Details of Obamas 6500 “move up” home buyer tax credit in Minnesota

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Homeowners who want to take advantage of a new home tax credit worth up to $6,500 when they buy a new place have until April 30, 2010, to get a deal under way. Is it time for you to get moving?
Before you decide, see if you can answer “yes” to these four questions.
1. Are you already in the market? – Let’s assume you qualify for the tax break. That means you’ve been in your current home for at least five of the last eight years consecutively, you’re purchasing a new principal residence — not a vacation home — that costs no more than $800,000, and you meet the income threshold — $125,000 for individuals and $225,000 for joint filers — to get the full $6,500 credit.

The tax credit is yours unless you sell or stop using the home as your principal residence within three years after the date of purchase. Qualified homebuyers also can take the tax credit on their 2009 or 2010 income tax returns.

But the decision to go after it hinges on other factors. For instance, if you were already planning to move, the tax credit can help you recoup some of those repairs you’ve been putting off to get your home ready for sale. Another reason could be the desire or need to upsize or downsize, to move closer to family or to make room for an aging parent are also ideal candidates for this tax credit.
 
2. Do local market conditions look favorable? – There are three reasons that now is the right time to upgrade your home.  First, interest rates are as low as they’ve ever been in our lifetime.  Second, prices are very competitive, and you can buy a lot more home today than you could three years ago. And thirdly, because of the first-time buyer tax credit, the first-time buyers are eating up the good inventory that’s affordable, and that’s good news for sellers. 
 
3. Can you sell your house in time? – You’ll have to close on your new home by June 30, 2010 and those in the military get an extra year. Because you certainly don’t want to be carrying two mortgages at once, a lot hinges on how fast you can sell your current home. Again, that depends a great deal on where you live.   Make sure you do your research before taking the plunge. Take a look at the recent history of how long it takes to get a “sold” sign up in front of other homes near you.
 
4. Can you close the expense gap? – While the tax credit can help offset expenses like home repairs and the seller’s commission, $6,500 will only stretch so far. If you are upgrading, you need to make sure you have enough equity and available cash to cover the down payment.  If you’re counting on the tax credit to cushion the higher mortgage cost of your new home, that’s a red flag.  The main reason is that in this economy, nothing is certain.  If you lose your job, the increased mortgage payments could throw you under. 
 
While the tax credit can be a financial boost to many homeowners who are ready to buy again, the purchase of a home should never be a tax-based decision. Look at this $6,500 as a cherry on a sundae.  The sundae is the historically low home prices, substantially low interest rates and sellers willing to bargain.