There has been much brouhaha about the first time home buyer tax credit of $8,000 and the existing home owner “move up” tax credit of $6,500.  Well, that’s all well and good but here’s a news flash.  You can’t get the tax credit if you can’t get a mortgage to buy a house.

First Time Home Buyer Blues

For the first time home buyer getting a mortgage is not as easy as it sounds.  You need sterling credit, cash reserves (at least enough to make a 3.5% down payment) and verifiable documentation that shows you can repay the loan.  Back in the old days you could apply a little smoke and mirrors and get a mortgage.  Not so nowadays.  Banks, credit unions, mortgage companies of all types are putting people through the ringer in order to get a mortgage.  Then, if the house doesn’t appraise at the contract price or some loan underwriter has a bad hair day, you could be screwed anyway.

What If You Own A House?

For the existing home owner, you still need all the stuff a first timer needs — great credit, cash, proof that you can repay the loan.  The added kicker for existing home owners is that they may need to sell their house in order to qualify for a mortgage.  Back in the old days, this was easy.  Put a sign in the yard and wait for the multiple offers to come in. Today, it’s not so easy.  You have to price your home aggressively to get a buyer interested and if your existing mortgage is too close to actual market value.  Well, you’re screwed, too.

Many times, if an existing home owner wants to purchase another house or “move up”  they’ll need to get the Seller of the “move up” house to take a home sale contingency which ain’t very likely.  Sure.  You might get lucky and a good Realtor (such as myself) will most definitely go to the mat for you in order to get the home sale contingency approved by the Seller through their listing agent but it won’t be easy.  Meanwhile, if you get a buyer for your home you have to cross your fingers and pray that the buyer’s mortgage will go all the way through to the day of settlement and you get your check so you can buy your “move up” house*.

*note: existing home owners don’t really need to “move up”.  They can move down like from a single family home to a condo or whatever.  They can move sideways like from one area to another but the same type of house.  It really doesn’t matter what type of house you buy.  If you have owned a house for five consecutive years out of the last eight years you may qualify for the $6.500 tax credit (until April 30th).

It’s All About The Mortgage

So if home sellers all around the nation are wondering, “Where in the world are all these home buyers?”  The sad answer is that they may want to buy your house but not be able to get a mortgage which means they aren’t buying squat and there will be no tax credit, either.  This, unfortunately, is the dirty little secret about the housing stimulus.

It’s tough out there. Give me a call at 240-417-9100 or e-mail me and let’s see if we can “get it done”.