Homebuyer Tax Credit Timeline

In an article by Holden Lewis , Bankrate.com included the following timeline illustration showing the benchmarks homebuyers need to consider from now until April 30th. The key is a homebuyer will need to be under contract by April 30th to be eligible for the tax credit. The program expires at the end of April and it is difficult to imagine this program resurfacing anytime soon.

There are several points that need to be emphasized:

1. FHA insurance premiums are set to increase on April 2nd to 2.25%. This is called “MI” which is similar to “PMI” for conventional loans. This “MI” is added to the mortgage amount. This will increase the monthly cost to own a home.

2. Interest rates may trend upward in late March or early April due only to the Federal Reserve actions. Interest rates are predicted to rise this year – refer to my previous post. This will increase the monthly cost to own a home.

3. Anyone with less than a 580 credit score may be required to have a 10% down payment.

4. In a buyer’s market, it is not uncommon for seller to contribute to the buyers closing costs. The FHA changes will reduce seller concessions from 6% to 3%. This will cause buyers to have more cash to close.

5. As the deadline nears, price negotiation strategies change from buyer to the seller.

Currently 1 of 4 mortgage applications are FHA. As April 30th nears, the best time to buy a home “in our lifetime” will come to a close. If you don’t have a fantastic credit score, the prospects of qualifying for a mortgage after April 30th will become much more difficult but not impossible – as long as you bring cash to the table.


Housing has always been the bellwether industry as the economy recovers from a recession. There are multiple adjustable rate mortgages resets periods which will further impact our economic recovery. This is important due to the high unemployment rate and the ability of homeowners to pay their mortgage once the interest rates are reset.

This above graph from Credit Suisse illustrates the magnitude of the mortgage problem later in 2010. Although this will flood the supply and cause downward pressures on pricing, it will most likely occur AFTER April 30th. If a buyer is waiting for prices to decline because of the resets and take advantage of lower prices, they are not watching the correct indicator. Interest rates will be the governing factor and FHA’s rules will make it more difficult for homebuyers to buy.

If you or someone you know are interested in buying a home, you should seriously consider now as the best time to purchase your home!!