First Time Buyer and Current Homeowner Tax Credit Ends April 30th
First Time Buyer and Current Homeowner Tax Credit Ends April 30thSome Common Sense Tips for all Involved.
“Only Robinson Crusoe had everything done by Friday."
The $8,000 First-Time Home Buyer Tax Credit will end April 30th. End means Friday April 30 is the last day to write a contract that qualifies. The transaction must also close by June 30th, which should be plenty of time.
In Texas, the “Effective Date” of the contract is written in by the agent after that last signature or initial has been placed on the contract. That’s the official contract date, and the date from which all time related matters are counted. It reflects the date the transaction becomes a “done deal” or finished.
Say you buyer misses the date by a few days. Can you backdate the contract and thus get him the $8,000.00 credit.
Is that legal?
No. We would not allow our seller to back-date the contract. It would be improper. To do so would be assisting the buyer with tax fraud. The IRS tax rebate rule states that the buyer must enter into a “binding contract before May 1st”. A contract does not become binding until signed and initialed by all parties, therefore an offer submitted After April 30th cannot have an April 30th Effective Date.
What if negotiations are complete by April 30th, the parties agree on terms, we have email confirmation from both parties, but the final signatures are not gathered until May 1st? Then May 1st would be the Effective Date, and the deal would not qualify for a tax rebate for the buyer.
Hopefully no one will fall into the trap of back dating a contract, but I know it’s going to happen to someone somewhere. Human behavior is predictable and people procrastinate.
First-time buyers should make an effort to write your offer before April 27th, to allow plenty of time for negotiation and signatures. Sellers should be prepared to respond quickly to offers at the end of April in order to accommodate your buyer. Good communication will go a long way.
- As a seller, you’d hate to lose a good offer because the buyer changes her mind after not being able to get things wrapped up with you by April 30th. So be ready and available.
- And as a first-time buyer seeking the tax rebate, you’d be dumb to write anything other than a clean offer after April 27th if you hope to be wrapped up by the 30th. Make it easy for your seller to sign off.
- Make sure your agent knows how to write a clean, error-free offer. You’d be surprised how many agents don’t know how to write a clean offer so read it carefully and make sure you understand the implications of every fill-in blank, every checkbox and every date.
- Ask why the blanks are filled in the way they are and whether the seller would object to anything on face value, such as asking seller to pay for a new survey.
- Don’t write in silly provisions, the wrong Title Company, or unreasonable provisions such as a 15 day option period for $50.
- Have your pre-approval letter ready and include it with the offer.
- Again, good communication between the agents up front should make things go quicker.
- Now let’s get out there and close some deals before the deadline. Call some of your clients who are fence sitting today and remind them of the deadline.
What else do I need to know?You have to submit a contract on your home by April 30, 2010.
- You must be a first-time homebuyer. You cannot have property in your name anywhere in the U.S. for the past three years to be considered by federal standards as a "first-time homebuyer."
- Income limits to apply to this credit. The full credit is available to individuals with an annual income of less than $125,000 and couples with an annual income of less than $225,000. A partial credit may be available to individuals with an annual income between $125,000 and $145,000, and couples with an annual income of $225,000 to $245,000.
- You must submit a contract on a house between January 1, 2009 and April 30, 2010. (Note: Settlement must occur before July 1, 2010.)
- This credit does not have to be repaid if you stay in your home for 3 years or more. If your home is sold within three years of purchase, the entire credit is recaptured.
For more information:
This is new legislation for this year. We recommend you contact your lender, your realtor, or your tax professional for more information on making use of this tax credit.
Federal Homebuyer Tax Credit: Current Homeowners
American Recovery and Reinvestment Act of 2009 & Worker, Homeownership and Business Assistance Act of 2009
This credit is part of the federal stimulus bill, signed by President Barack Obama on February 17, 2009 and extended on November 7, 2009. The Federal Homebuyer Tax Credit for Current Homeowners is a credit of up to $6,500 for qualified homeowners purchasing a new home.
There is a deadline! You must have a written binding contract to purchase by April 30, 2010. You will then have until July 1, 2010 to settle on your house.
