Congress is considering a new tax credit that would modify the current $7,500 tax credit for first time home buyers to $15,000 for any home buyer. This could really help a lot of people.
Here’s how it will work: Home buyers would get 10% of the purchase price of the home as a tax credit when they file their 2009 tax returns. The maximum amount of the credit is $15,000. If the tax payer usually pays less than $15,000 in taxes the credit can be split over two tax years, so the home buyer would get a $7,500 in 2009 and another $7,500 in 2010. And this is a true tax credit, not a tax deduction, so the home buyer gets $7,500 deducted from thier tax liability, not from their gross income. For someone owing some money this could mean they owe less or nothing at all. For someone already getting a tax return this would add up to $15,000 on top of it.
I’m sure for most middle-class home buyers this could mean a nice surprise at the end of the year.
The only way they could make it better? Make 90% to 100% of the rebate available at the closing table to be used as the down payment. $15,000 would be more than 6% down on the average home in Salt Lake City. Fannie Mae and Freddie Mac require 5% down payment and FHA requires 3%, so 6% would give the average FHA borrower the required 3% down plus an additional 3% to cover any closing costs not accounted for by seller concessions (which on short-sales there are no seller concessions to cover closing costs).
Let’s hope the Feds figure this out and either do something like that, or maybe the State of Utah could front the rebate money and make it due upon filing of taxes or in the case of those not getting a refund, repayable over, say, 10 years at a minimal amount of interest (such as not exceeding the note rate of the loan).
For Salt Lake City, UT today’s average mortgage rates are as follows:
30-year fixed: 5.25%
15-year fixed: 4.625%
Conforming Jumbo 30-year fixed: 5.75%
FHA 30-year fixed: 5.50%