Time is running out for first time home buyers to take advantage of the $8,000 home buyer tax credit. As of date of this post, members of Congress have not expressed whether or not they will extend the credit so you should plan, as of now, that your deadline is November 30 to close on your home. Also, keep in mind that in most states, you need to allow at least 45 days from acceptance of contract to close so your deadline is more like October 15 to get the home of your dreams under contract. So with little more than a month to find “that” house, here are a few tips to narrow your home search and aid in the home buying process.
1. Use a direct mortgage lender
Buyers have an option of utilizing a mortgage banker or a mortgage broker to obtain their mortgage. While a broker can shop a number of sources to obtain the best rate or terms for your situation, the trade off is usually higher fees and a lack of control over closing. It is absolutely critical that you close on or before November 30 therefore a direct mortgage lender (mortgage banker) will have more control over your file and should ensure that it closes on time as opposed to a broker. (sorry brokers)
2. Stay away from certain houses!
At this late date, first time home buyers should stay away from pre-foreclosures (also known as short sale properties) and to-be-built new construction homes. Rarely does the pre-foreclosure process take less than 45 days for a response from the bank. Typically, most files require at least 90 days and the outcome may not be what you anticipated. Therefore, unless a buyer just walked away from the property and the bank is ready to settle, you should look elsewhere. To-be-built new construction homes also require more time than you have right now so unless you are purchasing a spec home that can be delivered in less than 30 days (since builders generally require more time), look elsewhere.
REO (bank-owned properties), relocation homes, owner-sales, and HUD homes are all still available to you at this point but understand that as the clock ticks by, your options will get slim. For example, if the home you are purchasing is still owner occupied, you will need to allow time for the seller to find a place to move to, which could delay your plans. Ask your agent to call the listing agent of any home you are interested in and ask about the seller’s situation and how quickly than accommodate a closing.
3. Get the lender what they need ASAP
You want to head off any unforeseen issues ahead of time with your mortgage so once you have decided which lender you are going to work with, ask them for what documentation they require to approve your loan and send it to them right away.
4. Lock in your rate
At the end of July, new HERA disclosure laws went into effect that mandated waiting periods if the interest rate increased greater than .125% from the application. That could result in your closing being delayed a week if the interest rate changed and if you were cutting it close, you may have inadvertently cost yourself $8,000. Therefore, lock in your rate, program, and terms at the time of contract or post inspection to ensure that you will not be affected.
5. Do all inspections right away
We still schedule and perform all of our home inspections within 3 days of contract acceptance. This was a practice I learned from my time selling real estate in the DC Metro area and it has served me well to this day. By performing your inspections soon after contract, the buyer knows the type of property they are buying and if they wish to proceed. In those days, sellers were reluctant to fix repair items as another buyer was just around the corner. Today, many sellers are just happy to have a buyer and will fix most reasonable repair items with little hassle. However, by doing the inspections quickly, you will know if you’re dealing with a seller who may be unreasonable.
6. Don’t wait until November 30 to close!
November is a short month due to Thanksgiving, which kicks off the holiday mindset for most folks. Once we hit the third week in November, we are thinking more so about all the parties we have to attend than doing work (and this isn’t just a real estate thing). Also, some lenders run out of money to lend towards the end of the month if their warehouse lines of credit are less than demand. As a result, try to close before Thanksgiving week to give yourself a cushion should you need a few extra days.
While there are a few additional steps and limitations placed on buyers seeking to take advantage of the tax credit, I am sure you would agree that the hassle is worth $8,000.
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