A timeline for home buyers who want the tax credit
You have through April 30 to sign a binding contract and can wait until June 30 to close the deal. But that's less than two months left to get pre-qualified for a mortgage and find a good place.
Now, far be it from me to tell you when you should buy. Buy now, later or never, whatever suits you. But here's the timeline Realtor.com recommends if you want the tax credit and would like to avoid squeaking in at the last minute.
Immediately: Get pre-qualified for that mortgage. Shop around, make sure you understand all the terms and think carefully about what you can comfortably afford -- even in these more restricted times, it might be less than what a lender is willing to shell out to you.
By the middle of March: This is when Realtor.com suggests you find (what else?) a Realtor. Some buyers choose to work alone, of course, but either way you'll want to check out listings online to get a sense of what you can get for your money. (Or, at least, what sellers want you to offer.)
March 22th: Start going out to see houses. Realtor.com suggests this date with the assumption that you'll want four weeks to look and then a few days to get under contract. But it notes that "the shorter amount of time you take for house-hunting, the more time you allow to be under contract just in case something goes wrong." That's why it recommends that you actually get that contract in place by ...
April 1: Because if you have a contract at this point, you've got time to adjust if something goes wrong. Not to mention wiggle room for the home inspection, appraisal and other particulars. Appraisals can take as much as a month, Realtor.com says.
This might seem obvious, but don't rush to buy because of the $8,000 (or $6,500) and figure the actual house itself is secondary. Purchase in haste, repent in leisure.
Are you just getting started? What's your personal deadline for getting under contract?
And you folks who got the $8,000 when the deadline was Nov. 30: How much time did you allow?
Categories: First-time buyer tax credit, Repeat buyer tax credit
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Comments
Do you think when the credits expire the values of homes will immediately go down by $6,500 or $8,000? or how will that work?
Do real estate agents still charge the same commissions regardless of price? Will they always tell us it is a good time to buy because they get paid a percentage of the sales price? No sale. No Commission?
Is unemployment still an issue you think? When mortgage interest rates rise - what will happen to the value of homes? Will they go up or down?
Posted by: Paul Forshane | March 3, 2010 9:57 AM
I've heard strong arguments from some economists -- and real estate agents -- that sales will slump again after the credits go away, and that this will further dent prices. I've heard other economists argue that the $6,500 credit isn't having much impact now and the $8,000 credit isn't having as much impact as it did last year, which would suggest less of an effect when they disappear.
Naturally unemployment is still an issue. So are foreclosures. And mortgage rates. I leave forecasting to braver (or more foolish) folks, though.
Posted by: Jamie Smith Hopkins | March 3, 2010 10:03 AM
I think the tax credit will force many buyers to get in right before it expires. I expect sales to increase in the spring and remain flat over the summer as that is the peak buying season of the year when families relocate after the school year. I fully expect mortgage rates to increase slowly and gradually from June to August. I think rates will go up to 6% by the end of August. The reason is that the Fed will be ending their MBS program the end of this month. Without the Fed buying up all the mortgages to keep rates artificially low, there is only one direction they can go, and that is up. Private capital will require a higher return on their money when compared to Treasuries. While Treasuries are considered "risk free", mortgages are risky business. There will be a premium private investors will require above Treasury rates in order to invest. Once rates do start to go up, that will further depress home prices as higher rates will lower purchasing power by increase debt to income ratios. As higher debt to income ratios become more of an issue from higher rates, prices will have to go down in order to compensate.
I also suspect when the "shadow inventory" of foreclosures finally gets released on the market, there will be more supply than demand for housing. What really needs to happen is to let all the foreclosures on the market when they are suppose to get this over with. By controlling the supply of foreclosures, the banks are only prolonging this crisis. Everyone should want home prices to go down so it is truly affordable.
Here is a question I have... would you rather buy a home for $300k and get a loan of 5%? Or would you rather buy a home at $200k with a rate of 9%? If both payments are the same, would you rather owe more or less?
Posted by: Frank Rizzo | March 3, 2010 10:23 AM
Frank- you are on the money.
The only wildcard is the governments next step - and givin the recent history of our nanny state, it would not surprise me for our elected officials to extend all of these programs, such that they can secure November '10 votes and appease their overdebted, glttonous constituents . If, somehow, Congress were to do what is best in the long run for this nation and allow return to free market (rather that socialistic) princples, then the wildcard would be trumped.
And to answer your last question - no doubt I would take the $200k/9% scenario....and buy it with cash.
Posted by: Darwin Rules | March 3, 2010 2:21 PM