banktime.com

Are you a potential first-time homebuyer who has been watching the calendar with growing anxiety? You are not alone. The final weeks of an almost yearlong promotion targeting first-time homebuyers for a generous tax credit are ticking by, and time is growing unreasonably short for anyone who has not already locked in a purchase on the house they are planning to make their own. Three weeks isn’t a long time in which to select and close on a house, after all! Luckily, nobody will have to lose sleep over the loss of such an opportunity just yet. Yesterday, the Senate voted in favor of extending the homebuyers’ credit program for several more months, and to expand the initiative so that many buyers who already own homes might be able to receive a (slightly lesser) tax credit as well.

First-time homebuyers will stay eligible for a tax credit of as much as eight thousand dollars through the spring. Buyers must sign a purchase agreement by the last day of April, with two months given to close on the deal. The class of “first-time” homebuyers will now be expanded to include those purchasers who have not owned their own residence in at least three years: the perfect boost for former homeowners who may have had to turn to renting or living with family members as a result of joblessness or other economic crises. Buyers who already own a home but have lived in it for at least five years will be eligible for the first time for a tax credit of up to sixty-five hundred dollars.

The House of Representatives is expected to receive, confer upon, and vote on the bill today. The bill’s Senate champion, Senator Johnny Isakson, warned that this would “probably [be] the last extension.” It was packaged as one of a pair of generous tax breaks bundled in with an extension of unemployment insurance benefits for those who have exhausted a year of credit already. The second tax credit was one afforded to businesses who are currently in the red so that they can recoup taxes they have paid during the past five years in which they were profitable. Max Baucus, the head of the Senate Finance Committee, espoused the hope that “the right mix of tax breaks and investments” would help individuals, families, and businesses weather these times of recession and get the economy back on track where it needed to be. He stressed that Congress would need to continue to be “bold and [creative]” in crafting measures designed to stimulate the economy appropriately. Experts believe that the expansion and extension of the home buyers’ incentive program will cost the government somewhere around eleven billion dollars in lost tax revenues.

There is every indication that the first-time homebuyers tax credit has been a success in creating new mortgages. Through August, the last time that the numbers were tallied, approximately 1.4 million new homebuyers had qualified under the terms of the federal program. This, according to the National Association of Realtors trade group, includes an estimated three hundred fifty consumers and families who would not have purchased a home for the first time without the incentive.

According to Republican Kit Bond, however, that number is distressing. The Senator, who did vote in favor of the extension (it passed unanimously), questioned whether the incentive was truly and statistically effective in stimulating new home sales. Bond pointed out that the vast majority of homebuyers receiving the tax credit this year indicated that they were in the market for a house anyway. The credit therefore amounted to nothing so much as free money for them, and may have been put to better use elsewhere, he reasoned. Bond took it a step further, and wondered if those homebuyers who decided to go ahead and take the plunge because of the tax credit were really financially qualified to be purchasing the property, and weren’t using the credit as a de facto federal subsidy that it was never intended to be. With the real estate market struggling as badly as it is under the crushing weight of so many foreclosures and defaults stemming from predatory lending, everyone is wary of in any way encouraging consumers to buy homes they cannot afford.

The tax credit is aimed at those buying principle (not vacation or secondary) homes costing less than eight hundred thousand dollars. Individual mortgage filers making more than one hundred twenty-five thousand dollars a year or those married couples with joint incomes of over a quarter million dollars annually are ineligible. Members of the Armed Forces on active duty stationed outside the United States for at least three months will be eligible for the credit through June 2011.