Three Month Homebuyer Credit Extension Details

The House of Representatives recently passed an extension on the widely popular homebuyer tax credit program. The incentive was introduced by the Obama administration as a way to stimulate consumer spending in the wounded real estate industry. To qualify for the heft $8,000 tax rebate, consumers needed to contract their home purchases by May 30. Upon the program expiration, decreases in the real estate market were expected. A report released by the Commerce Department showed that new home sales dropped an astonishing 33 percent when the deadline took down effect.

It is estimated that nearly 200,000 potential homeowners will benefit from the homebuyer credit extension. The extension is not intended to help new homebuyers who are looking to get into the market. Instead, it will grant an additional three months time for homebuyers who contracted their home purchase by the May 30 date, but were unable to take ownership of the property by the official deadline of June 30.

An additional provision in the bill will help address prisoner fraud that infiltrated the program. The Treasury Inspector General for Tax Administration released a report proclaiming that $9.1 million was distributed to 1,295 prisoners who made fraudulent claims regarding the purchase of a new, qualified home. According to IRS spokesperson Frank Keith, the biggest challenge in reclaiming the money is complicated by trying to trace tax returns back to a prisoner as many times addresses out of the penitentiary system are used for filing purposes. If passed, the bill will simplify the task by granting the IRS permission to release tax return information to prison administrators.

The House of Representatives approved the measure to move the final closing date until September 30, 2010. The move passed with a total vote of 409 to 5. Senate passed the bill June 30 to ensure a seamless extension of the act and to help the economy from stalling completely.

Potential homebuyers are still encouraged to get out there and shop. Mortgage rates on traditional 30 year fixed rate mortgages are at historic lows, clocking in at percent. According to mortgage behemoth Fannie Mae, the mortgage rate is the lowest offer on documented since the company started keeping records back in 1971.