Buyers in the Denver Colorado real estate market once again feel the shifting of the economic plates. The good news is that first-time buyers of Denver CO homes may use their tax credits towards down payments. However, putting a little fire under potential investors and buyers in the national market, interest rates are edging up. Now is definitely an auspicious moment to take advantage of still-low interest rates and the great selection of Denver homes and real estate, plus the bargaining power of motivated sellers.
First-time buyers may apply the tax credit outlined in the Recovery Act of 2009 if they close on their homes by December 1, 2009. The decision by HUD Secretary Shaun Donovan allowing homebuyers in Colorado and the USA to use the $8,000 tax credit in conjunction with FHA financing will primarily boost the sale of starter homes. It will also create a domino effect as growing families upgrade. The $8,000 tax credit may assist first-time buyers as well as buyers who have not owned real estate in three years with their down payments and closing costs.
The FHA mortgage program requires borrowers to come to closing with a 3.5-percent down payment. Having an $8,000 to fulfill this obligation allows buyers who are otherwise strapped without gift money or family and friends to borrow from to enter the housing market during 2009.
Here is how it works. Certain approved organizations, “eligible government agency and instrumentalities of government,” may provide bridge loans using the $8,000 tax credit for repayment. FHA-approved lenders and non-profit organizations along with all government agencies up to 10 percent of the purchase price. To facilitate home sales, these entities along with state housing finance agencies may also provide longer-term loans secured by second liens.
Next, let us look at the interest rates increasing about .500 percent last week. They continue to be in the low 5-percent range for conventional, conforming loans. The government is apparently selling enormous supplies of treasuries, which are competing with Mortgage Backed Securities (MBS) as safe investments. The MBS market is the financial instrument that determines mortgage rates.
To avoid future interest rate hikes, it is imperative for current buyers to have a rate-lock strategy in place. First-time buyers especially do not want to wait until interest rate hikes eat up the benefits of their tax credits.
For more information about real estate in the greater metro area, including farms and horse properties, call Michael Paul of Realty Oasis at (303) 268-6052.
