Time Running Out on $8,000 Federal First-Time Homebuyer Tax Credit

How to Speed up the Process so You Don’t Miss Out

The $8,000 federal tax credit for first-time homebuyers is scheduled to expire on December 1. However, in order to qualify, the transaction must be closed on or before November 30, essentially leaving first-time buyers with less than three months to complete the process.

While the urgency of trying to find and close on a home before the deadline may seem stressful, it doesn’t have to be. For those first-time buyers who are in the early phase of the home buying process, here are seven steps for speeding up the process:

• Get Started Right Now! You should plan to identify and purchase your home within the next 45 days, which would then leave you up to 45 days to obtain mortgage financing and complete all the necessary steps to closing, including appraisals, inspections and title work. That means you should be under contract by early to mid-October in order to safely meet the closing deadline and qualify for this tax credit.

• Find A Qualified Real Estate Agent. A team of experienced professionals is the key to making the home buying process simple and seamless. Start by interviewing and selecting an agent who understands what you’re looking for. A real estate agent will arrange showings and keep track of the properties visited. He or she should also be able to help identify suitable lawyers, mortgage lenders, home inspectors and others who will play a role in the process. Remember, an agent is an expert who will negotiate the best price and incentives on a home and oversee the sales process on your behalf. It is critical that you get a timeline from your real estate agent so that you leave enough time for the sometimes lengthy closing process to occur.

• Know Before You Go. The first step in the home buying process is to have an idea of the type of property you want to buy. By separating the “must haves” from the “wants,” you can focus on what’s really important in a home. Free online tools such as Coldwell Banker On Location (http://www.youtube.com/coldwellbanker) and the recently launched mobile application for iPhone and Android devices, are available to help you quickly and conveniently learn about neighborhoods, view what’s on the market and compare home prices in most U.S. markets and 28 countries worldwide. If you arm yourself with as much knowledge as possible before hitting the ground with an agent, you are bound to save time in the long-run.

• Get Your Credit Report In Order. A sound financial track record and solid credit score can help lock in a home loan and lower interest rates. Lenders today are looking at prospective borrower’s credit reports more closely than ever, so it’s important to examine your credit report for mistakes and eradicate any “toxic” debt such as overdue credit-card payments before the home shopping begins. Rectifying mistakes is easy to do, but it can be a time consuming process. Checking a credit score and addressing any errors will help expedite the approval process when it comes time to make an offer.

• Compile Your Paperwork. At the same time you are working to correct or improve your credit report, you should also pull together the documents you will need to provide the lender. These documents include:

- Verification of employment form
- Two most recent pay check stubs
- Two most recent bank statements
- Copies of the last two W2 forms received from employer
- Copies of statements including retirement accounts, stocks, bonds or mutual funds
- Copy of social security card; if there is a co-applicant on the loan, all of these forms will be required of that person as well

• Get Your Pre-Approval. Once the paperwork is in order, it’s time to get pre-approved for a mortgage. “Pre-approval” means that a lender has verified your credit and other credentials and is committed to making a loan. This is different (and more valuable to sellers) than pre-qualification, which simply gives you an idea of the size of the mortgage you might afford without actually committing to a loan. You are not obligated to get a loan from the lender that offers the pre-approval letter, but keep in mind that a pre-approval does involve giving permission for a hard credit inquiry. This could potentially result in a small ding on your credit report. Getting this early green light, however, will put you in a stronger position with sellers, demonstrating how serious you are about home ownership – and that you are well-qualified.

• Shop for the Most Favorable Mortgage Option. Owners can face misunderstandings and even lose their homes if they don’t fully understand their mortgages. It’s imperative for you to educate yourself on the risks of the different types of mortgages and select the right one for you and your family. Early on, shop around for the most favorable mortgage rate and terms. A difference of even half a percentage point can mean a considerable savings over the life of a loan. For more information on mortgages visit http://www.bankrate.com/mortgage.aspx.

Market Flash

FINGERS CROSSED? YEAH, US TOO

First it was a sigh of relief, then it was a breeze, now it is a roar. Never mind new housing starts, the Federal Reserve, Case-Shiller or the exchange rate with the Chinese Yuan; nothing can stop spring in California!

Statistics:

Statewide: The median resale price of a single-family detached home in California for April was $403,870, a decrease of 32% from April 2007 and 2.6% from last month; but sales activity has increased 2.5% year-over-year. Unsold resale inventory represented a 9.2-month supply, compared to 11.3 months (CAR’s revision; we said ten months at the time) for the same period a year ago. Median number of days till sale was 52 in April, down from 53 for April 2007.

Alameda County: The spring surge catapults Alameda County sales securely into four digits – not quite to the levels of a year ago, but the best total since August. Little slices have been disappearing from the median and add up to a decline of about $100,000 since November.

Contra Costa County: Sales are actually better than they were a year ago while median year-over-year has declined by more than a third.