Current Homeowner Credit Details:
- The tax credit is calculated as $6,500 or 10% of the home purchase price, whichever is less. This means a homebuyer can receive a $6,500 tax credit if the home sales price is $65,000 or more. If the home costs less than $65,000, they can receive a credit of 10% of the purchase price. (Ex. Buying a $50,000 home could earn you a $5,000 credit.)
- The tax credit is available to current homeowners who have used the home they are selling as their principal residence consecutively for 5 of the previous 8 years.
- The credit is available on home purchases between November 7, 2009 and April 30, 2010. For the purposes of this tax credit, a signed contract must be in effect by April 30, 2010; settlement must occur before July 1, 2010.
- The home purchase price must be less than $800,000.
- The home purchase must be for a primary residence only.
- The tax credit is not a loan and does not require repayment. However, if the home is sold within 3 years, the entire tax credit must be re-paid.
- There are income restrictions on this credit. You do not qualify for the full tax credit if a) you are single and make $125,000 or more, or b) are married and make $225,000 or more. Partial credit may be awarded to singles making between $125,000 and $145,000 and couples making between $225,000 and $245,000. See the below charts for these estimated partial credits.
Individuals with income between $125,000 and $145,000
- Income Estimated - Tax Credit
- $130,000 - $4875
- $135,000 - $3250
- $140,000 - $1625
Couples with income between $225,000 and $245,000
- Income Estimated - Tax Credit
- $230,000 - $4875
- $235,000 - $3250
- $240,000 - $1625
It will be interesting to see how the real estate market settles once the artificial buying motivation expires. Interest rates have been near all-time lows and may continue to be so in the near term before they presumably start to rise again either late this year or early next year. For a chart explaining the tax credits produced by the National Association of realtors click here.
This information is particularly applicable to permanent resident / value priced projects on the Texas coast like the The Galveston Dawn Beach Condominiums
- Marketed by Cat Viggiano of The House Company, Galveston’s Premier Realtors and representatives of The Dawn, Luxury Condominiums.
Located on the Galveston Island Seawall Boulevard along the water, all condominiums either have a balcony or open patio with amazing views of the beautiful ocean.
The Condominiums at Dawn Galveston Texas are close to many of the high-end and premier destination beaches and resorts that Galveston is so well known for including the Pointe West Galveston, Intracoastal Canal, Laguna San Luis and Crystal Beach Texas just to name a few. With a resort setting, the Galveston Dawn Condominiums and luxury waterfront properties provide an amazing array of onsite amenities that will include a secure gated entrance and covered parking.
The Dawn Galveston beachfront and waterfront condos in Texas also have one car garages available for additional costs in addition to two resort swimming pools and a large sundeck. With professional landscaping throughout, residents at the Galveston Condos Dawn real estate properties will think that they were living in a resort hotel every day.
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Comment By Alan Lake
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Comment By Charon Sutton, CNN
In November the Obama administration decided to extend the first time home buyer tax credit and expand it as well. At the present time there is a tax credit of $8000 for first time home buyers and a tax credit of $6500 for move up home buyers. If you have lived in your permanent residence for more than five years and you are looking to move up then you are likely going to qualify for the $6500 tax credit.
At the present time it does not look as if there will be a first time home buyer tax credit extension but anything could happen over the next few weeks. It will be mainstream news if anything comes up.
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Comment By NAR
NEW YORK (CNNMoney.com) -- New home sales improved in March at the fastest single-month rate in 47 years, according to a government report released Friday, as buyers snatched up properties ahead of the tax credit that's set to expire.
New-home sales rose 26.9% to a seasonally adjusted annual rate of 411,000 last month, compared to an upwardly revised annual rate of 324,000 in February, the Census Bureau said. The gain snapped a four-month streak of declines.
A consensus of economists surveyed by Briefing.com expected March sales to rise to an annual rate of 330,000.
The March sales were the strongest since last July, and the percentage gain was the biggest on a month-over-month basis since a 31% gain in March 1963.
New-home sales spiked in every region of the United States. The South saw the biggest jump in new home sales, up 43.5%, while the Northeast region saw sales climb 35.7%. The West and Midwest regions both saw single-digit percentage growth, with the West up 6% and the Midwest up 4%.
