Announcing California Tax Credit of $10,000!

Governor Arnold Schwarzenegger signed a bill last week offering a Tax Credit to those who purchase a home in California closing after May 1, 2010.  You can qualify if you are a First Time Buyer or Buy a New Home that was never lived in.

Highlights:

  • Provides a 5% tax credit up to $10,000 to all buyers of new, never occupied homes or first time buyers of existing homes.
  • Sets aside $100 Million for each program, for a total of $200 Million
  • Requires First Time Buyers to close escrow between May 1st and December 31, 2010.  New Home Buyers have until December 31, 2010 to sign a purchase contract and must close escrow by August 16, 2011.
  • Requires Buyers to live in the home for at least two years.
  • Provides for the tax credit to be paid in thirds over a three year period.
  • Sets no income limitation on buyers.
  • Requires the Buyers to repay the tax if they fail to live in the home for two years or fail to close by the dates above.

Note that the last time California had a credit for New Home Buyers, the funds ran out in eight months.  There is a limit on the money allotted for First Time Buyers and New Home Buyers of $100 Million for each program.  Buyers should check with your CPA or Tax Preparer for details.

 

Federal Tax Credits are set to Expire on April 30, 2010

Escrow needs to be opened by April 30, 2010 and closed by June 30, 2010 to qualify for the $8,000 Federal First Time Home Buyer Tax Credit and the $6,500 Federal Move Up Home Buyer Tax Credit.  There is no sign that this credit will be extended at this time.

 

FHA Upfront Mortgage Insurance Rates Set to Increase on April 5, 2010

FHA will be raising its rate on Upfront Mortgage Insurance to 2.25% from 1.75% on FHA Case Numbers assigned beginning on April 5, 2010.  If you are close to entering escrow on an FHA loan, have the loan submitted by this Friday, April 2nd.  Since Upfront Mortgage Insurance is added to your FHA loan amount and amortized over the 30 year term of the loan, it does not make a big difference to the monthly payment but every little bit helps.

 

Interest Rate Update

 Interest rates continue to be at very low levels with Conforming 30 Year Fixed (under $417,000) at 4.875%, High Balance ($417,000 to $729,750) at 5.25% and Jumbo (over $729,750) at 6%.  The best program for Jumbo loans continue to be at the 5 Year Fixed Program offered as low as 4.75%.

 

At the end of March , the government did stop purchasing the mortgage backed securities that were part of the stimulus package.  The Feds think the rates have stabilized and they do not need to continue this support.  My opinion is that the government will test the waters and see what the market can sustain.  Let’s hope they stay low.