CHRONOLOGICALLY SPEAKING, December is still two months and half of a holiday-shopping season away. But from a homebuyer’s perspective it might as well be next week. Even though the $8,000 first-time homebuyer tax credit—available to individuals who make less than $75,000 a year or couples who earn less than $150,000 and who haven’t owned a home in three years—won’t expire until December 1, prospective purchasers who have yet to start trolling nabes for their future abodes may miss the chance to cash that check. Despite what the vague verbiage on IRS form 5405 suggests (it says only that a home must be “purchased” before December 1), closing must take place before the deadline, too. “And if you want to close by the end of November,” says Kristen Meyer Lapriore of Keller Williams Realty, “you need to be in a contract no later than October 15.”
A comparatively shorter 14-day close used to be attainable, but a new, drawn-out appraisal procedure (see Shock to the System ," September 2009) and byzantine changes to rules about how and when loan originators must disclose mortgage rates to their clients—both of which went into effect this summer—have bogged down the process. “Instead of taking two weeks to close,” says Evergreen Home Loans mortgage banker Jeff Mandels, “it’s taking as many as three to four weeks.” (And that doesn’t even take into account short sales, which can take months to finalize; if you’re just now making an offer on one of those, forget about banking the tax credit.)
Ironically, though, the biggest threat to quick-turnaround closings is the increased scrutiny that gun-shy banks are applying to loan applications to keep first-time buyers from stretching their bank accounts too thin. “Lenders just feel like the loans have to be squeaky clean,” Mandels says. And all that scrubbing can be an exhaustive, time—consuming slog. An exceptionally twitchy underwriter went so far as to ask one of Mandels’s clients, who received a $2,000 housewarming gift from her grandmother, to provide a signed letter from the relative stating that the money didn’t need to be paid back. “She already had the required 3.5 percent for her down payment documented prior to receiving the check,” he says. “This was just cash to buy furniture.”
So given the potential hassles, why dial up the insanity on an already stressful purchase process by hustling to grab what amounts to a little more than 2 percent of the median price of homes sold in July? “I just thought of it as free money,” says Elizabeth Duffell. With free money at a premium these days, the longtime renter spent months mulling when to pull the property-investment trigger. Then in June she snatched up a Capitol Hill condo after having an economic -epiphany. “People told me I should wait until after summer to buy, because that’s when prices would go down,” she says. “But I thought, ‘No, that’s when everyone else who wants this credit will be shopping.’"