Home credit crunch time

Eileen Ambrose

Time is quickly running out if you want to take advantage of the $8,000 first-time homebuyer credit.

The federal credit is available this year through Nov. 30, and you must close on the house by that date to get the benefit. Real estate agents warn that it takes about two months now to close on a house. That gives you until the end of this month or thereabouts to get a house under contract if you want to make sure you meet the deadline.

The credit is part of February's stimulus package. The National Association of Realtors estimates the credit will spur 350,000 sales this year that otherwise wouldn't have occurred. The industry and some economists back legislation in Congress to extend or even expand the credit, but warn buyers not to count on this.

The credit is worth 10 percent of the purchase price of a principal residence, not to exceed $8,000. To qualify as a first-time buyer, you can't have owned a house in the previous three years. The credit phases out as income rises. To get the full credit, modified adjusted gross income must be under $75,000 for singles and less than $150,000 for married joint filers.

The credit is refundable, which means that even if you don't owe any taxes, Uncle Sam will send you the credit as a refund. And the money doesn't have to be repaid, unlike last year's homebuyer credit, unless you sell the house within three years.

The credit pushed many to buy this year, when low interest rates and falling prices weren't quite enough.

If you're undertaking a traditional sale with traditional financing, you could have a house under contract by early October and still make the credit deadline, says Steve Meszaros, president-elect of the Maryland Association of Realtors.

But if you're getting specialty financing, such as a grant for buying a house close to where you work, you should be under contract by mid-September or so to make sure you close on time, says Carol Gamble, an associate broker with Century 21 HT Brown Realty in Howard County.

And with short sales, the timing is even dicier, Gamble says. Short sales occur when a cash-strapped homeowner, with the lender's approval, sells a house for less than the mortgage balance to avoid foreclosure. "They can take a couple of weeks to six months, if they happen at all," Gamble says.

JoAnne Poole, a broker with Poole Realty in Anne Arundel County, says some prospective buyers are starting to hold back.

"People are afraid they won't meet the deadline and are saying 'Maybe I'll just wait and see what happens, see if it's extended,' " she says.

But that's a gamble. "They could be out in the cold," Meszaros says.