The Senate has agreed to extend the tax credit for homebuyers to include contracts signed by April 30, 2010 that close by June 1. The credit for 1^st time homebuyers will remain at $8000 with the income limits raised from $75,000 for individuals and $150,000 for couples to $125,000 and $250,000, respectively.

The proposal also allows existing homeowners who have lived in their home for five consecutive years to receive a tax credit of $6500 if purchasing a home within this timeframe.

What does this all mean? As winter months are not normally high months for buying homes, this extension is unlikely to stimulate any significant incremental buying. Overall, is the five month extension enough? Everything that I have read and heard says "NO"."

As to existing homeowners, if you attended my course, Homes Buyers and Mortgages or read my book of the same name, you know that simply extending an existing program by 5 months will not be helpful to existing owners. These homeowners are probably underwater with their mortgage. And, if they are technically not "upside down" on their loan, the "Buy and Bail" rules, implemented by Fannie, Freddie and FHA, requiring existing homeowners to have a minimum of 25% equity in their existing home in order to be considered for the financing of another home will likely stop them in their tracks.

The House of Representatives is expected to pass their version of this bill within the week. We should expect that it will look similar to the Senate bill.

But, the reality will be that outside of first time homebuyers, the number of people that will take advantage of this credit will be minimal.

I will keep you apprised of further information as it happens.

Jason Kotar, Author

Homes Buyers and Mortgages