President Barack Obama is expected to sign a measure today to continue to provide tax credits to homebuyers as well as expand the credit to those who have owned a home for at least five years.
The measure will allow repeat homebuyers who have been in their current home for five years up to $6,500 in tax credits and extend the $8,000 first-time homebuyer tax credit that was about to expire in November. First-time homebuyers are defined as people who have not owned a home in the previous three years. Repeat buyers must have owned their current home at least five years.
Purchase agreements must be signed by April 30, 2010, and closings must be final by June 30. Note that the Fed has indicated its mortgage backed securities (MBS) repurchase program responsible for the current low mortgage rates will expire at the end of March 2010. The Fed will gradually slow the pace of the MBS purchases to avoid any wild swings in rates. What this means is that potential homebuyers should expect rates to gradually increase during the first quarter of 2010. With this in mind it may prove more effective to time your purchase for late 2009 or very early 2010 to secure a mortgage rate comparable to today's low rates.
The credit is available for the purchase of principal homes costing $800,000 or less, meaning vacation homes and rental properties are ineligible. The credit would be phased out for individuals with annual incomes above $125,000 and for joint filers with incomes above $225,000.
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