Senate Votes To Extends First Time Home Buyers Tax Credit

The Senate approved an extension of the first time home buyers tax credit of $8000 and also added a provision to allow existing homeowners to get $6500 from the rest of the taxpayers if they buy a home. The credit can be claimed by anyone that buys a home for under $800,000.

With the FHA underwriting loans with only 3% down this means you can buy a $250,000 home with no money down. This will have the affect of prolonging the housing decline over a longer period of time. A large percentage of these homes will go in to foreclosure because the buyers will have no equity.

Many homeowners who are already in negative equity situations are increasingly turning to shorts sales. In a short sale transaction the debtor is relieved of the mortgage and the bank accepts a reduced principal balance. This avoids the cost of foreclosure and allows the seller to walk away without the severe hit to his credit that a foreclosure would.

Recently the Obama administration stepped up its efforts to get lenders to speed up the process of allowing short sales. In the past, transactions would typically take six to nine months to complete.