First Time Home Buyers: Is Time Running Out?

The stimulus tax credit of $8,000 for first time home buyers expires on November 30, 2009.  That means your new house has to be signed, sealed, and delivered by the last day of November if you expect to qualify for the federal tax credit.  Is it possible to buy a house, have it inspected, appraised, the financing in place and all closing documents final?  Maybe, maybe not.

These days finding a house at a to-die-for-deal isn’t necessarily the challenge.  There are lots of sellers on the market just praying for a buyer.  Foreclosures are at an all time record high and REO (real estate owned) properties are being held by banks when they would just as soon wheel and deal.

What is the challenge is getting the financing in place and the property appraised in time to meet the deadline.

Mortgage lenders are going over homeowner applications with a fine toothed comb and looking for reasons to say no rather than yes.  Credit reports have to be near spotless.  The down payment has to be substantial and income levels have to be documented to the last detail.   All of this takes time.  Time you might not have.

Additionally appraisals are taking longer.  Of course it depends on where you live but the appraisal process can take several weeks.  You might think with the slow real estate market that appraisers would be sitting around whistling Dixie.  Not so, the refinancing blitz and loan modification process often requires a current appraisal.  Given that many appraisers left the business as the real estate market dried up, the ones still around are often back logged.

If you’re thinking of taking advantage of the stimulus tax credit for first time home buyers what can you do?

Get your credit report and check it for any discrepancies.  Knowing what your score is gives you a head start on the mortgage application.  While you’re waiting for the credit report, make copies of bank statements, brokerage accounts, income tax returns, and anything else you think the mortgage lender will want.

Talk with a mortgage broker, or directly with a lender, to see how much house you can afford and for any financing pre approvals.  Check with your credit union, many of them provide first mortgages.

Know what the market rate is for houses in the geographic location where you want to buy.  Sellers are willing to negotiate, especially if their house has been on the market for six months or more.  Don’t hold out for the screaming deal of the century or you just might run out of time. Make an offer, if it’s not accepted, move on.

It may take from 30 to 60 days to get your financing approved and the house appraised, start now. Remember you have to close by November 30, not just have a contract in place.