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MODESTO -- The $8,000 federal tax credit for first-time home buyers is being extended, and the deal is being sweetened: Now existing homeowners can get $6,500 from the government if they buy another house.
Congress approved the $10.8 billion tax break Thursday, and the president signed it into law Friday.
The $8,000 incentive for first-time buyers has been in effect since January, but it was due to end Nov. 30. Now buyers have until April 30 to sign a purchase contract and until June 30 to close escrow.
"I am so excited about this," said Mary Morales, 34, of Patterson. She had been "on pins and needles" worrying whether her pending house purchase would be completed by the Nov. 30 deadline.
The extension means she has plenty of time to qualify for the tax credit.
"I'm a single mom with kids, so that $8,000 will really help." Debbie Miller also was thrilled to hear the news. She has been trying to buy a home for months, but she keeps getting outbid.
A lot of people are looking and bidding for homes," said Miller, 59, who works for the Girl Scouts in Modesto. "The tax credit will be extremely helpful in getting me into my own place."
Miller's agent, Audrey Hermanson of Prudential California Realty in Modesto, said the tax credit has motivated many first-time buyers to enter the market.
To be eligible for the $6,500 tax credit, homeowners must have used the home they currently own as their primary residence for at least five of the past eight years.
The next home they buy must become their primary residence, whether they sell their previous home or keep it as a second home or rental property.
To get either tax credit, the home purchased cannot cost more than $800,000. The tax credit will be equal to 10 percent of the home's purchase price, up to $8,000 for first-time buyers and $6,500 for current homeowners.
Those who don't owe federal income taxes will be given the money anyway. But the tax credits will be phased out for individuals earning more than $125,000 a year and for couples earning more than $225,000.
"We needed this. It will be a boost for our local economy," said Craig Lewis, president of Prudential California Realty. He said the Northern San Joaquin Valley real estate market is driven by first-time buyers and losing the $8,000 tax credit would have reduced the eligible buyer pool by half.
By offering $6,500 to current homeowners, Lewis predicted that many people may be motivated to "move up" into larger homes or "move down" into smaller homes that better fit their needs.
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