First-Time Home Buyer Tax Credit Extension–Helpful For Homeowners But Many Worry About Defaults

Many home buyers were delighted when the home buyer tax credit was extended, which now allows home buyers until September 30 to close on their home so that they may claim the first-time home buyer tax credit for $8000 or the repeat home buyer tax credit for $6500. Thousands of homeowners were worried they were going to miss qualifying for this tax credit due to the original cutoff date of June 30, on which homeowners were supposed to have closed on their home to claim this tax credit.

However, there are many who worry that this tax credit could cause problems in the future. Despite the fact that home sales rose sharply over the past months when the tax credit was offered and around the time where homeowners had to be under contract on their home, many still believe that the homebuyer tax credit may have given many people the incentive to jump into the housing market when they couldn’t afford to do so.

For many home buyers this tax credit eliminated the need for a down payment, seeing as how a homeowner would recoup some of the money that they paid for closing on a home. Essentially, there are analysts who feel that by offering this tax credit many people could pay the closing costs on a home in the present, since they were able to recoup these losses from the tax credit, but in reality not truly be able to afford the cost of their home.

Also, the economy is not as strong as it was before the recession and there are still many questions about what is going to occur within the job market over the next few months. While many Americans still struggle with unemployment are seeking out jobs, there is still concern that more people may lose their job, and with so many jumping into the housing market as a result of the homebuyer tax credit, there could be trouble down the road.

Yet, those who are on a more optimistic side of this argument believe that this extension of the home buyer tax credit is the first step in a long journey to help repair the housing market fully. Many people were financially able to take advantage of low mortgage interest rates, low home prices and were given a tax credit as well. While there may be a likelihood that some homeowners have used the tax credit to purchase a home which they cannot afford, after the fallout from the recession, there are those who believe that anyone attempting to buy a home and using the tax credit to do so, may have a more strenuous process which they had to go when qualifying for financing.

Regardless of where one falls in this argument, home buyers now have until September 30 to close on their homes so that they can claim their tax credit. While the timeframe for closing on a home can vary, it is believed that this new extension of the closing deadline should allow anyone who qualified for the tax credit by signing a contract on or before April 30 to close by this new date.