2009 Real Estate Guide
real estate
Bailout can help you buy a home

While the tax-credit program is enticing, Anderson warns that mortgage qualifications based on income, assets and credit are stricter than the pre-bust years. In early April 2009, most banks needed to see a credit score of at least 620 to lend, he says.

Also, the market remains "flooded with homes right now and the (tax incentive) may not be as big of incentive as hoped for, but it does give an extra push," says mortgage expert Joe Gross, president of Teaneck, N.J.-based Qualified Mortgage Inc., and author of "How The Greed Of Wall Street And Your Mortgage Lender Are Destroying America's Credit." But the program is already generating deals, he adds. "Realtors say there is more traffic and as the year rolls on and more people learn about the program, there will be even more," Anderson concurred. "It is encouraging."

The new credit aims to boost sales in the nation's sagging housing market.

Lawrence Yun, chief economist for the National Association of Realtors, predicts homebuyers will purchase an additional 300,000 homes in 2009 as a result of the tax credit.

"We think this year's tax credit will certainly have a much bigger impact because it is a true tax credit which is also refundable," Yun says. "For instance, if you owe $1,000 in taxes and qualify for the first-time homebuyers tax credit, you will receive a tax refund of $7,000."

Although Yun and others are hopeful about the new credit's impact on the housing market, not everyone shares the optimism.

Greg Smith, a Certified Financial Planner with The Wise Investor Group in Reston, Va., says it's important to be realistic about the credit's potential in light of the increasingly shaky economy and souring job market.

"This incentive only works for people who have complete job security, who know they won't be transferred within three years, who qualify as first-time homebuyers and have the ability to obtain financing," he says. "In addition, they need to live in an area with reasonable home prices."

Michael Dooley, a financial planner with The Patriot Financial Group in Beverly, Mass., is also a skeptic.

"While the theory behind the tax credit is great, I just don't think $8,000 is enough," Dooley says. "The people who would benefit from this the most are looking to survive financially or are even leaving their homes because they can't afford them."

While the tax credit is meant to cover 10 percent of the purchase price (up to $8,000), an $8,000 credit covers only about 4 percent of the purchase price of a home with the 2008 national median single-family price of $197,000, Smith says.

Meanwhile, homeowners that are more affluent will not be able to take advantage of the new credit, which phases out for individuals with an adjusted gross income of $75,000 or above and for married couples with a combined adjusted gross income of $150,000 or above.


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