SANTA CRUZ (August 29, 2009) - The $8,000 tax credit has inspired many families to make the move into homeownership. This credit was one of the keystones of the federal government’s plan to stimulate homeownership and it has been a resounding success! How could it not be?

When combined with the low down payment requirement of an FHA loan, this program will reimburse a first time homebuyer for a large portion, if not all, of the down payment.

While homebuyers do not have to be a first time homebuyer for an FHA loan, they do have to be a first time homebuyer to receive the $8,000 tax credit. The definition of a first time homebuyer is one who has not owned a principal residence for the past three years. Even if you own a rental property, you can still be considered a first time homebuyer.

Unfortunately, this $8,000 tax credit offer is scheduled to go away on November 30 of this year. The good news is that there is still time to get approved for a loan, find a home and close escrow. In fact, prospective borrower(s) who get pre-approved for a mortgage in advance could conceivably close escrow within 15 days of entering into a purchase contract with a seller. Although it is not uncommon for glitches that could cause time delays to arise during escrow, transactions do not have to take more than 20-30 days when borrowers are prepared and have had their mortgage approved before they start looking for properties.

The much discussed (and cussed) Home Valuation Code of Conduct (HVCC) that requires lenders to order appraisals through an independent Appraisal Management Company (AMC) affects all appraisals on all mortgages originated after May 1 of this year and has actually speeded up the mortgage process. However, the HVCC has also brought on a lot of heartache for buyers and sellers because, now more than ever before, appraisals are coming in under the anticipated value. One unfortunate reason for this is that many lenders are now using appraisers from far out of the Santa Cruz area.

While this may seem to be unavoidable due to the fact that the HVCC does not allow lenders to pick their appraisers, lenders may, indeed, pick specific appraisers to be in the pool that the AMC draws from when it orders appraisals for that lender. For example, my company selected 12 appraisers, that we know and like to work with, to be in our pool. Now, when we order an appraisal from our AMC, we are assured that one of our 12 appraisers will be selected.

The Fed’s desire to promote homeownership is keeping pressure on 30 year fixed mortgage rates to keep them hovering around 5 percent. Do not expect these rates to stay down. Combine low rates with the $8,000 tax credit and the FHA loan with its low down payment requirement and liberal underwriting guidelines and you have a winning combination for those who want to become homeowners.

This column is written every Saturday by Peter Boutell, Certified Mortgage Planner and a principal at Santa Cruz Home Finance. You may reach him at (831) 425-1250 of email him at Peter@SantaCruzHomeFinance.com.