Interest rates are up and tax credit news

Bad news: interest rates are up. This will likely put the brakes on our local market somewhat. The good news for buyers is that houses will likely be staying on the market longer.

Remember HUD's move to monetize the $8000 first-time buyer tax credit? So a buyer could actually apply it towards down payment or closing costs? Guidelines and details are still not out on that yet. I predict that very few people will actually be able to use the credit this way.

And speaking of: did you know there are income caps on the $8k tax credit? If you are single, and make more than $75,000, the credit is reduced. If you make over $100k, it is eliminated. For couples, the salary threshold is $150,000.

$8000 1st-time buyer tax credit can now be used for a downpayment

As we all know, The American Recovery and Reinvestment Act of 2009 offers homebuyers a tax credit of up to $8,000 for purchasing their first home. Now, according to this HUD press release, first-time buyers can now use their $8000 tax credit towards their down payment or closing costs. While I don't quite get the mechanics of how this will work, it's good news.

Here's a quote: "Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5 percent of appraised value or their closing costs, which can help achieve a lower interest rate." Here's what that means. Often, a buyer's interest rate is a little higher for a government-backed loan, like FHA. This will enable a buyer to "buy down" their interest rate and therefore have a lower monthly payment.