Home Buyer Tax Credit Extended and Expanded

President Obama signed the bill extending and expanding the home buyer tax credit.  The credit was part of a bill that included more aid for jobless workers and broadened tax breaks for businesses. The measure passed the House by a vote of 403 to 12, one day after it was unanimously approved by the Senate.

HOME BUYER CREDIT EXTENDED

The bill also extends the $8,000 tax credit for first-time home buyers until April 30, 2010.  The credit was previously set to expire on November 30, 2009.  The new law expands the credit to cover more affluent buyers. The bill will raise the adjusted gross income cap to $125,000 for single filers and $225,000 for joint filers. The amount of the credit currently begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers.

HOME BUYER CREDIT EXPANDED

The new bill also creates a new $6,500 credit for repeat buyers who have been in their current home for at least five years.

The credit will be available only for the purchase of principal residences priced at $800,000 or less.

The credit does not have to be repaid as long as you stay in the house is your principal residence for three years after the purchase date. However, this would not apply in the case of a member of the Armed Forces, military intelligence or Foreign Service who is on extended duty. In addition, members of the military who have been deployed overseas for 90 days or more in 2008 or 2009 would have until April 30, 2011, to claim the home buyer tax credit.

INTEREST RATES FALL BELOW 5%

The Mortgage Bankers Association said rates on 30-year fixed-rate mortgages fell below 5% for the first time in four weeks.  The 5% level is something of a psychological tipping point, typically sparking home loan refinancing activity.

The MBA said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week to Oct. 30 increased 8.2% to 608.3.  Low mortgage rates, high affordability and the federal government’s $8,000 tax credit for first-time home buyers – part of the stimulus bill – have helped pave the way for stabilization.

The National Association of Realtors said pending sales of previously owned U.S. homes unexpectedly rose in September to their highest level in nearly three years ahead of the Nov. 30 expiration of the tax credit.