First Time Home Buyer Tax Credit Extended and Expanded

President Obama today signed the extension and expansion of the First Time Home Buyer Tax Credit.  Will this help the local real estate market begin to correct itself?  In my opinion, probably not.

The credit is being touted as a boost to housing sales across the country, but truthfully, I don’t know anyone who decided to purchase a home simply because of the credit.

Buyers still need to have down payment funds, still need to have closing cost funds, still need to qualify for a mortgage and still need to remember that buying a home should be a long term investment.  It’s not something you do because the government says they will reward you with a one time credit that most people won’t save for a rainy day or use to reduce the principal balance of their mortgage and build their equity position.

Can it be useful to people who purchase a home that needs updating or renovation? Absolutely.

Should it be the only reason you are going to buy a house? No way.

OK.  Now that I’m off my soap box, let’s look at the rules for the new credit.

• The up to $8,000 credit to first time buyers is extended to contracts written by April 30, 2010 and closed by June 30, 2010
• A new credit of up to $6,500 is being offered to existing home owners who have lived in their current home for 5 consecutive years and purchase a new home
• Income limits have been raised to $125,000 single taxpayers and $225,000 for joint taxpayers
• Maximum home purchase price is $800,000
• Military personnel who have been overseas for a minimum of 90 days in 2008 or 2009 will have until April 30, 2011 to claim the credit
• Credits can no longer be claimed by minors and documentation of the closing must be submitted when applying for the credit (as a result of rampant fraud with the previous system)

More about the changes to the tax credit