By now, you’re probably aware of (and maybe tired of hearing about) the $8,000 tax credit for first-time homebuyers. The tax credit was basically created to help boost new home purchasing. Low mortgage rates are encouraging shoppers to get out there and buy, while at the same time, helping existing homeowners lower their mortgage payments. But even with these perks, the housing market is still in the early stages of recovery.
Everyone likes free money and the $8,000 tax credit is a nice touch, but it doesn’t seem to be making a strong enough impact on the housing market. Part of the issue is that first-time homebuyers might have trouble coming up with a down-payment. That $8,000 would be better used up-front, for closing costs, legal fees, or down-payment assistance.
The state of Missouri has created such a program. Under the system, first-time homebuyers will receive $8,000 as a loan to help with initial costs, and are expected to pay the money back down the road, interest free. This program has received both praise and criticism.
The primary drawback to the program is enforcing repayment of the loan. What will happen if the first-time homebuyer is unable or unwilling to pay the money back? One requirement of the $8,000 tax credit is that the recipient must remain in the house for 3 years. What happens if the home is foreclosed in that 3 years?
Some states already provide assistance (not in the stimulus package) with down-payments, closing costs, or legal fees. Some critics suggest that states and local agencies already provide enough assistant and that this proposal is moot. Another drawback is that the tax credit is only offered through December 1st of this year, which would leave only a few months for states or agencies to set up similar programs to that of Missouri’s.
All in all, it’s not a bad idea. In this blogger’s opinion, the $8,000 tax credit could use a tweak; maybe give first-time homebuyers the option to use the $8,000 up-front (with government enforcing re-payment), or perhaps even extend the tax credit well into 2010 as the housing market slowly recovers.
Loading ...
RSS feed for comments on this post. TrackBack URL
Leave a comment