It’s only July 16th and The $8,000 First Time Home Buyer Tax Credit is not due to expire until December1, 2009.

What’s the hurry?

If you’re a first time home buyer, it’s understandable that you may think there is puh-lenty of time to decide if you want to go out to purchase a home and still take advantage of one of the best incentives that have come down the pike — the First-Time Home Buyer Tax Credit.  This tax credit is really like free money.  If you owe money to the IRS at the end of the year, you can reduce the amount you owe by $8,000.  If you are due a refund at the end of the year, you can add $8,000 to your refund.

Could and extra $8,000 come in handy?  You bet!

However, unless Congress acts to extend the credit, it will end on December 1, 2009. It’s any one’s guess whether or not that will happen.  All I know is I hear a lot of talk about the current health care reform program and how much that will cost and where will they get the money to pay for it. Infrastructure improvements.  And on. And on.

What Needs To Happen To Qualify for the $8,000 First Time Home Buyer Tax Credit

Let’s say you want to buy a house and you want to take advantage of the $8,000 First Time Home Buyer Tax Credit.  Remember, this can be your very first home or, as long as you haven’t owned a home in the last three years, you can claim it as well.

You need to purchase and go to settlement by December 1, 2009. By settlement, I mean:

• obtain financing and get a pre-approval letter for a mortgage
• search for a home, find a home, make an offer on a home,
• have the offer accepted by the seller,
• perform all the inspections,
• negotiate repairs with the seller,
• wait for the appraisal on the home to be completed
• satisfy any conditions the mortgage company may require to commit funding for the mortgage
• and, finally, meet at the title company to sign off on all the mortgage documents and transfer of the home from the seller to you!

Whew!  How long does all this take?

What’s Happening Between Now and December 1, 2009?

Let’s say you decide to start looking for a house on August 1, 2009.  That’s about two weeks from now.  That should give you time to talk to a mortgage person and get your pre-approval in order.  That leaves 122 days.

You have to eliminate all the short sales.  They take too long.  Bank owned?  Maybe.  Better to try and find a house that is owned by a seller that has some equity and can work with you to get the house to settlement in time.  How long will it take to find a house?  You have to work, right?  That leaves evenings and week-ends.  Things come up.  Let’s say it takes a month.  It’s now September 1, 2009.  You have 92 days left.

You make an offer.  The seller might be in town, he might not be.  He might like your offer.  He might not.  Let’s hope for the best and say the seller gets the offer right away but counter-offers. You get it back from the seller.  You might be good with the counter offer.  You might not be.  Get the picture. Let’s say this back and forth takes about a week which includes the Labor Day weekend when people go to the beach and all kinds of other things.  That leaves you with 85 days.

If all goes well and there are no major inspection issues and  the appraiser gets out and does his job fairly quickly and there are no issues with the appraisal you may get to settlement within about 45 days.  You will have 40 days to spare — a little over a month.

What Could Go Wrong?

So we laid out a plan that if you started right away and everything went smoothly you could be in your home by the middle of October with days to spare and the $8,000 First Time Home Buyer Tax Credit safely tucked away.

But…what if:

• it takes you longer than expected to find a home you really like. After all this is a big decision.
• all the homes you find in your price range are short sales or foreclosed homes in trashed condition being sold “as is” and needing lots of repairs
• you find a great home but the seller is holding firm on his financial terms
• you find a great home and do the inspections and find out the home needs a roof or a new A/C and heating unit or has termites
• you find a great home and when the appraiser finally gets out to the house and fills out his appraisal report for the mortgage company or bank it turns out that the appraised value of the home is lower than what the seller wants to sell it for (or can sell it for if the seller is maxed out on his mortgage).
• you find a great home but your mortgage company wants more documentation or wants to update your credit report or needs to re-verify your employment or assets.
• everything is moving along slowly but people from your mortgage company take off for sick leave, or take long weekends for Veteran’s Day, Columbus Day or other holidays.

No one wants to believe all the nightmare scenarios can happen to them.  Believe it.  There are many bumps in the road between now and when you sign on the line and pick up the keys.  Some bumps are bigger than others.  Some can kill the whole deal and you have to start over from square one.

The Clock is Ticking

Yes, the clock is ticking and the ticking is getting louder with ever passing day.  I’m really not looking forward to the day when I have to tell someone that they missed the deadline by one or two days.

Do you want to get started but don’t know where to start?  Give me a call at 240-417-9100 or e-mail me.