MORTGAGE RATES » Home Mortgage Loan News

Those who have yet to take advantage of the hefty $8,000 First-Time Homebuyer Credit may have more time than they think to get in on the action. It seems that Congress is hard at work trying to extend the credit past its current deadline of Nov. 30, 2009. If the extension is passed, the credit will be available for a "limited" period of time, according to Treasury Secretary Tim Geithner and Housing Secretary Shaun Donovan.

Specifics of the Extension

Right now, the details are still sketchy, but what has been released to the public about the extension is the following:

• Possible Spring deadline: The credit extension, if passed, will likely stretch out to Spring. With the new proposal, contracts to buy a home would have to be signed by April 30, 2010 and deals would have to be closed by June 30 to qualify.
• Current homeowners included: The credit may extend to existing homeowners who are stepping up to a different home (must have lived in current home for five years).
• New dollar amounts proposed: In addition to the current $8,000 credit for first-time homebuyers, $6,500 may be available for homeowners looking to trade up to a bigger residence (homebuyers must have AGI of less than $125,000 ($225,000 for married couples filing jointly).

While the credit has yet to be approved, it's passage looks promising. If you're thinking of taking advantage of the credit this time around, it's doesn't hurt to start your search for affordable mortgage rates now.

Will you take advantage of the homebuyer tax credit if the extension passes?

Seasonally-adjusted mortgage applications dropped 12.3 percent in the week ending Oct. 23, 2009 from the week prior while refinancing applications dropped 16.2 percent, according to the Mortgage Bankers Association (MBA). These numbers have dropped for several weeks - right alongside mortgage interest rates (30-year fixed mortgages are roughly 5.03 percent). This makes you wonder why the demand for homes is dropping if the interest rates are so attractive.

People Are Afraid

It's pretty evident that people are feeling leery about spending their money, no matter how low mortgage rates fall. This is mainly because companies are still laying people off and others are imposing a hiring freeze. In other words, if you get laid off, you might stay that way for a while. And with the status of unemployment benefit extensions still being debated by the Senate, not many people feel excited about taking on a new mortgage with unstable means.

The Double-Edged Sword

It seems that Americans are living with our backs against one big double-edged sword. On one end, we have low home prices and a sizable tax credit begging for some attention. On the other hand, we have millions of individuals with no jobs and homes in foreclosure. The bad economy has driven people off of their jobs and out of their homes. As a result, home prices have dropped. But who wants to buy homes in such distressed times? Even more, who feels comfortable profiting from a distressed home with former distressed homeowners?

This may mean that until the economy truly starts to turn around (not just in numbers as Bernanke stated about the recession) people will not feel right about taking on a new mortgage. The only question we need to concern ourselves with, however, is will home prices and mortgage rates increase dramatically as the economy improves?

Are you turned on or turned off by the thought of purchasing a new home?

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