$8000 at closing for first-time buyers! Really this time.

I don't understand the appeal of the $8000 credit. A 2.5% drop in price on a $300K home has the same effect. With the bottom a long way off, I'll take the inevitable 20% - 30% hair cut in prices that is coming over $8K.

I agree about tempting the wrong people. If $8000 is making or breaking the deal, you're already too close to the edge with your finances. I could see this making a difference if the median sale price was $100k, but that isn't currently the case in this state.

Yeah, I read that this morning. I guess if you can afford to buy, it would be nice to have the money up front. But if you need the $8,000 to get into a house, I also wonder how it's a good thing. What do they say about the road to hell?

I've asked before, has anyone read Steven Malanga's article "Obsessive Housing Disorder" in the City Journal?

Can this up front money be used for the home downpayment?

Even as a homeowner about to move into my third home, I can see this appeal and wish it applied to us. It doesn't have anything to do with the affordability of our home.

Most buyers are putting as much as they can down on their home to get the best mortgage, so they probably don't have a lot of fluid cash leftover right away. It doesn't mean they are going to be house poor, it just means you probably don't have the money to remodel or redecorate right away. There are so many things that you can actually "need" in your first home that you wouldn't have had as a renter: a lawnmower and other yard equipment such as a wheelbarrow, rakes, etc., trash barrels, maybe a grill would be nice or a patio table for the yard...the list is really endless.

It doesn't matter what area of the country you live in or what the median home price is. Most people stretch their finances to get into the best home they can afford and worry about the extras later. You can do without them, but it's appealing to have some cash to fix up the place. Even if it is as simple as being able to buy a dining room set and pick out paint and curtains with the $8K. Or what if the seller is taking the refrigerator and washer/dryer?

THis is the exact sort of thing that got us into this mess in the first place.

All this does is make the tax credit they are already entitled to available to them right away, instead of waiting to file for a return next year. $8000 available at closing, instead of after the closing, I'm sure would be welcomed by *anybody*.

Economic recovery all starts with housing at a basic level. this is designed to help housong recover...otherwise, don;t complain about your property value being low.

Being a first-time low income soon to be homeowner, I would say "Thank You". Is not so much about having the downpayment, but if you can get an extra "free" $8,000 to put toward the home "why not" we as tax payer shoulkd take advantage, is my money being used; and if you are smart enough you will pay the money back when you get the credit.

I don't think it should be the only resource to buy a home, hopefully with some of the cash you have saved up; it can help with the 20% (Im taking advantage!!)

Boston Runner,

You will be putting funds into escrow when you sign and offer and when you sign a Purchase and Sales Agreement. Those happen before closing.

If you want to use the $8000 toward the purchase price, you can. You could also pocket the $8000 to pay down your equity. (Make an $8000 payment toward equity when you get your first payment bill.) That would take years off your loan, if you intend to hold the property for a long time.

Here is another example of how first time buyers can really benefit from this - they tax credit that they wouldhave to wait for until next year to go, they can instead use now.

This can now be used to cover closing costs, escrows, the other non-loan costs that come up such as home inspection and owners title insurance and buyers attorneys fees - and apply the rest towards an um-front single premium mortgage insurance policy,

Wow! Now people who have enough for the downpayment, can use the tax credit they are entitled to to reduce thier out of pocket costs so they can keep more in the bank and end up with a lower total cost of housing (no monthly pmi)

And this

Two years from now there will be a study, showing that home-buyers who utilized this credit were foreclosed on at a much higher rate than other buyers. It holds true for every "subsidy" out there. No-money down, VA, FHA financing, etc. This is essentially just the outright "buying" of votes...

I agree with Hung. This incentive is contrary to the interests of all parties involved. There will be a strong "self selection" bias toward stupidity in this pool of buyers. Consequently, they will not weather the upcoming economic storm well. But the good news is--like all the other highly publicized government programs to help troubled homeowners-- this program is so limited in scope that very few people will actually qualify. So at least the long-term damage will be contained to a relatively small group.

As for those folks who think the tax credit is a great deal and now is the time to buy... Get ready for an expensive lesson from the school of hard knocks.

The incentive isn't contrary to a buyer if the circumstances are right. If someone has been saving for a home purchase in about this timeframe of life, why not collect 8K? I think it is quite an inaccurate generalization to suggest that anyone who buys this year and collects this credit is acting stupidly. Stupid was buying 5 years ago when interest rates were three points higher and prices were 17% higher with no money down. Obviously, there is still likely to be some depreciation of real estate prices, especially in larger homes which just don't have the families to fill them. On the other hand, our forthcoming economic troubles could involve a lot of inflation and a 5% mortgage could be a reasonable hedge against that in a portfolio.

Hung and Lance nail it again.
The intended beneficiary of this tax credit is the lender holding the seller's mortgage. This and any tax credit, will simply increase the price of the target asset. Buyer overpays to get credit; seller gets out of their mortgage; seller's lender is more likely to be made whole at closing (or, lose less money).