Time is running out to take advantage of some of the government programs set up to help consumers during the economic meltdown.
Among them are programs meant to shore up the credit markets, which allow for more available credit and lower interest rates on loans for homes and automobiles, as well as tax benefits to entice consumers to buy that new house or car
Real Estate
Mortgage-Backed Securities Purchase Program. This Federal Reserve program is slated to end in March. Since its implementation in January — and expansion in March — of this year, the Fed has been buying up mortgage-backed securities from Fannie Mae, Freddie Mac and Ginnie Mae in an effort to keep the mortgage-securities markets afloat. By the program’s scheduled end, a total of $1.25 trillion in mortgage-backed securities is expected to be acquired.
The upshot for consumers has been mortgage interest rates at or near historic lows, says Paul Ballew, senior vice president, customer insights and analytics for Nationwide, an insurance and financial-services firm.
Once the program ends, however, rates most likely will rise, says Keith Gumbinger, vice president at mortgage-education firm HSH Associates.
The question is, how much?
“By our reckoning, rates are about three quarters of a percentage point lower with the Fed’s program,” Mr. Gumbinger says. “Not that we expect interest rates to go screaming off into the night, but rates half or a full percentage point above where they are now isn’t unthinkable” once the program ends.
A one-percentage-point rise could add more than $150 to a monthly mortgage payment for a $250,000 30-year fixed-rate loan.
For homeowners thinking about refinancing, it’s probably best to act now. After the program ends, “there will be more uncertainties in the marketplace than there are now,” Mr. Gumbinger says. “Rates may be affected and the availability of credit might be affected.”
Home Affordable Refinancing Program (HARP). HARP, part of the Making Home Affordable initiative, is slated to end in June. It assists homeowners with little or no equity in their homes, who otherwise wouldn’t qualify for refinancing, to refinance their mortgages backed by Fannie Mae and Freddie Mac. HARP is aimed at homeowners whose houses have lost value and who now have a mortgage that’s higher than the house’s value.
Homeowners who qualify for HARP should take advantage of the program before it ends because later on they might not be able to qualify for a refinance without it, says Greg McBride, a senior financial analyst for personal-finance site Bankrate.com.
Home-Buyer Tax Credit. Consumers also have less than five months to take advantage of the home-buyer tax credit, which originally was part of about $288 billion in tax benefits in the $787 billion economic stimulus package. The credit has been extended — and expanded — through June 2010, though you must have a contract in place by April.
First-time homebuyers get a tax credit of up to $8,000, while existing homeowners may qualify for up to a $6,500 credit if they’ve lived in the same home for five consecutive years in the eight-year period ending on the date of the new home purchase. It must be a primary residence.
You’ll need to show proof of purchase and income limits apply. See the Internal Revenue Service Web site, www.irs.gov, for more information.
Automobiles
Term Asset-Backed Securities Loan Facility (TALF). Slated to start winding down in March, TALF is a loan program meant to help thaw credit markets. Investors were reluctant or unable to buy loans from lenders, and lenders that didn’t want to keep those loans on their own books stopped making loans.
TALF was “designed to provide financing so that those transactions could take place,” says Mr. McBride. “Investors could buy those loans, lenders could sell those loans and then pump more money back into additional loans.”
Consumers have been seeing TALF’s effect on their ability to get auto loans and on interest rates, says Karen Dynan, vice president and co-director of the Economic Studies program at the Brookings Institution.
According to Federal Reserve data, the average rate for an auto loan from auto finance companies was 6.41% in October 2008. Over 2009, however, rates have come down significantly, with an average rate of 3.42% in October.
If the program ends in March, there’s a chance rates could go up, Ms. Dynan says.
Mr. McBride says if the markets are in working order when TALF ends, there shouldn’t be a spike in interest rates. But a hiccup in the credit markets could cause them to tighten up again, which could cause rates to rise again in the absence of TALF.
Sales-Tax Deduction for New Vehicle Purchases. There are only a few weeks left to take advantage of a tax deduction meant to entice would-be car buyers.
You can deduct state and local sales and excise taxes on your 2009 tax return for up to the first $49,500 of the price of a new car, light truck, motor home or motorcycle. The eligible vehicle must be purchased between Feb. 17 and Dec. 31, 2009, and there are income limits.
“If you’re on the fence about…buying a car, this is a good time to go ahead and do it” because you could save hundreds of dollars on your taxes, says Nick Rizzi, CEO of tax-preparation firm Smart Tax.
As you can see from the information posted above, the Federal Government is trying to stimulate the economy and keep us out of further banking problems…….we may not fully support some of these programs, but we have seen a significant increase in housing sales this year which should hopefully start us back to a road of recovery in the metro Scottsdale/Phoenix marketplace.
So if you are a First Time Home Buyer, we would welcome the opportunity to assist you with your home purchase and help you receive a hefty tax credit in the process. Give us a call anytime at 602-620-2164 and we can start the process immediately.
Until next time, hope you enjoy the post.
Stephen & Alice Proski