0:00 /2:25Newbie homebuyers go small
The Census Bureau data followed a report from the National Association of Realtors on Thursday that showed existing home sales soared nearly 7% in March, as new homebuyers raced to buy up properties before a tax credit expires on April 30.
"It's obvious that homebuyers are rushing in to take advantage of the tax credit that's set to expire," said Robert Dye, senior economist for PNC Financial Services.
In November, the government extended and expanded an $8,000 tax credit, which also allows some repeat buyers to qualify for a $6,500 credit. Buyers have until April 30 to qualify.
Fewer homes to buy
Dye expects to see continued strength in April's data before "tailing off" through the summer as the group of buyers who rushed in are "all spent out."
The Census Bureau estimated that 228,000 new homes hit the market in March. At the current sales rate, it would take 6.7 months to sell through that inventory, down sharply from an estimated 9.2 months of inventory in February.
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Comment By Charles Feldman
Buyers Rush to Meet Tax Credit Deadline
Nearly half the homes sold in March – 48.2 percent – were purchased by first-time buyers, according to a survey of more than 1,500 real estate practitioners by Campbell/Inside Mortgage Finance.
"Many observers had felt that the pool of first time home buyers had been depleted last fall," Thomas Popik, research director for Campbell Surveys, said in a statement. "Instead, the normal spring-summer buying season is combining with the tax credit to produce blow-out results for first-time home buyers."
Source: Reuters news (04/19/2010)
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Comment By CNN Money
It certainly seems as if the tax incentive, along with still fairly low rates for a 30-year fixed-rate mortgage (5.07%, according to Freddie Mac), have worked their combined magic.
According to figures released Thursday by NAR, "Buyers responding to the homebuyer tax credit and favorable affordability conditions boosted existing-home sales in March, marking the beginning of an expected spring surge."
Sales of these previously occupied homes went up 6.8% last month, higher than had been anticipated by many real estate experts. In fact, for a period of time, it had seemed as if the tax incentives had lost some of their luster as sales dropped. But nothing like a good deadline, apparently, to get some people moving...literally.
The increases were geographically broad-based,too: existing-home sales up 6.0% for March in the Northeast; 7.2% in the Midwest; 7.1% in the South; and 6.6% in the West, according to the NAR figures.
But the NAR's assessment that we are witnessing the start of a "spring surge" may turn out to be overly optimistic.
Some real estate experts think that once the tax incentive is gone, and mortgage rates continue to rise (some have projected rates as high as 6% by the end of 2010), we will see a sharp drop-off in home sales, unless we experience a dramatic turnaround in the unemployment and underemployment rates (those who have part-time jobs but really want full-time ones).
"This is a temporary surge that won't be sustained," Paul Dales, US economist with Capital Economics, tells the AP. "It won't be very pretty."
See full article from WalletPop: http://srph.it/cNPauy
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Comment By Biggio, J
5 Costly Mistakes First-Time Buyers Make
Buying a first home can be a daunting experience. Here are five common and costly mistakes that novice home buyers make:
1. Ignoring the costs of having a low credit score. Lower-score borrowers pay thousands of dollars in increased interest rates over the life of the loan.
2. Muddying the waters by shopping for other things before closing. Lenders continue to check credit scores right up until the time of closing. Too much shopping could cause the lender to take back the loan.
3. Scrimping on an inspection. Being surprised by the need for expensive repairs can be financially devastating.
4. Buying without contingencies. Buyers should give themselves an out if the inspection turns up problems or the bank raises the interest rates.
5. No money for insurance. Insurance can be surprisingly pricey. Buyers who don’t budget for it can face a nasty surprise.
Source: CNNMoney.com, Les Christie (04/19/2010)
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Comment By Bloomberg
As the federal tax credits come to an end, home buyers everywhere are hurrying to get in under the wire.
But in California the rush has turned into something of a stampede as some would-be buyers try to qualify for both the federal credit and a $10,000 state credit that kicks in Saturday.
As one home shopper tells the Los Angeles Times, "I am looking at properties almost constantly, and it is just kind of a feeding frenzy right now.”
"The stimulus has worked," says Rick Hoffman, president of Coldwell Banker Residential Brokerage in San Diego and Temecula Valley. "Buyers are confident that we have seen the bottom of the real estate market and that we are on the way back up."
