First Time Home Buyer Tax Credit Ending Soon

The article Behind FHA Strains, a Push to Lift Housing from the Wall Street Journal was first brought to my attention by The MAD Investor in this blog post.

Currently the deadline for a buyer to qualify for the first time home buyer credit (maximum of $8,000) is November 30th. This means that closing has to occur before December 1st with the title dated before that date. Anything later and the buyer is out of luck. There has been a lot of speculation that the first time home buyer program would be extended but this WSJ article brings to light quite a few things that tell us otherwise.

The issue comes not with the first time home buyer program but with FHA backed mortgages. The FHA guarantees loans with as little as 3.5% down and with falling prices in many areas, that leads to them insuring properties that are upside down on the mortgage. With FHA loans in default at a record 7.5%, that leaves the FHA with prospect of dwindling reserves and an increased liability for the future. The FHA has a government mandated minimum reserve and if it doesn’t have that reserve, drastic measures could be taken.

Officials worry that the resulting losses will help push the FHA’s reserves below the level required by Congress. The value of those reserves will be revealed in the agency’s annual review due Sept. 30. If they have fallen below the minimum, that could prompt a new round of questions about the role government should play in stabilizing the housing market.

With the prospects of the FHA falling below their minimum reserve amount and mounting pressure from lawmakers to not only have the FHA meet that reserve but decrease spending, it looks like the first time home buyer credit is an easy target for the chopping block. It’s the easiest and most likely as law makers will just have to do nothing with it (i.e. it would have to come up for a new vote to get extended).

What I think about the first time home buyer credit
Overall I feel that the government should not be giving money to people for specialized programs and that less government spending is better. At first this is how I felt with the first time home buyer program but a recent conversation has me thinking the tax payer isn’t getting such a bad deal with this program compared to the millions of other tax payer dollars that are spent each day.

The first time home buyer credit equals more house sales. Increased house sales means more jobs for local regions but that isn’t enough to make it worth while. Increased house sales in an area like Detroit means that there are more foreclosures that are going from vacant non-performing assets to fixed up, lived in houses with people that are paying property taxes and everything else that a person pays for owning a house. There are many dollars that are invested in local regions and governments with this program.

What this means to you is that you have a limited time to let your buyers take advantage of this tax credit. Whether you want to invest in a house and resell it our invest in our program. Our First Time Home Buyer Program helps the buyer utilize the tax credit to use as a down payment by reducing their principal owed. What this means is that you get more money up front on the program. It’s an excellent program to use in Detroit or anywhere in Michigan without the tax credit but it’s a no-brainer with it. Contact us for more information on it so we can get everything closed by November 30th!

Successfully Yours,
Jared Pomranky

Detroit real estate Free Report on Detroit foreclosure investing "how to" Detroit Real Estate market