5 Things to know before buying for the tax credit

If you're thinking of purchasing a home, here are five tips: (Taking advantage of the tax credit)

Don't procrastinate
Start your house search now. Getting an early start will give you a better chance of finding the right house before the credit deadline.
Don't wait until the last month to get into contract, as there may not be enough inventories that fit your needs.   
We are already seeing a tremendous shortage in the Tracy/Manteca areas where most houses on the market have multiple offers as soon as they come on the market.  Before you start house hunting, get pre-approved for a mortgage and do a realistic assessment of what you can afford.  Buyers who have to sell an existing home should price it aggressively from the beginning to drum up interest and get a buyer as soon as possible, as this may keep you from qualifying for the $6,500 tax credit for "move up buyers".

Don't count on another tax credit extension
"This is a medication for the housing crisis, and once the patient is cured there will be no medication needed."  You may find yourself out of luck. This credit won't be available forever.

Be mindful of interest rates
Interest rates are low right now, but may rise next year.  Higher rates will affect your monthly mortgage payments, thus the affordability of the house you are buying.  One of the reasons houses are so affordable is based upon the interest rates currently available to borrowers. 
Average rates on 30-year fixed-rate mortgages have been hovering around 5%. But when the Federal Reserve stops buying large amounts of mortgage-backed securities next year, so interest rates could rise.

Communicate with your lender
Make sure you're speaking with your lender regularly to avoid any delays. If the lender asks for any additional documentation, turn it in as soon as possible, as delays in producing documentation will most certainly delay your close of escrow; thus, you could run out of time in getting your tax credit.
And think twice before pursuing a short sale. That's where someone sells a home for less than what he or she owes on a mortgage, with permission of the lender. The process can be lengthy and unpredictable because the homeowner's lender has to approve any deal, and it can get complicated when there is a second mortgage associated with the property.

Don't take shortcuts
Don't forgo any of the steps you would normally take just to make the tax-credit deadline. That means making sure the house is a good fit and is in the right location and getting a home inspection, as skipping steps could cost you in the long run.
"Don't let the tax credit get you to make a decision to buy a house that you wouldn't otherwise want to buy," he says. "Don't shortcut the process to get the tax credit."