top of page


As you may recall, there was a movement to extend the American Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $8000.00 for qualified first-time home buyers purchasing a principal residence. The expiration of this first time home buyers tax credit is on November 30, 2009. Many purchasers to be are pushing to close before this date to avail themselves to the credit.

Law makers are working to extend the first time home buyers tax credit to stop and reverse sinking home prices in an effort to prop up the sagging economy.

The plan would extend the homebuyers credit past the November 30th expiration date to home purchases under contract by April 30, 2009. Borrowers will be allowed another 60 days to close the sale.

The credit would be available to individuals earning up to $125,000, or $250,000 for couples, up from $75,000 for individuals and $150,000 for couples under the current law.

There is a proposed expansion of the tax credit also. Other individuals, who are not first time home buyer could get up to $6,500, starting December 1st, if they’ve lived in their current home for at least five years. There are reports that the proposed legislation would require the purchase of a home to be a primary residence but no requirement to sell an existing home. This is an acknowledgment by lawmakers of one of the realities of the economy. Proposed home buyers may not be so quick to sell their current property in preparation of purchasing their new home. Not requiring the sale of an existing primary home while being permitted to utilize the tax credit and purchase a replacement primary home would potentially subsidize paying the carrying costs of the yet to be sold house while it is on the market.

One of my primary concerns about not requiring the sale of an existing primary home while utilizing a tax credit is unwise financial decisions that may lead to additional defaults and foreclosures. An individual in attempting to utilize a tax credit while owning an existing home may attempt to retain the original home as a rental investment property hoping that the net operating income (net amount of income generated by rent after deducting the homes expenses) is sufficient to pay the existing mortgage. If the bill is passed not requiring the sale of the original primary home (even if the deadline is an extended period of time) it could lead to a great number of wannabe investors going into default on existing loans when the rental of these home are delayed or do not materialize. The alternative argument to permit the retention and rental of an existing primary residence while purchasing another primary residence is that only borrowers with incomes sufficient to pay two mortgages simultaneously will be able to obtain a mortgage while still living or renting their existing primary residence because a lender may very well determine that the borrower-to-be has too much debt in relation to their income to obtain a mortgage in order to finance the purchase of another home without satisfying the prior mortgage.

There is significant support for the bill by both democrats and republicans and is endorsed by the Obama Administration.

See the link to an article on

There are still questions on where the additional funds will come from and debate on whether to expand the credit to existing homeowners in an effort to boost home sales.

Due to a Republican demand that a vote be allowed on an amendment to end the Treasury Department’s Troubled Asset Relief Program at the end of this year, the proposal to extend the tax credit wont be voted on by the Senate until next week.

The U.S. Senate won’t vote until next week at the earliest on proposals to extend both an $8,000 tax credit for first-time homebuyers and unemployment benefits for the nation’s jobless. The administration endorses an extension.

Senate action was delayed by a Republican demand that a vote be allowed on an amendment to end the Treasury Department’s Troubled Asset Relief Program at the end of this year. See article:

Visit: for more information

2 views0 comments


bottom of page