Tim and Brianne O'Rourke found a neighborhood that reminded them of their childhood homes, and just after their January wedding, they identified a perfect house within a mile of where they grew up.
How divine.
Even better, the three-bedroom ranch style home with a basement in the Harvest Acres section of Schererville came with an extra bonus -- an $8,000 tax credit from Uncle Sam.
"That $8,000 tax credit made me start thinking about buying a home," said Tim O'Rourke.
The credit is a feature, that if taken advantage of by enough future homebuyers, could add an economic boost to the local real estate industry. It's available to first-time homebuyers and to those who have not owned a home for at least three years.
The house must be the buyer's principal residence, and the new owners must stay in the home for at least three years. The $8,000 credit works like a refund when buyers file their federal income taxes.
"I waited to file my 2008 taxes until we closed on the house in March," O'Rourke said "That $8,000 was added to what we were getting back anyway."
First-time buyers also can amend 2008 returns to receive the credit without waiting until April.
Prices a plus
Price and availability drew Alyssa and Michael Newman to a tri-level home about a mile from Valparaiso University.
"We were planning to buy a home before the tax incentive was announced. The $8,000 was a bonus, but it wouldn't have stopped us if it hadn't been available," Alyssa Newman said.
Like the Newmans, homeowners are finding another incentive to buy --- falling prices.
"There's a really good market for homes under $200,000 and especially for homes priced at $150,000 and under," said Kristin McCoy, a Realtor with Wold Realty in Schererville. "If it's in good condition (and) there are multiple offers -- it's gone. Many sellers don't know what a fabulous market this is."
But time is running out to qualify for the tax credit, says Jim Oster, broker-manager of the Lansing Coldwell Banker real estate office.
"Because you have to close on the house before November 30, about the latest you could buy a house is October 15," Oster said. "There's been buzz about renewing the tax credit, but I wouldn't count on it."
The fall rush to reap the tax credit could mirror the federal government's Cash for Clunkers auto replacement program, McCoy said.
Lending stricter
Getting approved for a mortgage is one challenge awaiting today's homebuyers, but there are options, says Carol A. Nettle-Hasler, a loan officer with Lake Mortgage in Schererville.
After the subprime mortgage debacle, lenders tightened their guidelines, requiring more money down and higher credit scores.
"Borrowers are required to put 10 percent down for a conventional loan, but those with high credit scores of at least 700 can put down 5 percent instead," Nettle-Hassler says.
Many buyers are finding mortgages from the Federal Housing Authority, or FHA, the easiest way to finance, says Randy Schaaf, senior loan officer with A&M Mortgage in Merrillville.
"It's not the initial lenders -- the banks -- but the end lenders -- Freddie Mac and Fannie Mae. Their guidelines are so strict," Schaaf said.
"They've gone to the extreme and need to loosen up the guidelines so credit can flow again."
The average FHA loan is $180,000, and buyers are required to put down 3.5 percent of the purchase price, Schaaf said.
Another option for some buyers is a Veterans Affairs loan, which only is for veterans and can be obtained with no money down, Nettle-Hassler says.
Both the O'Rourkes and the Newmans chose FHA financing.
Down payment help available
Some Lake County residents may qualify for down payment assistance, Nettle-Hassler says.
The Homebuyer Assistance Program helps qualified households whose income does not exceed limits for the area established by the U.S. Department of Housing and Urban Development.
The maximum assistance available is $5,000 per household. But the program is not available in East Chicago, Hammond and Gary because those cities offer their own assistance programs.
A new Illinois program signed into law by Gov. Pat Quinn in July is helping first-time buyers in that state use the federal tax credit as part of their down payment.
The Illinois Home Start Loan Program is administered by the Illinois Housing Development Authority. Home Start offers a 30-year fixed rate loan insured by FHA for first-time homebuyers and gives them the option to use a second advance loan on the federal tax credit for down payment assistance.
Schaaf says the zero-interest Home Start Advance Loan can be for up to $6,000 and is repaid when the purchaser receives the federal tax credit.
"I wish Indiana would do the same thing," he said.
Apartment living no more
The Newmans, who are in their early 30s, were tired of apartment living. They looked at the tri-level home in one of Valparaiso's long-established neighborhood several months before they were able to get a mortgage.
"We were surprised that it was still on the market," Alyssa Newman said.
"It's a friendly neighborhood. I can garden and decorate the house the way I want to."
How-tos for first-time homebuyers
Before touring homes for sale, get pre-approved for a mortgage and know your budget.
Ask lots of questions about the required down payment, terms, closing costs.
Bring a digital camera and take a series of photos.
Take notes of unusual features, colors and design elements.
Pay attention to the home's surroundings and location.
Once your offer is accepted, arrange for a professional home inspection.
SOURCE: Kristin McCoy, Wold Realty in Schererville
