Test-drive a home: A new path to home ownership

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Buying a home requires a lot of homework.

Before even choosing a home, prospective buyers should determine a comfortable monthly mortgage payment and create a wish list of features they want.

Buyers should ask themselves a dizzying list of questions: What features do I want, and what features do I not want in a home? What neighborhood most appeals to me and the lifestyle I enjoy? What amenities are important to me that need to be within close proximity to the home?

Any buyer’s wish list can be limitless, but the biggest obstacle many potential homebuyers face revolves around the simple idea of economics: Can I afford it now?

Jason Waugh, the president and CEO of Berkshire Hathaway HomeServices Northwest Real Estate says the three primary barriers to home ownership for many folks since the severe market correction of 2008-2011 are lack of inventory, credit-related issues, and the stricter qualification criteria of today’s regulatory climate. They may see a home they like, but they’re not always ready or able to commit to a 30-year mortgage quite yet.Loving couple looking at their dream house

“But what if you gave folks the chance to ‘test drive’ a home before deciding to buy?” he asks.

To test out this theory, Berkshire Hathaway has endorsed the Chicago-based organization Home Partners of America (HPA), which, for the last two years, has bought homes for prospective homebuyers who cannot do so, or are still undecided about taking on a mortgage.

Here’s how it works. Once a potential homebuyer is lender-approved and chooses a home, HPA buys that home—with cash—and then rents the property to the homeowner for as long as five years.

Waugh says this gives the potential homebuyer the chance to test a home out while deciding whether the home is a good fit.

Each of those five years will be broken down into consecutive one-year leases, he says. “You have the opportunity to rent at a fixed price for five years, and for each of those years you’ll know exactly what you’ll be paying in rent, and what the purchase price will be during each of those five years should you exercise the right to buy.”

By enrolling in HPA’s program, potential homebuyers can pay rent in the home they want, while simultaneously saving for that home’s down payment.

And if those homebuyers change their minds? Waugh says they can simply walk away at the end of any of the one-year lease terms for whatever reason, just like a traditional rental agreement.

Right now, the program is still in its infancy, but Waugh says it provides an alternative and less burdensome path to home ownership for many qualifying buyers—especially those who are having a hard time coming up with the cash for that initial down payment, are repairing credit, or don’t want to commit to a mortgage because they just relocated to the area and are unsure about where they want to live.

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Tax Credit encourages buyers to shop early

The homebuying season is starting early this year, thanks to the expanded first-time and move-up homebuyer tax credit.

Typically, the busiest time for home shopping starts in March and continues through May, but this year buyers who want to take advantage of the tax credits have to have a signed contract by April 30 and close the deal by June 30.

That is getting people off the couch.

“The tax credit will absolutely have an effect,” says Pete Flint, CEO of residential real estate search engine Trulia.com. “It is going to shift demand from the later part of the year to the first part. January and February will be very strong. The next three months, there will be a surge in demand.”

Read more about the Tax Credit here.

Source: USA Today, Stephanie Armour


The Basics: Extended Home Buyer Tax Credit

Bringing the Dream of Homeownership Within Reach

As part of its plan to stimulate the U.S. housing market and address the economic challenges facing our nation, Congress has passed new legislation that:

  • Extends the First-Time Home Buyer Tax Credit of up to $8,000 to first-time home buyers until April 30, 2010.
  • Expands the credit to grant up to $6,500 credit to current home owners purchasing a new or existing home between November 7, 2009 and April 30, 2010.

Here is a little more information about how the Extended Home Buyer Tax Credit can help prospective home buyers become part of the American dream.

Who Qualifies for the Extended Credit?

  • First-time home buyers who purchase homes between November 7, 2009 and April 30, 2010.
  • Current home owners purchasing a home between November 7, 2009 and April 30, 2010, who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight.

 To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.

Which Properties Are Eligible?

The Extended Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.

How Much Is Available?

The maximum allowable credit for first-time home buyers is $8,000.

The maximum allowable credit for current homeowners is $6,500.

If you have specific questions or need additional information, please contact a tax professional or the Internal Revenue Service at 800-829-1040.


Timing couldn’t be much better for first-time homebuyers

First-time homebuyers dominated the U.S. real estate market in 2009, accounting for roughly half of all residential transactions, according to the National Association of REALTORS®.

That trend is likely to continue well into the new year. That’s because interest rates are hovering near all-time lows, home-price affordability is near all-time highs and a third factor – Congress’ extension of the first-time homebuyer tax credit until April 30, 2010 – make conditions quite favorable for those considering homeownership for the first time.

Still, with the prospect of making one of the largest investments you’ll ever make in your life, you can easily become overwhelmed. Some of the questions you may be asking are: Will I be able to afford the home of my dreams? Do I have enough money for a down payment? Will I qualify for the tax credit? Will I make smart home buying decisions? If you go into the process prepared, your first purchase – like the current timing – can be just right.

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Homebuyer tax credit extended and expanded

capitolU.S. real estate received a big boost from Congress earlier this month when President Obama signed into law a five-month extension of the first-time homebuyer tax credit and a new tax credit benefiting existing homebuyers.

The first-time credit, part of the American Recovery and Reinvestment Act of 2009, was set to expire Nov. 30. Both credits will be available for qualified buyers through April 30. “Congress did the right thing by extending and expanding these tax credits,” said Prudential Real Estate and Relocation Services President Earl Lee. “The first-time homebuyer credit played a significant role in the U.S. housing market’s recovery in 2009, and both will help the market in the new year.”

According to the National Association of REALTORS, nearly half of all home sales are now being made by first-time purchasers. In fact, 47 percent of all Americans who purchased homes this year had not owned one during the previous three years, said NAR, up from 36 percent in 2006. NAR forecasts that existing home sales will rise 2 percent this year to just over 5 million. NAR predicts a 13.6 percent gain in 2010 to 5.69 million homes sold.

The first-time homebuyer tax credit equates to as much as $8,000, or 10 percent of a principal residence’s purchase price and is available to those who have not owned a principal residence in the past three years. Existing homeowners who have lived in their current home for at least five consecutive years of the previous eight and who are purchasing a home to be their principal residence may be eligible for up to a $6,500 tax credit.


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