Thursday, February 5, 2009

$15,000 Home Buyer Tax Credit

Update: I notice I am getting a lot of hits from people wondering when the credit is valid for. The amendment indicates the credit is good from the date the bill is enacted for 1 year forward. People purchasing before this time do not get this credit.

Here is the text of the new $15,000 Home Buyer Tax Credit. It has been added to the Senate version of the Stimulus bill. If passed it would have to be reconciled with the House version which doesn't have the provision but I don't see it being taken out. As the text currently stands with it being a credit after purchase not a credit at purchase I don't think it will affect the higher priced markets much. There was a previous version where it was designed to be able to be used as a down payment. That combined with FHA loans would means that 100% financing would be back for a wide swath of the market. I think that is a horrible idea and luckily it appears to be removed from the current version. I think we will see spurred home sales in the lower priced areas of the USA which are at or near affordability. For the high priced markets in California it might sucker some to jump in early but I don't see it as a game changer.

For a higher level overview you can read the press release here.

4 comments:

Noz said...

Let's hope it's not a game changer and the prices continue to fall and fall hard. That will be the only way we clean out the trash.

Stimulus packages are a joke...and only for the people who got themselves into deep crap and want a handout. Tough shit I say...let em burn.

Anonymous said...

you say that a previous version allowed the money to be used as a down payment, but with an FHA loan it would be 100% financing. How would this be 100% financing if you were putting $15,000 down? any down payment you give the bank reduces the financing amount, therefore NOT 100% FINANCING. i don't understand where you got this. If people received the tax credit AFTER making a home purchase, it wouldn't be a STIMULUS, it would be a REWARD. This would not help our economy at all if that were the case. The money needs to be made available to people for use of a down payment on a home. Most people can get approved and probably even afford a mortgage, they just can't come up with thousands of dollars for a down payment. If the credit was given after a home purchase this would only be rewarding the people who already have money and don't need the extra help. This would be absolutely ridiculous to do.

Noz said...

Most people can get approved and probably even afford a mortgage, they just can't come up with thousands of dollars for a down payment. If the credit was given after a home purchase this would only be rewarding the people who already have money and don't need the extra help. This would be absolutely ridiculous to do.

Most people? What most people are you talking about who can afford $3K a month for a home?

Isn't the LACK OF a down-payment and 100% financing the reason for the mess we are in? Because anyone could qualify?

And frankly, why should I, as a responsible person who doesn't own but has been saving for years and now ready to buy, give my hard earned taxes to free-loaders who want a home too but can't come up with a down-payment? No one gave me this money, no one is going to bail me out...so why the hell should I?

If anything, someone like myself who didn't get in over my head, didn't flip homes, and didn't buy a place with no money down so as to make a quick buck should be the one who gets the $15K handout...hec after all the honest and right things I've done, I deserve it.

Effective Demand said...

Anonymous,

Effectively, for the buyer if they allowed instant credit of the rebate it would have allowed buyers to come to the closing table with no money down (for them, 100% financing).

100% financing is bad. All sorts of games can be played when the buyer has no skin in the game. Buyers can go (basically) impulse buy a home. But when they have to write a big check they stop and think about what they are doing. Or Alternarively, those type of impulse people never learned to save and so are shut out of the market until that skill is learned. If underwriting standards were tight and appraisals were extremely conservative, 100% financing wouldn't be as much of a problem since you would be guaranteed that the home isn't overpriced and the buyer isn't getting in over their head.

A buyer putting down 3.5% of a purchase isn't a massive burden. If it is then the buyer needs to wait and be disciplined to save for a home. There are also several other approaches for down payment assistance available.

Thanks for stopping by.