SANTA CRUZ (January 2, 2010) - The prudent prospective homebuyer realizes that the New Year brings near-historically low mortgage rates, home prices at or near the bottom of a three year decline, federal tax credits for homebuyers, sellers anxious to make a deal, and the FHA and expanded conforming loan limits up to $729,750. These key benefits are available now but most will be going away.

Sure, there is always something on the horizon that, if focused on, can bring gloom and doom and cause some to hesitate when deciding on whether or not to become a homeowner. Certainly, as I have mentioned many times over the years, buying a home is not for everyone. A good dependable stream of income and the desire to own a piece of America are required ingredients to becoming a homeowner and not everyone possesses these attributes. If you don’t, hold off and rent a home until the time is right for you.

Assuming our economy continues on a slow and steady return to health, we probably will not see 30 year fixed rates below 5 percent again but, hopefully, we can count on rates staying below 6.5 percent through 2010. On the other hand, if the economy falters, the Fed may decide to continue its policy of promoting homeownership by extending the homebuyer tax credits (which, by the way, are no longer restricted to just first time homebuyers) and placing continued downward pressure on mortgage rates.

When we talk about home prices ‘at or near’ the bottom for this current cycle, keep in mind that there are only two realistic options: you either will buy when home prices are going down or when home prices are going up. No one will know when or where the bottom was until after it has passed. If you buy on the way down, home sellers will be much more willing to cut a deal because they won’t know when the bottom will be reached. If you miss the bottom and buy when home prices are on their way up, sellers will more likely want to wait for another, higher offer is received. In either case, a homebuyer should not delay the search for their ‘ideal’ home.

The first time homebuyer $8,000 tax credit is now scheduled to disappear on April 30, 2010. That is, you must be in escrow to buy your home by that date and you must close escrow by July 1, 2010. There also is a $6500 tax credit for homebuyers who buy a home between November 7, 2009 and April 30, 2010. There are limitations that apply, please check with your tax advisor for details. Even if this tax credit does not influence your decision to buy a home, the cash it is injecting into our economy is a substantial stimulus. Just consider the money that may well be spent on furniture, appliances and remodeling and the result that has on the local economy!

Lastly, let’s not take it for granted that loan limits will remain at their current $729,750 level. These loan limits have historically been based on the average home price in this country each year and if that were the case today, this loan limit would be back down to somewhere around $400,000 and mortgage rates for loan amounts above $400,000 could have been 6, 7 or even 8 percent!

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.