Staff Photo by Margaret Fenton Sheila Swanson paints her cabinets a new color on Saturday afternoon in her new East Brainerd 5-bedroom, 3-bath house. She bought the foreclosed property this spring for $99,500, and she is using her $8,000 federal tax credit to pay for remodeling throughout the house.

After more than two decades of renting her home, Sheila Swanson became a homeowner for the first time this spring.

Thanks to the federal stimulus program, the 48-year-old Cigna quality inspector also recently got an $8,000 check to help her fix up her new East Brainerd house.

“It’s great to have my own place at last,” she said last week while painting the kitchen of her new home.

Ms. Swanson said she was pleasantly surprised to find out about the federal tax credit, as well as the discounted home prices available amid the worst housing slump in a decade. The foreclosed home she bought for $99,600 in April includes five bedrooms and three baths on a spacious lot only a few miles from her former rental home in Apison.

“We worked very hard to close the sale by April 14 so Sheila was able to file for the $8,000 tax credit on her 2008 returns,” said Jo Rievley, an agent for Best Realty GMAC in Chattanooga.

Ms. Rievley and other agents said lower home prices and mortgage rates allow home buyers to get into the market for less. The tax credit, which will be available only for home purchases closed by Dec. 1, make this year one of the best ever for first-time home buyers.

But for many, the tax credit remains out of reach because of the higher down payment requirements imposed following the mortgage meltdown last year.

Nickie Schwartzkopf, an agent for Remax Properties who serves as president of the Chattanooga Association of Realtors, said the era of no-money-down home purchases is largely over.

In January, the Federal Housing Administration raised its minimum down payment requirement from 3 percent to 3.5 percent, raising the amount required to buy most Chattanooga homes, including closing costs, to more than $4,000.

“The tax credit is a great value for those that have the money,” Ms. Schwartzkopf said. “But it’s not so important for people who want to buy but don’t have the money for a down payment. Most first-time home buyers simply don’t have the 3.5 percent for a down payment.”

With Tennessee’s unemployment rate above 10 percent and the stock market off more than 25 percent from its high of a couple years ago, many buyers are unable or unwilling to jump in the market, even with interest rates near historic lows and home prices down.

In Tennessee, home sales for all of 2008 were 32 percent below the peak reached in 2006 and first quarter home sales this year were down another 27 percent from a year ago, according to figures compiled by the National Association of Realtors.

But Walter Molony, the NAR’s senior public affairs specialist, said Realtors expect nationwide home sales by this fall to be up from 10 percent to 15 percent over year-ago levels.

A key component of the rebound is coming from first-time buyers, who made up nearly half of all buyers in the first quarter of 2009 and 40 percent of the buyers in April.

“We’re not starting to see the impact from the tax credit,” he said.

Don Oaks, president of Mortgage South in Chattanooga and a former chairman of the Tennessee Mortgage Bankers Association, said he is seeing more first-time home buyers seeking mortgages.

“Surprisingly, many people are still not aware of the stimulus tax credits,” he said. “A lot of people have heard about it, but they don’t always know how it works.”

The federal tax credit was included as part of the federal stimulus package adopted by Congress in February. It allows first-time home buyers on any purchase that closes by Dec. 1 to get an $8,000 tax credit — or 10 percent the value of the house if less — on either their 2008 or 2009 taxes.

Realtors eager to revive the depressed housing market are trying to encourage buyers to take advantage of the credit and favorable market conditions by buying this summer. The Georgia Association of Realtors has launched a statewide campaign urging buyers to “Get off the Fence” and claiming “Now is the Right Time!”

In Washington, D.C., U.S. Sen. Johnny Isakson, R-Ga., also is eager to extend and expand the home buying tax credit to encourage even more home purchases.

Last week, Sen. Isakson introduced a measure to provide a $15,000 tax credit for any home purchase, whether it was made by a first-time home buyer or not. The proposal also would remove the income cap on who qualifies and extend the credit into 2010 purchases.

“I believe that our economic problems start with the housing market and that we must restore the housing market if we are going to restore our economy,” he said.

The National Association of Realtors is backing Sen. Isakson’s buyer incentives. However, a similar proposal by Sen. Isakson earlier this year failed to make it into the stimulus package.