U.S. Senate leaders moved closer to an agreement replacing an expiring $8,000 tax credit for first- time homebuyers with a smaller one that would expand access to so-called step-up purchasers. Although it is still unclear as to what will be the final version of the credit and whether or not it will extend beyond first time homebuyers. Here are some of the possibilities:
The deal as it stands now would allow first time homebuyers the same credit as before (up to 10% of the home’s purchase price but not exceeding $8,000) and allow current homeowners who have owned for at least 5 years a reduced credit capped at $6500. The credit would be available on home purchases that are under contract by April 30, and borrowers would have 60 days more to close the sale. The existing credit is due to end Nov. 30.
The new agreement, Lawmakers want to keep home sales from slipping as the economy struggles to recover from the worst drop in home prices since the Great Depression.
The demand for new homes and condominiums may increase by “more than two times because you’re allowing step-up buyers into the equation,” said Andrew Parmentier, a managing partner at Height Analytics, a research firm in Washington. “ You just opened up a whole new pool of people who can buy into those empty homes and empty condos that were built out.”
The income eligibility for first-time homebuyers would remain the same at $75,000 for individuals and $150,000 for couples. The income criteria for step-up buyers would be $125,000 for individuals and $250,000 for couples.
The credit would be limited to homes costing $800,000 or less. There is currently no price cap on home purchases.
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