Earlier today, President Obama signed legislation to extend the deadline for taking advantage of the Federal tax credit offered to home buyers.To take advantage of the credit [$8,000 for first-time home buyers, $6,500 for most everyone else], you still have to have a contract dated on or before April 30. Now, however, you have until September 30 to complete the transaction.

Why does this matter? The National Association of Realtors has estimated that 180,000 eligible buyers were not going to complete their purchase prior to the June 30 deadline. There are several possible reasons for this. With the looming deadline, many lenders were overwhelmed with applications [I know of one lender who had an internal deadline prior to April 30 for loan applications] and were simply unable to complete their paperwork in a timely manner. Also, if a home buyer was looking at a foreclosure or a short sale, the added delays could easily push a closing  out past 60 days. Now those people have another three months to finish up the transaction.

As an added bonus, the same legislation reauthorizes the National Flood Insurance Program. this ends the legal limbo some buyers were in where they were required to purchase flood insurance, but the Feds weren’t offering it. The combination of these two measures should bring some additional stability to a housing market that could certainly use it.

Now that the opportunity to claim the Federal home buyer’s credit has passed, the $64,000 question is: what will happen to the housing market without that $8,000 crutch? There is a wide variety of opinion — some have said the credit has had no effect, so removing it will also have little effect. Others have said that the housing market is poised for another dip as buyers will leave the market without an incentive. Prudential decided to ask the people who really count — potential home buyers. Here’s what they found out

[The raw data of the survey comes from Prudential. The graphics and analysis come compliments of Tara Steele and Agent Genius]

* People still in the market think the end of the credit will have little effect

. . . but they felt the credit helped them enter the market in the first place

even though other factors are larger drivers on the market

It’s certainly worth taking a few moments to read the raw data or the graphical interpretation depending on how you process data. What I took away from it was that the tax credit did what it was supposed to. It got people off the fence in 2009 and early 2010 at the expense of slightly slower sales in later 2010. As time went on, however, larger issues such as employment have a greater influence on the buying decision.

We’ll see over the next few months what the price is for having the credit over the past two years.

Like every other lender, Fannie Mae has its share of bank-owned property [called REO, or Real Estate Owned]. Unlike most other lenders, however, Fannie Mae is taking some aggressive steps to move that inventory. most recently, Fannie Mae has stepped up to offer a 3.5% incentive to buyers who buy one of the homes listed on their HomePath website. The 3.5% incentive can be used for the following

• Closing costs
• The purchase of new Whirlpool appliances by Fannie Mae
• Any combination of closing costs and appliances up to the 3.5% limit

Like anything, this offer has some limitations;

• Offers must be accepted on or after January 28, 2010
• Property sales must close before May 1, 2010
• Buyers must be owner-occupants, investors are excluded

This is a great incentive to get people looking at HomePath, especially since the $8,000 tax credit can’t be used towards a downpayment. The incentive gets you past the closing and into the home, while the $8,000 tax credit can take care of the first six months of payments.

If you’re interested in making an offer on a HomePath home, please send me an email. To take advantage of the $8,000 tax credit, you must have a home under contract by April 30, which is less time that most people think.

I wanted to take a moment to invite all my readers to my Open house this Sunday at 1824 Birmingham Avenue. This beautiful home was built by master builder George Birmingham as his personal residence in 1939. It’s 1,600 square feet and four bedrooms make it a great starter home with plenty of space. The half-acre lot gives you plenty of space around you too! Plus it’s minutes from Northgate Mall, I-85 and just about anywhere in Durham you want to go.

We’ll be holding the Open House on Sunday, January 10 from 3PM until 5PM. I hope to see you there!

One of the ways the Federal government is trying to reform the housing industry is by adding more structure to the closing transaction. In particular, HUD is requiring two new forms for all closings after January 1, 2010. Those new forms are;

The Good Faith Estimate. When one applies for a mortgage, the lender is expected to provide an estimate of the expenses and fees involved in getting the new mortgage. Starting in 2010 those estimates will be given on a standardized form – the Good Faith Estimate. This form lays out all the charges related to the loan and note which charges can not change, which can change a small amount, and which have no restrictions. By doing this, HUD hopes to make comparison shopping easier and to help consumers understand the loan they are applying for.

The second form is a revised Settlement Statement or HUD-1 form. The HUD-1 is given to the buyer and seller by the closing attorney prior to closing [supposedly 24 hours prior - usually about 30 minutes prior] and is the official record of where all the money comes from and where it ends up. The new form has a new section which compares the actual settlement costs to the Good Faith Estimate and a final section which spells out the details of the mortgage in relatively clear English.

Overall, these changes are pretty positive. They make good strides towards making the money trail in a closing clear and in making the estimates given by lenders mean something. They certainly aren’t perfect — for example the Good Faith Estimate doesn’t actually tell the borrower what the mortgage payment is — but I expect a couple of quick revisions will take care of the main points.

For a great review of the new forms, including some sample forms, take a look at the Virginia Association of Realtors website. Since the forms are Federal, their comments should also be valid here in NC.

[Thanks to Tina Merritt and the Trump Blog for pointing out the VAR site]