Homebuyer Credit Updated - I Don't Get It!

By Heather, CPA (Balance with Purpose)

What I mean is, I understand it, but I DON’T GET IT! So, I’ve got my own proposed legislation.

Congress decided to extend the parameters of the First-time Homebuyers Tax Credit to allow more people to take advantage of the credit. 1) Homeowners who have lived in the same house for five of the last eight years may be eligible for up to a $6,500 tax credit by purchasing a new home. 2) The new law raised the income threshold, allowing more Americans to take advantage of the benefit. 3) The availability of the credit, set to expire at the end of 2009, has been extended to at least April 30, 2010.

Great, right? Not-so-fast!

Let me ask a question. Suppose you have been trying to sell your house for the past year and a half. Let’s also suppose you’ve lowered the asking price at least twice during that period. But you need to sell it. You know you will take an offer that is lower than what you are asking because you’ve become desperate to sell. Then, Congress tells you that the Federal government is going to hand your new buyer $6,500 for buying your home. Are you going to accept a price much below asking now?

Now, let’s suppose you have lived in your home for the past six years. You’re paying your mortgage payments on time, you’ve refinanced at least once to take advantage of the fabulously low interest rates and you’re locked in for thirty years at an amazing rate. Are you really going to jump ship for $6,500? Let’s face it $6,500 is not REALLY that much money when you’re selling one home and buying another.

There will be people who can take advantage of this credit, but the only groups of people I see benefiting from this new extended law are the banks and the real estate professionals. This is just another tactic for bailing out the financial markets – not for helping you and me.

In the first scenario above, the purchasers are going to end up financing the $6,500 over the 30-year mortgage because the sellers are going to raise the asking price (or not be willing to accept a lower price).

In the second scenario, the cost of selling one home and buying another is not worth the credit unless you were already planning the move.

Here’s my proposal. Why doesn’t Congress truly help the Americans who have been responsible homeowners for the past five out of eight years? Reward the Americans who choose to pay off debt each month rather than pay minimum payments? Reward those who have not been using their mortgages as ATMs. I propose that Congress gives a credit to Americans who have paid their mortgages, their credit card bills, their auto loans, and all of their other bills and payments on time. I propose that Congress reward the citizens of this fabulous country for their fiscal responsibility.

Heather Sunseri is a Christian, wife and mother of two young children. She has worked as a CPA for the past 15 years for thoroughbred horse farms and in public accounting in Central Kentucky. She spends her free time as an inspirational writer and enjoys the little things in life from long bike rides in the country to homemade pizza and family game night.