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Comment By Mortgage
By Courtney Schlisserman
May 1 (Bloomberg) -- The expiration of a government tax credit yesterday may slow, rather than derail, a budding rebound in U.S. home sales being fueled by the drop property values, according to real-estate executives.
“The meat and potatoes about the housing recovery and the reason to get out and buy a house now is affordability,” Jeffrey Detwiler, president and chief operating officer of Long & Foster Cos., a private real-estate company based in Chantilly, Virginia, said in an interview. “The tax credit right now is simply the gravy on top of that.”
The National Association of Realtors projects sales of existing homes will rise 6.6 percent this year to 5.49 million as a drop in prices, near record-low mortgage rates and growing incomes sustain demand beyond the recent pickup spurred by a government incentive worth as much as $8,000. Buyers need to have signed a contract by yesterday and close on the deal by the end of June to be eligible for the credit.
The rush to qualify for the credit helped boost home resales, which are tabulated at closing, by 6.8 percent in March and will support these figures through June. Purchases of new houses, tabulated when a contract is signed, surged 27 percent two months ago, the biggest jump since 1963, according to data from the Commerce Department.
The government incentive, originally designed to expire last November, “has done its job,” and the economy has improved enough for the credit to lapse, NAR Chief Economist Lawrence Yun said April 22.
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Comment By Reuters
Leading mortgage lender and broker Total Mortgage announced today that even though the first-time home buyer tax credit and repeat home buyer tax credit have expired, there are still a number of favorable market dynamics present in the housing market that continue to offer a once-in-a-lifetime opportunity for potential home buyers.
"Despite the end of the tax credit, the nationwide housing crisis is opening the door for home buyers throughout the U.S. to purchase an affordable home," commented John Walsh, president of Total Mortgage. "This generational home buying opportunity is being created by declining housing prices, record inventories and a very favorable mortgage rate environment where a qualified borrower can lock-in a very attractive 30-year fixed interest rate currently around 5 percent."
"This confluence of low mortgage rates and home prices comes along once in a generation," continued Mr. Walsh. "Market conditions and Federal Reserve actions will likely cause mortgage rates to move higher within the next eight to 12 months. Therefore, qualified home buyers who are looking to become part of their local community for the long-term would do well to purchase a home while current mortgage rates are close to historical lows."
Mr. Walsh believes that even though housing prices are very close to the bottom in most markets, there is a chance that downward pressure on home values can continue due to an increase in the housing supply. However, homes are undervalued in many markets, and according to the most recent Housing Affordability Index from the National Association of Realtors home affordability is close to historic levels.
Total Mortgage experienced an increase of more than 50 percent in purchase loans in April 2010, compared to March 2010, which was driven by borrowers buying homes before the expiring tax credits on April 30. Previously, refinance mortgage loans have been far more prevalent than purchase loans over the last three years.
"The tax credits accelerated the home buying schedules of many borrowers over the last few months," added Mr. Walsh. "However, even though these attractive tax incentives are behind us, we believe that extremely low mortgage rates, combined with high inventories and affordable prices, make right now an excellent time to purchase a home."
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Comment By TAR quoting A&M's Jim Gaines
Economists and realtors are cautiously optimistic that the improving economy, particularly the return to job growth, will support sales beyond the credit.
"Later in the second half of the year, and into 2011, home sales will likely become self-sustaining if the economy can add jobs at a respectable pace, and from a return of buyer demand as they see home values stabilizing," said Lawrence Yun, chief economist with the NAR.
The economy has grown for three straight quarters, driven mainly by the manufacturing sector as businesses rebuild inventories. Excluding transportation orders, factory orders surged 3.1 percent in March, the biggest gain in almost five years. Excluding defense, factory orders were up 1.3 percent.
Non-defense capital goods orders excluding aircraft, viewed as an indicator of business confidence, jumped 4.5 percent, the steepest increase since December 2007.
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Comment By Earl Lee
The Texas housing market may be on the road to recovery. According to the latest Texas Quarterly Housing Report released Monday by the Texas Association of Realtors, both sales and prices for homes in the Lone Star State increased on a year-over-year basis in the first quarter of this year.
