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Economic Stimulus and the First Time Homebuyer

Amid all the debate and discussion over the new stimulus package there are some points that may have gone unnoticed as they relate to first time homebuyers.

It appears the $7500 tax credit which is repayable over 15 years at $500/per for first time home purchasers will be allowed to sunset and be replaced by a new $15,000 tax credit for new home purchases by first time buyers that will not have a repayment provision. Obviously this will go a long way towards stimulating the Central Florida real estate and mortgage market at a time when we collectively need all the help we can get.

I would propose the following amendment to this valuable credit: Allow approved FHA lenders to certify that the buyers qualify for the first time buyer credit- that the property is a primary residence, that the buyers have not owned other real estate in the previous three year period, that the property meets FHA property guidelines- and allow the funds to be drawn from the treasury through the local government down payment assistance entities and used for the purchase, which may allow the buyer to get into the house for no money out of their pocket. The buyer would then forward their settlement statement , or similar government document certifying the moneys used, to the IRS with the tax returns the following filing period and the remainder of the money, if any, would be credited.

In my opinion this would really help jump start the market as it would allow buyers access to funds at the time of purchase that they qualify for after the fact. There is no shortage of prospective buyers in the Central Florida area who qualify for mortgages, whose mortgage payment may be equal to or even less than their rental payment, but don’t have the necessary funds available for a 3.5% down payment plus a portion or all of their closing costs. This proposed advance of the tax credit would alleviate that issue and bring more buyers to the market.

Hopefully we’ll see a provision like this included in the new bill.

Please check in next week when our next blog will discuss the exciting new FNMA Homepath initiative!

Pierce Outlaw