El Dorado County: Encouraging when you look at the whole picture. Sales, which have been between 130 and 180 for almost every month of the last year, are now smack in the middle of that. While median is declining here as elsewhere, it has only shed a respectable $50,000 since April 2007.

Marin County: Sales are two-thirds of what they were a year ago but are also twice what they were in January. Median for the year has oscillated between $750,000 and $950,000, so the current $800,000 is not bad; and it is also the high median for the month.

Monterey County: Only a slight decline in median for the month. Sales somewhat make up for it with a 50% increase for the month, putting the sales total over 200.

Napa County: Looking pretty good, in a fast rebound from the results of January and February. Both median and sales are at roughly 90% of April 2007 levels, and just as it does in Monterey, this looks somewhat like new money from outside the county. If the wine country is catching its breath, we are glad, because it was suffering – along with the rest of the regional second-home market – for a while.

Nevada County: This county too has weathered a slump, as both sales and median climb back through the levels of last November. Sales are poised to return to triple digits if the recovery of the regional market continues.

Placer County: Median is sliding gracefully, but recent strength in sales and a sales increase of almost two-thirds year-over-year makes Placer County one of this month’s standouts. Actually, the whole Sacramento/Tahoe region is looking like itself for the first time in well over a year.

Sacramento County: Sales year-over-year more than double – a distinction that Sacramento County shares only with San Benito County. Median has declined smoothly every month since last May, but it has still only lost about a third for the year.

San Benito County: After all its struggles, this county comes out on top with a year-over-year sales increase of almost 110%. That comes at a cost of $200,000 loss in year-over-year median, but prices should pick up as the market recovers generally. Sales have not been this high since the summer of 2006.

San Francisco Bay: Median stayed almost steady from March to November 2007, but since then has declined every month and lost almost $110,000 in six months. Sales, on the other hand, are climbing enthusiastically and totaled over 6,000 for April, after being stubbornly below that since the beginning of September. Prices are finally finding the level that will bring buyers back into the market.

San Francisco County: A 50% leap in sales month-to-month means that this county’s sales have actually increased – by a sliver – year-over-year. Considering that year-over-year median has declined by a trivial 3%, we have to say that San Francisco County is in good shape.

San Mateo County: Sales are coming back smartly but still are not quite at the level of a year ago, while median (broadly speaking) has declined steadily since last July and will now have to climb back up through the magic $700,000 mark.

Santa Clara County: Santa Clara County sales are once again showing formidable volatility, nearly doubling month-over-month and climbing from three figures into a firm four figures. Considering that year-over-year median has only declined by about 12%, this is a strong showing that may continue to broaden.

Santa Cruz County: Spring is the prettiest time of year in Santa Cruz and guess what? The county had April’s best month-over-month results for both sales and median. Year-over-year median declined barely more than 10%.

Solano County: A big month-to-month jump brings sales almost within reach of the April 2007 figure. Median has been declining steadily since its recent peak in May and is down $110,000 year-over-year. Again, this looks like a county finally finding the price point attractive to prospects.

Sonoma County: A big jump for the month brings sales even with last July, although they are still a couple of hundred below the 2005-2006 average. Median seems to be perking up a bit and if this recovery keeps going, Sonoma will really be back on track.

Yolo County: Median is down $120,000 or about 40% for the year. But Yolo picked up 40 sales last month for its highest sales total in our records, which go back to 2006.

Interest Rates*: Thirty year fixed 5.95%, 5/1 ARM at 6.18%, 30-year fixed jumbo at 7.18%. The consensus seems to be that, largely because of Ben Bernanke’s understanding of deflation and macroeconomic fluctuations, the Fed has done an excellent job so far of balancing the demands (and they are demands) of lending and of inflation. The “crisis,” or more exactly, the acute phase of the current economic correction, may be largely behind us. But lenders are not about to go out on a limb in the way that they did two and three years ago; apparently, if you want a jumbo loan right now, you will need flawless finances and the longevity to back them up.

Inventory: Sales go up, inventory goes down. That said, we are still looking at a nine-month supply overall, which should be plenty for everybody. If sales keep up April’s pace all the way into summer, though, we may see short inventories as a material factor for the first time in a couple of years.

Overall Assessment: It is June, the weather is warming up and the real estate market appears to be doing the same. Prices have stabilized in many areas, affordability has increased for many individuals and inventory is still strong. All of these factors seem to indicate one thing – that now may be one of the most opportune times in years for fence sitting home buyers to jump into the market before housing begins to swing back up.

*Area interest rates are reported to be as follows:Sacramento/Tahoe, San Francisco Bay Area and Silicon Valley regions: Princeton Capital reports that as of June 6, 2008, the “Agency Jumbo” rates are as follows: 30-year fixed with one point is 6.25%, the 15-year fixed with one point is 5.875% and the 5/1 ARM with one point is 5.375% for loan amounts up to $729,750.