Mortgage Rate News

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The first time home buyer tax credit has been extended — and expanded. The $8,000 credit has been extended by six months, and there has been an expansion to include current home owners who want to buy. Current home owners can get a $6,500 tax credit when they look for a new home. This is along the lines of the tentative agreement reached last week. Bible Money Matters offers a great summary of the main points for the new $6,500 tax credit:

• The credit is available for homes that go under contract by April 30, 2010 and close by June 30th, 2010.
• Current homeowners can claim a $6,500 credit as long as the property they are vacating has been their primary residence for at least five consecutive years out of the last eight years.
• Income limits: $125,000 a year for individuals, $225,000 a year for married couples. (these are higher limits than before)
• Homes that cost more than $800,000 aren’t eligible for the credit.
• $6500 tax credit is not retroactive.  (from the language of the bill: “shall apply to residences purchased after the date of the enactment of this Act.”)

Sadly, I don’t qualify. Which is okay, I suppose. We weren’t planning on moving any time soon, so it’s not like we would use it anyway. But it would still be nice to know that if we wanted to take advantage of such a great deal, we could. It’s not $15,000, but it’ll do. It’s better than nothing.

However, the tax credit extension is also expected to help keep home prices higher. The Wall Street Journal reports on the first time home buyer tax credit and its results:

Goldman Sachs estimates that the credit resulted in 200,000 sales this year, but that many of those sales were front-loaded—driven by a surge in sales shortly after the tax credit took effect. The simple extension “should result in fewer incremental first time purchases than the first round of the credit did,” writes Goldman economist Alec Phillips.

While the tax credit won’t reduce excess inventory, the incentives could keep prices up because “potential sellers are likely to incorporate a fraction of the credit amount in their sale price—with the knowledge that the majority of buyers will qualify for either the first time or move-up credit,” writes Mr. Phillips.

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When it comes to buying a home, it is important to consider your options. And it is important to be aware of some of the main issues associated with buying a home. This is especially true if you want to purchase a home that is in foreclosure. Buying a foreclosure can be a tricky proposition, and you need to be careful. There are definite advantages and definite bargains to be made. But if you aren’t careful, you could get way more than you bargained for. And not in a good way.

Real Estate Pro Articles offers these helpful guidelines to use when buying a foreclosure:

1. Finance: Real estate calls for huge investments, so check the availability of finances. See how much you have and how much will you need approximately. Ascertaining that, get yourself pre-qualified for securing a loan.
2. Look for available foreclosure homes: Search carefully for foreclosure listings available on various websites, real estate magazines and advertisements in newspapers. Contacting banks to get information is also a good idea, as banks are the most common lenders who sell foreclosed properties.
3. Know what you want: Be clear about what kind of a property you are looking for. This will help in choosing a property among the various available properties which matches your requirements the best. Think on parameters like, size, expected rate, locality, amenities, etc.
4. Knowledge about foreclosure laws: Buying foreclosed properties has its own intricacies, so it is very essential that you gain proper knowledge as to the laws and procedures governing foreclosures in your State.
5. Consulting a realtor: If you are not sure about how to go about making the investment in foreclosure homes, then consulting a realtor who has the requisite experience in dealing with foreclosed properties is a good idea as he will guide you and help in getting the right kind of property.
6. Thorough inspection: Examine the property that you wish to buy very carefully as there will be repairs that may be needed and for which you will have to pay. This will help you to negotiate better.
7. Closing the deal: Once you have made the offer and the seller accepts it, then on making the payment and finalizing the deal, carefully ascertain that all legal compliances are done with, necessary documents are in order and that you get a clear title to the property. Seek assistance from attorney if you feel the need.

It is still a good time to buy a home. Mortgage rates are low, and so are home prices. And if you are interested in something that is an uncommon deal, you might consider buying a foreclosure. Just make sure you are careful, and you know what you are getting into.

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Technically, the recession may be over, but that doesn’t mean that individual financial problems are just going away. That’s not really how it works when it comes to personal finances. Instead, things are looking kind of desperate for some folks. The cumulative effects of a weak labor market and tighter credit (not to mention the things credit issuers have been doing that mean hardship for consumers) will be hard to shake off, and the latest data about bankruptcy filings bears this out.

Indeed, the American Bankruptcy Institute offers this report on the number of bankruptcy filings in October:

The 135,913 consumer bankruptcy filings in October represented a 27.9 percent increase over last October’s monthly total of 106,266, according to the American Bankruptcy Institute (ABI), relying on data from the National Bankruptcy Research Center (NBKRC). The October 2009 consumer filings represented an 8.9 percent increase from the September 2009 total of 124,790. Chapter 13 filings constituted 28.5 percent of all consumer cases in October, a slight increase from the September rate.

“The nearly 9 percent increase in consumer bankruptcy filings in October, together with a 7 percent jump reported in business cases, demonstrates the sustained stress on the U.S. economy,” said ABI Executive Director Samuel J. Gerdano. ABI forecasts that total bankruptcies this year will exceed 1.4 million, the highest number since 2005.

This is a new high, and likely represents the hard times that people have fallen upon. Traditionally, most bankruptcies are caused by medical bills and expenses. However, I’m wondering if this most recent rash of bankruptcies is more the product of job loss and an inability to keep up with everything due to economic conditions. And, of course, in some cases it might be a strategic decision to start all over, much like a strategic default.

Of course, the increase in bankruptcies should also serve as an important reminder to the rest of us: It is vital to prepare our personal finances ahead of time. Emergency funds, paying off debt and proper insurance can help. Although, in some cases, there are situations so devastating, or so long-term, that no amount of preparation can avert a financial catastrophe.