The December 1st deadline for securing the $8,000 tax credit for buying a new home (if you’re a first-time buyer) is quickly approaching.  But is this program just a government sponsored no-money down scheme that could increase the number of foreclosures in the long-term? According to an article in the Star-Telegram, the tax credit has already had a big influence on the housing market encouraging many first-time buyers to make the leap into homeownership.

The article said:

“The National Association of Realtors estimates around one-third of home sales this year reported nationally are first-time home buyers. In a normal market, it’s between 10 and 15 percent.”

But how many of these first-time buyers are financially prepared for the responsibilities of homeownership?  Usually, saving and parting with a hefty down payment is preparation for and evidence of a buyer’s ability to handle the financial demands of homeownership.  When mortgage lenders approved massive amounts of no-money down loans, it was a major factor in the now growing foreclosure crisis.  Why?  If a buyer is unable to save a down payment it is usually an indicator that he/she is unprepared financially to handle homeownership.

And those types of buyers are vulnerable to foreclosure . Yet, this tax credit is creating the same conditions that allow those who are unable to save down payments to buy homes. Many of those same buyers don’t have emergency funds or don’t have enough disposable income to handle life’s unexpected emergencies that can cause one to increase their debt load, if they’re not prepared.  For those of you considering the $8,000 tax credit, please take the time and energy to save at least 3 to 6 months of projected expenses so that you reduce your chance of foreclosure by being prepared for life’s inevitable emergencies.