Sales volume for existing single-family homes was 42,682 for the first three months of 2010, up 4 percent from the same period in 2009. In addition, the median home price jumped 3.13 percent from $137,200 in the first quarter of last year to $141,500 in the first quarter of this year.
“First quarter 2010 figures were up compared to 2009, despite sales being down in January and February,” said Jim Gaines, Ph.D., an economist with the Real Estate Center at Texas A&M University, which compiled and analyzed the data for the quarterly report.
Gaines noted that the positive year-over-year gain was due solely to significant March sales being strong enough to bring up the whole quarter. “With March’s increased figures we are cautiously optimistic that we’ll continue to see positive results in the second quarter,” he said.
According to Gaines, several local multiple listing services reported a larger percentage of sales coming from foreclosed properties. However, he added that Texas has maintained a near-balanced market of 6.8 months of inventory, statistically unchanged from 2009. Additionally, he said the market is showing strength by maintaining property values, indicating that the market is absorbing foreclosed properties and not experiencing an excess of supply.
“We are seeing gradual improvement in the Texas housing market and managing our foreclosure rates well compared to national rates,” Gaines said. “Other states, such as California and Florida, are seeing significant foreclosure increases due to high unemployment rates in combination with exotic mortgage-financing options such as option ARMs. Texas is not experiencing the same levels of pressure in these areas.”
Bill Jones, chairman of the Texas Association of Realtors, said Texas’ home-equity lending laws have provided homeowners across the state with some of the strongest consumer protections in the nation, which is why Texas has been able to avoid drastic foreclosure increases compared to other states. He explained that many of the states facing the highest foreclosure rates and largest drops in real estate values are the same states that allow homeowners to borrow 100 percent or more of their home value.
Looking forward, Gaines said the next two quarters will determine the real strength of the market for 2010. He thinks the second quarter should continue to show positive improvement due to increased demand and government incentives, namely the federal homebuyer tax credit, which expired April 30. And he said the third quarter, typically the best quarter of the year, “will show us how well the market can sustain itself.”
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Comment By Yousef
Home prices? They tallied their eighth-consecutive monthly rise as measured by the Standard & Poor’s/Case-Shiller 20-city home price index in late March.
Since all real estate is local, I surveyed several Prudential Real Estate Network affiliates around the country for their post-tax-credit perspectives.
Dan Forsman, president and CEO of Prudential Georgia Realty, Roswell, Georgia, said he’s “cautiously optimistic” that the sales momentum his company generated during the first quarter will continue.
Broker Jay Christiana, of Prudential Manor Homes, Realtors in Albany, New York, said the first-time home buyer tax credit helped fuel sales gains at his company during 2009’s second and third quarters.
Transactions continued climbing through the first quarter, Christiana added, with particular strength in second homes—a market segment impacted little by tax-credit expirations.
Kevin Kirkpatrick, president of Prudential Indiana Realty Group in Indianapolis, reported that first-quarter home sales at his company rose 13% vs. the same period a year ago, spurred in part by tax-credit appeal. Though Kirkpatrick expressed concern that tax credits are no longer available to his clients, market fundamentals in greater Indianapolis point to continued recovery, he said.
Broker Mark Woodroof, Prudential Gary Greene Realtors, said sales volume at his Houston-based company grew appreciably last fall in advance of the initial first-time home buyer tax credit expiration. Volume eased during the November-January period, Woodruff added. “I think we’ll see some of the same this time around,” he said. “Our March and April are better than expected, while May, June and July might be slightly less than we expected with softening in our entry-level to move-up markets.”
Woodroof, similar to the other Prudential Real Estate brokers I surveyed, anticipates growth in 2010.
It should be a better year for our industry, assuming unemployment improves with a firming economy, corporate investors step in to replace the Federal Reserve as buyers of mortgage-backed securities, and troubled housing assets and mortgage-loan resets don’t swamp the recovering market and consumers.
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Comment By Bob
NEW YORK (CNNMoney.com) -- New home sales soared in April as homebuyers rushed to claim the tax credit that expired at the end of the month.
New home sales climbed 14.8% to a seasonally adjusted rate of 504,000 last month, up from an upwardly revised 439,000 in March, the Census Bureau reported on Wednesday. Sales year-over-year were up 47.8%.
