First-time buyers get some breathing room to close their sales deals

Although Congress has refused to extend the $8,000 tax credit for buyers who purchase their first home, legislators have approved a separate bill to give taxpayers who signed their deal by the April 30 cutoff date a little more time to finalize their transaction.

Q. You recently wrote that the $8,000 tax credit for first-time homebuyers has expired, but I heard a report on the radio that said it was extended until Sept. 30. Which is correct?

A. The tax credit itself expired April 30. The measure that Congress approved about two weeks ago simply gives buyers who had a binding purchase contract in place by April 30 some additional time to close their transaction.

The original bill required that the sales contract be signed by the end of April and that the deal itself be fully completed by June 30. But sales surged in late spring as consumers rushed to take advantage of the tax break before it disappeared, which in turn created a giant backlog that left lenders and other real estate professionals unable to close about 200,000 sales before the end of June - thus jeopardizing the ability of buyers who had already signed a contract to qualify for the credit.

Thanks to the new legislation, first-time buyers now have until Sept. 30 to formally complete their transactions and still obtain the $8,000 credit. The same extension applies to repeat buyers seeking a credit of up to $6,500 under a similar program.

In short, the extension doesn't help anyone who's still shopping for a home today: Buyers qualify for either credit only if their sales contract was signed by the original April 30 deadline and the deal officially closes by the new, extended Sept. 30 deadline.

Q. What's the most common town name in America?

A. It's "Franklin," according to the U.S. Census Bureau. There are 30 cities, towns or boroughs named Franklin, the bureau reports, including two each in New York and Pennsylvania.

The second-most-popular community name is "Clinton," with 29, followed by Greenville (25) and Salem (24).

Q. Are "debit bureaus" the same thing as "credit bureaus"?

A. No. A credit bureau keeps track of a consumer's credit accounts, outstanding balances and payment history. A debit bureau focuses on an individual's checking-account activity, with a special emphasis on whether he or she has a tendency to bounce personal checks.

Some lenders order reports from both a debit bureau and a credit bureau before they'll approve a mortgage application, but request only a debit-bureau report if a customer merely wants to open a new checking or savings account.

Q. I've heard that borrowers can save a lot of money by choosing a mortgage that requires payments once every two weeks rather than once a month. How do these loans work? Are they a good deal?

A. Choosing a biweekly loan-repayment schedule can be a great (and fairly painless) way to pay a loan off earlier than a typical 30-year term would allow while simultaneously saving tens of thousands of dollars in future interest charges.

Under a biweekly format, you would pay roughly one-half of your monthly mortgage bill once every two weeks rather than pay the full amount once a month. Since there are 52 weeks in a year, you'd wind up making 26 biweekly payments - the equivalent of 13 monthly payments each year instead of the usual 12.

Those additional payments can generate huge long-term savings. For example, choosing a biweekly repayment schedule for a $200,000 loan at the current rate of about 5 percent would allow you to retire the debt in about 251/2 years rather than 30. And, by trimming more than four years from the repayment schedule, you'd save a staggering $32,698 in future finance charges.

Unfortunately, biweekly loans can be difficult to find. Part of the reason is that few lenders have the computer software needed to process a borrower's payments once every two weeks rather than once a month. That's why many of today's biweekly loans are made by employee credit unions, which can automatically deduct the required payments directly from a worker's twice-a-month paychecks.

If you can't find a lender that issues the loans, you can achieve roughly the same savings that a biweekly repayment plan would provide by choosing a standard 30-year mortgage and then adding an amount equal to 1/12 of your scheduled payment directly to the loan's principal each month.

For instance, if your monthly payment for principal and interest on a 30-year payback plan is $1,000, adding $83.33 (1/12) each month would be the equivalent of making a 13th monthly payment each year and would result in about the same amount of savings in time and money as you'd reap from a biweekly schedule.

• For a copy of the booklet "Straight Talk About Living Trusts," send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 2960, Culver City, CA 90231-2960

© 2010, Cowles Syndicate Inc.