mortgage

Last-minute homebuyer tax credit tips

Tip: Buyers should be preapproved for a mortgage because glitches such as a mistake on a credit report or a lender's request for tax returns that must be retrieved from the Internal Revenue Service can cause a delay, according to Patti Ketcham, owner of Ketcham Realty Group in Tallahassee, Fla.

"You don't want to wait until the last minute because you could end up shooting yourself in the foot over something that's no one's fault, but you just run out of time," she says.

Tip: Buyers also should allow extra time in case the mortgage lender requires a second appraisal, which can delay final loan approval.

"The appraisal process in residential lending is going through some painful changes. It is not uncommon to have a mortgage lender require more than one appraisal," Ketcham says.

Tip: Buyers should line up homeowners insurance as soon as the house is under contract. Homeowners insurance is usually routine, but some states have special disaster-related issues. A big storm, earthquake or fire can trigger a moratorium on new policies.

Tip: Buyers should be aware that short sales, in which the seller needs a lender's approval to sell the home for less than the loan balance, are typically subject to lengthy delays. For instance, one typical requirement is that the final closing statement must be sent to the bank for final approval. That can take five to 10 business days, Bennett says.

It's an unfortunate irony for homeowners who've experienced a financial hardship, but Ketcham suggests buyers who want to claim the tax credit should set some firm deadlines or avoid short-sale homes.

"If the home they fall in love with is a short sale, they need to have a very serious talk with their Realtor with the calendar in front of them and say, 'If we don't have an answer by this date, we need to look for another house,'" she says.

Tip: The IRS has introduced Form 5405 and instructions for taxpayers who want to claim the homebuyer tax credit.

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