Because of the unexpected move last week by the Fed, (they bumped up the Fed Discount Rate ¼% which is the rate they charge member banks to borrow) the  signal is one of confidence that the banking crisis may be close to over. This encourages banks to borrow from one another instead of the Fed. It also signals to the market that the Fed is okay with rates inching up a bit to head off any inflation the recovery may be generating.

Even though it may mean slightly higher rates, it should be viewed as a good conservative move on the part of the Fed to avoid having to hike rates drastically later. This means things are looking up. While waiting to purchase a house will mean missing the lowest prices and interest rates that will be available this year, it is a good thing that the overall economy is starting to show definite signs of recovery. If the time is right for you to buy, now is still the time.

Employment numbers coupled with other fiscal factors impact interest rates, and while most would think that keeping interest rates as low as possible is the goal, ultimately, it is not. When the economy is rocking at a healthy pace, interest rates are around 8%. Currently, the Fed is doing quite a few things to keep rates low to get the housing market moving along because a healthy housing market, most of the time, is also needed to have a healthy economy. We will all have to wait and see if everything that has been done will actually work to restore jobs and a health economy.

This may seem like a really bad deal but most economists believe that a healthy economy should have a working interest rate of somewhere between 7 and 8.5%. If were buying a house in the early eighties you would have given your right arm for an interest rate in the 8’s because many of us were paying 12 to16% in that rough economy. As much as I don’t want any of us to go back there I do think it is important to put things into perspective and realize that our economy will not grow unless rates eventually go up to a healthy place. Investors don’t want to invest if they can’t make money so eventually, it has to be a win, win for everyone.

Also in the new legislation is a tax credit for those selling their existing home and moving into another. You must have used the home as your primary home for five out of the last eight years and the tax credit is for $6,500. You will have to attach your closing statement, also called the HUD, to your income tax paperwork to get the credit. The same income and price restrictions as the first time home-buyer credit applies. If you have additional questions, make sure you call either the IRS or your accountant as this is a tax question.

But as we get ready for Thanksgiving, we are looking at a year that has been very hard for many and thankful it is behind us as we look forward to opportunities and better times ahead. Homes are selling and loans are still affordable as we head into 2010. It look like the Congress will pass another type of stimulus to encourage home ownership for new owners and maybe even for those who would like to move up into a larger home for the sake of a growing family or business. Stay tuned to learn the details as they become available.

So the short answer right now is; don’t count on it! If you want to partake of the $8,000 tax stimulus rebate you will need to close on your home prior to November 30^th of this year. Remember this is only for first time home owners (those who have not owned property or on a deed of a property for the last three years) and you will get 10% of the purchase price up to the $8,000. If you have any questions as to whether you qualify, talk to a Certified Public Accountant (CPA) to get the best information you can or call the IRS directly.

If you’re like me, you keep hearing that credit is tight.  Well, I’m not so sure that’s true.  What I do think has tightened are the regulations and rules in regard to who is a good credit risk.  You can still get a good loan with a good rate if you start out with a good credit score, job history and salary.  If you lack any of the above, you are going to have a harder time getting credit.

Since there are so many Americans right now who are lacking in one or more of those critical areas, it does feel like credit is tightening.  If you are a business that is highly leveraged you also will find it harder to get credit right now.  It seems like the problem is; we got here by lending to unworthy credit customers and the fact that the banks and lending institutions have stopped lending to unworthy customers doesn’t mean that credit has dried up.  It does mean that the rules of the game have gotten harder and you have to be prepared to play by the new rules as the old ones may be gone forever.

So I’d heard in MSNBC the Jon Stewart of the Daily Show just didn’t understand what all was happening.  After all he is a comedian, not a financial wizard like the people who are on MSNBC and we should all know the difference.

Well, if you have never seen the Daily Show, I highly recommend you find out when it is running in your area and tune in.  I watched last night when Jon took on Jim Cramer and everyone who listens to these guys that are spouting advice should watch.  Who knew that the comedians have become the watchdogs of our day!  I hope the news media is paying attention because this is calling it like it is.

1. If you have not owned or been on the deed of another home in the last 3 years, you are considered a first time home owner
2. The time frame for purchasing a home is January 1, 2009 through December 1, 2009
3. The tax credit is 10% of the purchase price of your home up to an $8,000 limit.  So buying a house of $80,000 or more will get you the $8,000 tax credit, under that it’s 10%.
4. You must purchase the home before you get the tax credit.  You cannot get the tax credit and use that money to put down on a house
5. The tax credit covers just about anything that can be considered a home (anything with sleeping quarters and a bathroom) from manufactured homes, trailers, house boats and even yachts!
6. If you meet the above and qualify for a home and purchase it you get the tax credit and you DO NOT have to pay it back.
7. You can amend you 2008 tax return and send it in and the IRS will get you your tax credit back to you before the 2009 year is over.

Here is the best website I have seen explaining the tax credit http://www.federalhousingtaxcredit.com/2009/home2.html

Over the last two weeks I have been asked my opinion more than I can remember about two things; should I wait until I know we get the $15,000 tax credit to purchase a home and; when will we see the government give us the 4.5% interest rate so I can either buy a house or refinance my current mortgage?  The answer is in the question; how many times has the government ever followed through on the rumors heard before a bill is actually passed?  The answer to that question is not very many!

The $15,000 tax credit was reduced to $7,500, which is not exactly true since we already have a $7,500 tax credit for those that fall within a certain income level that have bought a house within the last year or so (check with your accountant to see if you qualify) and it’s the same one.  No one can tell me where this 4.5% money is coming from or if it really exists.  Down payment assistance programs from non profits are supposed to be allowed again, however, no one can tell me if that is true or not or where it’s coming from?  So, if I could buy or refinance a property today for 5% for sure or wait until all these other things materialize from the government, I would do it in a heartbeat!  It is a difference of about $30.13 a month in payment but if you are saving much more than that it is worth it!