5 Homebuying Traps to Watch For

Spring season has begun, and houses are going up for sale across the country. Prices are low, and there are plenty of other good reasons to purchase real estate right now. However, be sure that you avoid making one of these missteps.

From MSN:

Considering your house an investment.

(Yale economist Robert Shiller) found that except for a brief period after World War II and the boom between 2000 and 2006, the inflation-adjusted return on housing has been zero. Zilch. Nada. And Shiller's analysis didn't factor in the considerable costs of maintaining, repairing and modifying a home.

Your house is a place to live with tangible and intangible benefits -- you don't need permission to paint or decorate, and you have a place to call "home sweet home." However, depending on where you live, renting may be a far better financial option.

Buying too much house.

Your lender and your real-estate agent will try to tell you how much you can afford, but they don't know your goals. Ever heard the expression "house rich, cash poor"? Weston advises, "In general, limiting your housing costs -- including mortgage, property taxes and homeowners insurance -- to 25% of your gross income will ensure you have enough money left over to cover other goals, like retirement savings."

Overpaying for a mortgage.

Lenders are mighty picky about whom they extend credit to. Money Talks News explained how to get the best mortgage deal in three steps:

• Increase your credit scores as much as possible.
• Research interest rates and call the lenders to learn about fees.
• Get lenders to compete for your business.

Read more here

IRS Paid Out $111 Million in Erroneous Stimulus Tax Breaks

Due to a lack of controls to prevent ineligible taxpayers from claiming the 8,000 first-time homebuyer tax credit, and credits for vehicles, the IRS paid out $111 million in erroneous refunds. The Treasury Inspector General for Tax Administration released these figures, among others, earlier today.

The Wall Street Journal reports

To put the errors in perspective, IRS processed more than $81 billion in claims for stimulus-related tax benefits in 2010, involving upwards of 90 million returns.

About 126,000 of those returns were flagged by TIGTA as including erroneous claims that weren’t caught by the IRS before they were processed. In some cases, the IRS put compliance controls in place during the tax-filing season to catch the errors.

The number of U.S. taxpayers filing returns electronically continued to increase, reaching 72% of all filers in 2010, the report said.

About 8 million people claimed more generous tax credits for college tuition in the stimulus law this year, for a total of $7.1 billion in benefits. Four million took advantage of a tax break for state sales and excise taxes on new-vehicle purchases, for an average tax deduction of $2,048.

Read more here

Bill Would Extend Home Buyers' Deadline for Tax Credit

Despite reports that there was not enough support for a homebuyers tax credit extension, a bill has been introduced in Senate floor to extend the deadline by a few months. According to the Washington Post, the creators of the legislation hope to allow qualifying taxpayers an additional three months to claim the credit.

Senate Majority Leader Harry M. Reid (D-Nev.) co-authored a proposal that would allow those eligible for the tax credit to close on a home by Sept. 30 to give lenders more time to process a crush of applications.

Reid and his co-sponsors hope to attach the measure to a separate bill moving through the Senate that would extend a variety of tax breaks as well as emergency unemployment benefits. But even if senators succeed in attaching the tax-credit initiative, Democrats are still struggling to assemble the votes needed to pass the overall tax bill.

To qualify for the tax credit -- $8,000 for some first-time buyers and $6,500 for certain current homeowners -- buyers must have signed a contract by April 30 and close on the their transactions by June 30.

The National Association of Realtors said many home buyers will not be able to meet the June 30 closing deadline because of the surge in loan volume and delays related to home appraisals and short sales, transactions in which lenders allow struggling homeowners to sell their homes for less than they owe on them.

Continue reading at Washington Post.com…

Banks Seizing More Foreclosed Homes

Despite the fact that less Americans are behind on their mortgage payments, the number of homes being foreclosed actually increased in May. CNN Money put together a great article discussing some potential reasons for the hike, as well as a set of tips for those who have faced or are likely to face foreclosure in the future.

Bank repossessions hit a record monthly high in May, according to RealtyTrac, the online marketer of foreclosed properties. Lenders took back 93,777 properties, up 1% from the previous month's record and 44% from the same period a year earlier.

Foreclosure filings, meanwhile, fell by 3% from a month earlier and edged up less than 1% from May 2009. One in every 400 homes received a foreclosure notice last month.

"Lenders appear to be ramping up the pace of completing those forestalled foreclosures even while the inflow of delinquencies into the foreclosure process has slowed," said James Saccacio, RealtyTrac's chief executive.

After foreclosure: How long until you can buy again?

Overwhelmed by the mortgage meltdown, lenders have been relatively lax in repossessing homes as they try to cope with the flood of borrower defaults. As the housing market starts to stabilize, however, they are turning their attention to taking back homes.

Continue reading at CNN.com…

Tax credit end not deterring US homebuyers

While the homebuyer’s tax credit certainly gave the real estate market a jump, according to a new survey, the end of the credit may not be an end to increased sales. Consumer confidence in the housing market has increased along with home prices, which as this Reuters article explains, are both a good sign for the future of real estate.

Among consumers shopping for homes, 65 percent said the end of the tax credits will have little or no effect on their interest in purchasing a home, according to the survey, which was conducted by Prudential Real Estate and Relocation Services, part of Prudential Financial (PRU.N).

But 90 percent of the consumers believe that the tax credits have helped both first-time home buyers and the U.S. housing market overall.

Eligible borrowers must sign contracts by April 30 and close on their loans by June 30 to qualify for the tax credits, which include $8,000 for first-time buyers and $6,500 for home owners buying a new residence.

Consumers remain unsure about the direction of the housing market, but are optimistic about real estate values, with 46 percent expecting prices in their area to increase over the next year. Just 12 percent expect prices to decline, the survey found.