Tax Credits, Low Interest Rates, Bargain Prices Fuel Housing Market in CNY

Until Nov. 20, Russell Hess was the perpetual renter.

"I've wanted to do this years ago, but I never had the brass to do it," Hess said, minutes after signing the purchase agreement on his first house in Phoenix.

After decades of renting, Hess, 44, - like many renters - could no longer ignore the financial benefits of buying, especially now. On Dec. 3, federal mortgage rates hit a record low of 4.71 percent on a 30-year-fixed-rate mortgage from Freddie Mac. (The federal rate is often used as a benchmark, but local banks are offering mortgages at somewhat higher rates.) The rate rose a smidge this week to 4.81 percent.

Home prices have fallen, and government programs are offering huge tax savings, giving homebuyers extra incentive to shop and buy.

Working with Andrea Addison, an agent with the Hodgkins and O'Hara Real Estate Team of Coldwell Banker, Hess found an $81,000 foreclosed house eligible for a Freddie Mac program that helps with closing costs. He secured a 5 percent interest FHA loan by putting down $5,000.

Addison also walked him through the $8,000 tax credit for first-time homebuyers, which he expects to collect next year.

After all the paperwork is signed - his closing is scheduled for Jan. 16 - Hess' monthly mortgage payment will be $408 a month. His taxes will be about $300 a month, bringing his monthly payments to just over $700. Rent for a two-bedroom apartment - half the size of his four-bedroom house - is about $750 a month, he said.

"It's almost like getting a free house," Hess said. "I needed to have $7,000 in the bank now, but I'll get it all back (with the homebuyer tax credit)." The rest of the credit money, he said, will be put into home improvements.

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By Pam Lundborg
December 11, 2009, 9:06AM
Syracuse.com