Minnesota Mortgage Blog - MN Mortgage and Real Estate News

The Homebuyer Tax Credit is about to expire. Should you still buy a home? Are you’re better off waiting?

St Paul, MN: In case you've had your head buried in the sand, Washington will give you money for buying a home and stimulating the economy. Up to $8,000 for first-time homebuyers and up to $6,500 for move up buyers who have owned their existing home at least 5-years. With the Federal Homebuyer Tax Credit set to expire April 30th, many potential homebuyers are wondering if they should rush to buy a home or forget about buying a home altogether without the benefit of free government money.

The answers vary depending on who you ask, but three major items need to be understood.

First: Not a single buyer "needs" the tax credit to buy a home. The credit is given to buyers AFTER the purchase as part of your tax refund. You must file your taxes and ask for the refund. You still must come up with your down payment and closing costs to buy the home.

The vast majority of my clients are saying they would be buying anyway. The only reason they are rushing to do it now, is to get the free money. Who can argue with that? The tax credit can be used to replenish savings used to buy the home, fix up the home they just bought, or for whatever the buyer desires.

Second: The tax credit is driving prices up. Sales on quality home in the most affordable under $200,000 bracket have been brisk. Many of these homes have been selling in just days, thousands of dollars above asking price, with multiple offers as people desperately try getting in before the tax credit expires. It makes no sense to me to pay $10,000 more for a home to get an $8,000 tax refund. We saw this same phenomena last fall when the initial tax credit was about to expire. By December, prices dropped dramatically, and then slowly picked up again as we get closer to the new tax credit expiration date. Many of my clients have been outbid 5, 6, 7 or more times on houses

Third: Prices will fall after the tax credit expires: Many experts believe home prices will fall without the artificial tax credit demand currently effecting the market. Once the credit expires, fewer people will be in the market and prices should drop, at least for the short-term, as sellers and bank lower asking prices to sell homes.

Should you still buy a home? Are you’re better off waiting? Hard to say, but one thing is for sure. If you plan on living in the home at least four years, home ownership has many advantages!

If you have questions about the process for homes in MN or WI ONLY, please call 651-705-6261, or APPLY ONLINE 24-hours a day via our secure application. There are no costs or obligations.

Joe Metzler is a Certified MN Mortgage Specialist (MMS). He and his team at Mortgages Unlimited are proud to provide home mortgages loans for First time home buyers in Minnesota and Wisconsin.