First Time Home Buyer Credit Extended and Expanded

Last week, after the Senate gave its final and fully supportive approval on the homebuyer tax credit extension, the House of Representatives voted overwhelmingly to pass the legislation, sending the tax credit to President Obama who's final sign-off on Friday made it official.

The $8,000 first-time homebuyer tax credit, which was slated to expire Nov. 30, 2009, will be extended for contracts signed before May 1, 2010 that close before July 1, 2010. First-time buyers, who are in the process of closing now, no longer have to worry about qualifying for the $8,000 tax credit if they do end up closing after the Nov. 30 deadline. The new legislation also increases the income limit for couples with income up to $225,000, a nearly $55,000 increase above the current level.

Buyers who already own a home are also now eligible for a tax credit and the purchase of a home. The $6,500 maximum credit will be available to existing homeowners who have lived in their current residence for five of the prior eight years. The legislation does set forth several provision including, limiting eligibility for existing homeowners to homes worth $800,000 or less, as well as making both credits available only for primary residences, not second homes or investment properties. The legislation will take effect November 7, 2009 and is not retroactive.

The original first-time homebuyer tax credit jump-started the housing market, driving home sales to the highest level in more than two yeas. The National Association REALTORS® reported sales jumped 9.4 percent to a seasonally adjusted annual rate of 5.57 million units in September and are 9.2 percent higher than the 5.10 million-unit pace in September 2008.

Extension and Expansion of the First-time Home Buyer Tax Credit???

Congress is currently working on legislation to extend the first-time homebuyer tax credit. In order to be eligible for the current credit, prospective buyers need to purchase and close on a home by Nov. 30. Under the proposed bill, the deadline is expected to be extended into 2010. The details of the extension are currently being worked on and a vote is expected as early as this week -- some say that a vote may occur today. Therefore, you may have some breathing room with your closing if you already purchased a home and are trying to beat the Nov 30 deadline. If you are a prospective first-time homebuyer who missed the opportunity to take advantage of the current credit, you may have a second chance.

In addition to the extension, Congress is said to be working on a bill to expand the current tax credit to prospective homebuyers who already own a home. Under this proposal, existing homeowners who purchase a home after this bill is enacted may receive a tax credit of as much as $6,500 dollars. This would apply to prospective purchasers who have owned a home for 5 of the last 8 years.

Although we will not know the exact details of these proposed bills until Congress completes their work, we do know that they need to act quickly if they expect to extent the current credit before it expires. Stay tuned...