The Homebuyers Tax Credit jumped its last hurdle yesterday, as both the House and the Senate have passed the bill and it now awaits President Obama's signature, expected today or tomorrow. And while we have been expecting this to happen for some time and with all the changing details, let's go over the actual Bill. For First Time Homebuyers or those who have not owned a home within 3 years, the tax credit remains at $8,000, with income restrictions maxing out at $125,000 for singles and $225,000 for couples. Current Homeowners - those defined as having owned a home for five or the previous eight years - can now also take advantage of a credit, with the slightly lesser amount of $6,500, with the income restrictions the same as described above. To qualify for the new program, purchase agreements need to be signed by April 30, 2010 and close by June 30, 2010. For those in our armed forces, persons stationed outside the United States on official duty for 90 days during the period from January 1, 2009 and before May 1, 2010 will have eligibility extended for binding contracts signed before May 1, 2011 and closed before July 1, 2011.
On the backside of the tax credit extension, that we need to be aware of, are interest rates. Remember the Fed's Mortgage Backed Security Program? $1.25 Trillion was allotted to help keep interest rates low. Currently the Fed has purchased $977B, which leaves $273B to be purchased over the program's remaining 22 weeks. That's an average of about $12.4B in purchases each week, much less than the $20-25B the Fed has been buying weekly since the program begun, and before the rationing started. It is obvious that rates will trend high due to the reduced Fed buying but when there is no longer Fed buying then we could see rates jump 5%-1.5% overnight.
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