A consensus of economists surveyed by Briefing.com had expected April sales to rise to an annual rate of 425,000.
April was the second straight month of increases. In March new home sales snapped a four-month losing streak and surged at the fastest single-month rate in 47 years as homebuyers snatched up properties ahead of the looming deadline for the tax credit.
The homebuyer tax credit, which expired April 30, boosted sales since buyers had to sign contracts by the end of last month. First-time homebuyers qualified for a tax credit up to $8,000, while repeat buyers could get as much as a $6,500 break.
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Senate combines jobless benefits, homebuyer credit
By STEPHEN OHLEMACHER (AP) – 1 hour ago
WASHINGTON — Senate Democrats are trying to jump-start their stalled election-year jobs agenda while saving unemployment benefits for hundreds of thousands of laid-off workers.
The latest plan combines in one bill the unemployment benefits with an extension of a popular tax credit for people who buy new homes.
Democrats are still a vote short of the 60 needed to advance the bill, Senate Majority Leader Harry Reid said Wednesday. Reid said he had commitments from two Republican senators to support the bill, but with the death of Sen. Robert Byrd, D-W.Va., Democrats need another vote.
Under current law, homebuyers who signed purchase agreements by April 30 must close on their new homes by Wednesday to qualify for credits of up to $8,000. The bill would give those buyers until Sept. 30 to complete the purchases and qualify for the credit.
Democrats hope to pick up Republican support for the bill by combining the two provisions. They have been trying for weeks to pass an extension of unemployment benefits as part of a larger tax and spending package, but the larger bill died in the Senate last week.
Without an extension, unemployment payments would continue to be phased out for more than 200,000 people a week. More than 1 million people have already lost benefits, said Labor Secretary Hilda Solis.
Many Democrats see the benefits as insurance against the economy sliding back into recession. Many Republicans, however, worry that adding nearly $34 billion to the budget deficit will only contribute to the nation's economic problems.
"Both sides have offered ways to address the programs in this bill that we agree should be extended," said Senate Minority Leader Mitch McConnell of Kentucky. "The only difference is that Democrats are demanding that we add the cost to an already unsustainable $13 trillion national debt."
Republicans want to pay for the unemployment benefits with unspent money from last year's massive economic recovery package.
Reid filed a motion Tuesday to end debate on the bill and force a vote Thursday evening — if Democrats can round up the necessary 60 votes to end a Republican filibuster. The two senators from Maine, Republicans Olympia Snowe and Susan Collins, have both said they would join Democrats in supporting an extension of unemployment benefits.
"We have a basic responsibility to help our constituents respond to emergencies," said Reid, D-Nev. "We have a fundamental obligation not to deny them the help they need when they need it the most."
The House, meanwhile, overwhelmingly passed a bill Tuesday to extend the deadline for the homebuyer tax credit. House Democrats plan to vote on a bill extending unemployment benefits Wednesday evening.
House Republicans blocked the unemployment bill Tuesday, denying Democrats the two-thirds majority they needed to pass the bill under a special procedure that limited debate and allowed no amendments. Afterward, the House Rules Committee passed a rule allowing a vote on the unemployment benefits anytime this week with only a simple majority needed for passage.
The measure, which is the same as the one in the Senate bill, would provide up to 99 weekly unemployment checks averaging $335 to people whose 26 weeks of state-paid benefits have run out. The benefits would be available through the end of November, at a cost of $33.9 billion. There are no offsets in the bill, so the cost would add to the budget deficit.
It's a tough vote for some lawmakers who want to help constituents hit hard by the recession but are wary of being labeled big spenders. The economy is starting to pick up, but unemployment is still high as the nation continues to struggle from the loss of more than 8 million jobs. At the same time, angst over deficit spending is growing as midterm congressional elections loom in November.
The homebuyer tax credit is a much easier sell. Nearly 3 million taxpayers claimed the tax credit through May 22 — totaling more than $21 billion — according to the Treasury Department.
The National Association of Realtors estimates that 180,000 homebuyers who already signed purchase agreements are likely to miss the Wednesday deadline because mortgage lenders and appraisers were swamped with borrowers trying to get approved by the end of the month.
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