Cindy's Blog

Well, once again, I must apologize for the lapse in time since my last post. That's what seems to make up fully half of my overall posts, unfortunately. As you can imagine, the market has been a bit of a wild ride recently! With the crazy collapse of the many banks and lenders, on top of the already imploding consumer lending markets, it seems that things have gotten even crazier than they were before.

Homes are selling, though, and if you're in the market to buy, there are still loans out there to be had, and programs if you need them. One that alot of people don't know much about is the First Time Buyer Tax Credit- if you're in the market for your first home, or at least haven't owned a home in at least 3 years, you can take advantage of it if you meet certain criteria.

The First-time Home Buyer Tax Credit was passed this year as part of the Housing and Economic Recovery Act (H.R. 3221) on July 30 and targets any individual or household that hasn’t owned a home for at least three years. Taxpayers can take the credit on their 2008 tax return if they bought their house this year after April 9.

It’s worth up to $7,500 and can be taken in a single tax year. Authorization for the credit ends July 1, 2009, so even if you don't buy until the first half of 2009, you can take the credit on your 2009 tax return.

The actual credit amount is set as a percentage of the home purchase amount. That percentage amount is 10 percent, so you can get 10 percent of the home price credited against your tax liability, up to a maximum of $7,500.

Income limits are $75,000 for individuals and $150,000 for households. Individuals whose income exceeds the $75,000 limit but isn’t more than $95,000 can still take the credit but on a reduced basis. The same thing applies to households earning up to $170,000.
Any house is eligible as long as it’s a primary residence and is in the United States.

To help keep the program cost effective for taxpayers, the federal government requires the tax credit to be paid back in small, 6.67-percent increments over 15 years. For that reason, some analysts have likened the credit to a 15-year, interest-free loan to help make home buying affordable.

There’s one restriction on the type of financing that you can use if you plan to take the credit. That restriction is on tax-exempt mortgage financing. That only applies if you're  using below-market interest-rate financing from a public agency or nonprofit that’s funding the loan using proceeds from a tax-exempt mortgage-revenue bond issue. For most buyers, this won’t be an issue. It’s mainly an issue for low-income buyers using special mortgage financing.

Yes, this may sound a bit confusing, but if you think you may qualify, here are some frequently asked questions that may help you determine whether you do, and how it works. It really is rather simple, in that there is no pre-financing application or paperwork- you just file the purchase on your taxes. If you have any further questions that are tax specific, give your tax professional a call. But if you think you might be thinking this is a great time to buy a home, call me!