The Worker, Homeownership, and Business Assistance Act of 2009 has extended the tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence. The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.

For sales occurring after November 6, 2009, the Act establishes income limits of $125,000 for single taxpayers and $225,000 for married couples filing joint returns.

The income limits for sales occurring on or after January 1, 2009 and on or before November 6, 2009, are $75,000 for single taxpayers and $150,000 for married taxpayers filing joint returns.

Existing Homeowners

The Worker, Homeownership, and Business Assistance Act of 2009 has established a tax credit of up to $6,500 for qualified move-up/repeat home buyers (existing home owners) purchasing a principal residence after November 6, 2009 and on or before April 30, 2010 (or purchased by June 30, 2010 with a binding sales contract signed by April 30, 2010).

For more information, visit the National Association of Home Builder’s website.

Upon first glance, one would think that the answer lies in whether you could get a better rate of return on the money that you’d be putting into escrow each month if you kept it and invested it versus the waiver fee.  But there are several factors that come into play when considering which way to go.   For starters, it is convenient for most folks because it is budgeted for and handled by the lender at no extra cost.   This way you’re not hit with a lump sum bill that you hadn’t budgeted for.  If you do have a tight budget or you’re not real disciplined, this is probably the way you should go.

On the flip side, most lenders require three months of reserves to start out an escrow account.  This is a cushion should the taxes or insurance premium go up (as they generally do) the following year.   And if there aren’t enough funds, they hit you up with a shortage which is due either as a lump sum or they will conveniently add it to your monthly payment, which can crimp your budget. 

The biggest problem is that escrow accounts can be difficult for the average person to reconcile, although the lender sends an “Escrow Analysis Statement” at the end of the year.  But too many people rely on the lender to be correct, and millions of dollars go unaccounted for each year by way of escrow accounts.  My advice is to pony up the fee and waive the escrow account.  However, if you’re more comfortable carrying an escrow account, be sure that you can account for every penny flowing in and out of the escrow account.  If you don’t understand the analysis statement, be sure to contact the lender and go over it in detail until you do.

Another great reason to get quaified as early in the process as possible is to insure the fastest closing possible. If there are multiple offers going in on a home, you may be at a disadvantage if you are not able to secure financing quickly. Don’t wait until the last minute!

We have home purchase specialists standing by that can give you FREE home purchase finance advice. Feel free to request a FREE Rate Quote or to Contact Us directly.