Monday, June 29, 2009

HOW TO TAKE ADVANTAGE OF THE $8,000 TAX CREDIT BEFORE IT EXPIRES FOR 1ST TIME HOME BUYERS!

Not many first-time homebuyers are aware that there is a considerable tax credit that is available for them. And if they know about it, they probably don’t know the details and how it can benefit them in their home search.

We have compiled the following information from trusted sources (i.e. mortgage lenders and escrow officers) to explain how the tax credit can be used to one’s advantage.


Highlights:

Timeframe: Must purchase a home (close and receive title) on or after January 1, 2009 and before December 1, 2009.


Down payment or closing costs: Qualifying buyers can use these funds upfront as a down payment or for closing costs.


FHA-approved lenders only: At this time, only FHA-approved loans are required if tax credit is used as a down payment.


Need 3.5% upfront: While the $8,000 tax credit can be used for the down payment or closing costs, home buyers must still come up with FHA's required 3.5% down payment on their own.

If you are buying a home this year, it's important to know whether you qualify for the $8,000 tax credit for first-time home buyers. Read on for details.

Qualifications for $8,000 tax credit:

  • Must purchase a home (close and receive title) on or after January 1, 2009 and before December 1, 2009.
  • Must be a first-time home buyer, which means you cannot have owned a home for the past three years prior to purchase.
  • Must use as a primary residence. The home cannot be used as a vacation home or rental property.
  • Cannot purchase a home from a close relative such as your spouse, parent, grandparent, child or grandchild.
  • Must make less than $75,000 for a single taxpayer or less than $150,000, if filing jointly.


About the $8,000 tax credit:

  • Use as downpayment or closing costs -- Initially, the tax credit was designed as a refundable credit on buyers' tax return next year -- either up to $8,000 or 10% -- whichever came first. Now, a new HUD initiative allows qualifying first-time home buyers to receive these funds upfront to be used as a down payment or money towards closing, as announced by U.S. Housing and Urban Development Secretary Shaun Donovan. This has been referred to as a bridge loan.
  • FHA-approved lenders, only -- At this time, only the Federal Housing Administration (FHA) has issued guidance regarding the monetization of the first-time home buyer tax credit. Home buyers using FHA-approved lenders can apply the tax credit to their down payment.
  • Home buyers must pay the 3.5 percent -- While the $8,000 tax credit can be used for the down payment or closing costs, home buyers must still come up with FHA's required 3.5% down payment on their own.


For more information on the $8000 tax credit, review these Q&A's from the IRS: http://www.irs.gov/newsroom/article/0,,id=206293,00.html


More relevant information can be found on the following links:

http://www.federalhousingtaxcredit.com/2009/home.html


http://portal.hud.gov/pls/portal/docs/PAGE/FHA_HOME/LENDERS/MORTGAGEE_LETTERS/2009_MORTGAGEE_LETTERS/09-ML-15%20USING%20FIRST-TIME%20HOMEBUYER%20TAX%20CREDITS.PDF

As in any financial transaction, we of course recommend consulting with your financial or tax advisor for implications specific to your situation. Call us today if you need referrals to any of our lenders, or for any real estate question, at 702.285.1990.