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Will the tax credit lead to more foreclosures in the future?

Many who would not have chosen to purchase a home yet are coming into the real estate market due to the $8,000 incentive. There are even some buyers that cannot afford to buy a home that want to benefit from the tax credit.

Down payment assistance is available through the Colorado Housing and Finance Authority (CHFA) for buyers who do not have the funds for a down payment. CHFA even offers a JumpStart program allowing buyers to use a portion of their tax credit in advance to cover closing costs and/or down payment.

As a result, buyers can get into a home with very little cash. Does this sound familiar? Of course owning a home is better than renting but are all first time home buyers ready to own a home and make monthly mortgage payments after they get their $8,000 tax credit?

I am worried some buyers out there do not understand the responsibility it takes in owning a home and may end up learning the hard way through foreclosure.

Will the free money buyers are receiving lead to more foreclosures down the road? Only time will tell.

Patricia Beck – Selling Colorado Springs Homes

Posted by Colorado Springs Realty Patricia Beck on 11/11/2009 03:47 PM

Comments (14)

Tax Credit for 1st Time Homebuyers in the ActiveRain Channel

colorado springs real estate, colorado springs home buyers, first time home buyer tax credit

14 Comments on Will the tax credit lead to more foreclosures in the future?

NOV

I am in hopes that the lenders will weed out those that can not afford to own a home. You have a very valid point. We don't need any more folks getting into a home before they can afford it. As you said only time will tell.

Patricia,

You may be on the right track but things have changes. There will always be foreclosures. Lending is tougher with income and credit verification. Before we could do no docu loans with no income verification. Since they aren't really around anymore people have to look pretty good on paper in order to get the assist. Good brainstorming!

I agree with Barry. I think it's still difficult to get a loan without great credit and the lenders do seem to be doing a great job at weeding out the folks that can't afford a home. There are still so many foreclosures on the market which is just a reminder of how tough things still are.

I wouldn't think the credit has anything to do with foreclosure, that is where the payment comes in and if they cannot afford it then the $8000. won't help.

Will the tax credit lead to more foreclosures in the future? YOU BETTER BELIEVE IT, and I'm willing to give 10:1 odds on it.

Great to see you again on ActiveRain -- yes it will be interesting to see how things turn out with the new round of incentives. Hope all is going well for you!

Patricia, I have wondered about this also although the lenders are being more stringent. I guess time will tell.

NOV

Barry- I agree!

Marcie- Very true, hopefully I'm wrong.

Kathy - Thanks for stopping by!

Marchel - Lenders are definitely being more stringent but I'm still concerned about buyers who don't have any money invested into the home purchase.

NOV

I think interest rates are so stinking low that it would prevent foreclosures. We have a definite dispairity rental prices being higher than comparable mortgaged homes (prices + rates.) I think the tax credit is a bonus. If you could see some of the homes here too - you know where the money is going - back into the home and not necessarily the slot machines!

NOV

Great point Patricia. There are many long-term implications of this tax credit extension, one being how the average American citizen is going to be saddled with more tax debt, and the other being what you mentioned here. This extension may create an artificial bubble for the housing market as many people rush to claim this credit, and let's hope that doesn't lead to another wave of foreclosures in the next 2-5 years.

NOV

Renee- Great point made! Thanks for commenting!

Tim- Thanks for stopping by! I am definitely concerned about the tax debt this will create for the average American citizen.

DEC

Lets hope that with all the fall out people will be more conscious of what they can afford.

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