
Be mindful of interest rates
Interest rates are low right now, but will likely rise in the coming year. While we can’t say for sure when they will rise or by how much, we do know that higher rates will affect your monthly mortgage payments and the affordability of the house you are buying.
Average rates on 30-year fixed-rate mortgages have been hovering around 5%. But when the Federal Reserve stops buying large amounts of mortgage-backed securities next year, interest rates could rise. The Fed plans to end its purchase program in March.
Communicate with your lender
Make sure you're speaking with your lender regularly to avoid any delays. If the lender asks for any additional documentation, turn it in as soon as possible. Delays in getting your lender the information they ask for will delay the closing and could jeopardize the closing.
Think twice before pursuing a short sale. That's where someone sells a home for less than what he or she owes on a mortgage, with permission of the lender. The process can be lengthy and unpredictable because the homeowner's lender has to approve any deal and it can get complicated when there is a second mortgage associated with the property.
Don't take shortcuts
Don't forgo any of the steps you would normally take just to make the tax-credit deadline. That means making sure the house is a good fit and is in the right location and getting a home inspection. Skipping steps could cost you in the long run.
Don't let the tax credit get you to make a decision to buy a house that you wouldn't otherwise want to buy. Don't shortcut the process to get the tax credit.
For more information on everything dealing with Lexington South Carolina Real Estate visit our website at http://www.WelcomeToLexington.com or fill out the following form and I will be in touch with you shortly.
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