The federal tax credit for first-time homebuyers is set to expire November 30, 2009. According to the National Association of Realtors, since its inception earlier this year, the tax credit has brought 1.2 million new buyers into the market nationwide. In Indiana, nearly 60 percent of first-time homebuyers reported they would not have purchased a home without the tax credit.

At this time it seems likely that the U.S. Senate will approve a deal to extend the First-Time Homebuyer Tax Credit, but early optimism the program might be extended for all home buyers is not going to happen. The proposal in the Senate that appears to have the most likelihood of passage would extend the $8,000 credit through March 31. Then its value would drop by $2,000 for each of the subsequent three quarters of 2010. This plan was offered by Senate Majority Leader Harry Reid of Nevada and Senate Finance Committee Chairman Max Baucus, a Montana Democrat

Be aware as you begin looking for your new condo that there are new rules that could potentially hurt you if your looking for a FHA loan. FHA will put into place new rules that will limit borrowers ability to obtain FHA financing on a condo.

Specifically,

- Only 30% of all units in a development can be FHA Loans
- The development will need to be approved by FHA. Prior to this change FHA would allow
spot approvals on individual loans.
- The development will need to be at least 50% sold.
- The condo association will need to pay for a reserve study on an annual basis at a cost of
$3,000 to $5,000. Many associations only preform this every couple of years.
- FHA will not insure a loan if more that 15% of the members are deliquent on their dues. I am
unclear if this includes units that are REO or in Pre Foreclosure.

These changes will have a dramatic effect on potential buyers but also sellers as FHA loans are todays primary funding source for First Time Homebuyers.

Copied from the Thomas Register - Bill H.R. 3842

To amend the Internal Revenue Code of 1986 to extend the first-time homebuyer tax credit.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. EXTENSION OF FIRST-TIME HOMEBUYER TAX CREDIT.
(a) In General- Subsection (h) of section 36 of the Internal Revenue Code of 1986 is amended by striking `December 1, 2009' and inserting `October 1, 2010'.
(b) Extension of Waiver of Recapture- Subparagraph (D) of section 36(f)(4) of such Code is amended--
(1) by striking `December 1, 2009' and inserting `October 1, 2010', and
(2) by striking `IN 2009' in the heading and inserting `AFTER 2008'.
(c) Election To Treat Purchase in Prior Year- Subsection (g) of section 36 of such Code is amended--
(1) by striking `December 1, 2009' and inserting `January 1, 2010', and
(2) by adding at the end the following: `In the case of a purchase of a principal residence after December 31, 2009, and before October 1, 2010, a taxpayer may elect to treat such purchase as made on December 31, 2009, for purposes of this section (other than the preceding sentence and subsections (c) and (f)(4)(D)).'.
(d) Coordination With First-Time Homebuyer Credit for District of Columbia- Paragraph (4) of section 1400C(e) of such Code is amended by striking `December 1, 2009' and inserting `January 1, 2010'.
(e) Effective Date- The amendments made by this section shall apply to residences purchased after November 30, 2009.

There may be hope after all.

I was reviewing my Alerts last night and stumbled upon this gem( http://thomas.loc.gov/cgi-bin/query/z?c111:H.R.3706:) which is a new bill sitting in the House Financial Services Committee. This bill if it continues would require an increase in the downpayment required on FHA loans from the current 3.5% to 5%. I am sure that everyone that does not live under a rock would view this as possibly the worst thing that could be enacted in this current economic environment. A FHA loan is perhaps the only way a first time homebuyer can afford to buy a new home. Lets hope that this bill gets stuck in committee, insert the school house rock music at this point.