Revisiting the $7,500 First Time Home Buyer Credit
December 1st, 2008 Categories: For Buyers
There was a lot of attention paid to this a few months ago when it was first introduced, but everyone has kind of let it slide to the back burner since then… and that is a shame because this is an interesting time to be in the real estate market as a buyer.
First, let me cover a few basics:
- While termed a “First Time Home Buyer Tax Credit”. it really isn’t any of those things…
- If you haven’t owned a home for 36 months, you are a first time home buyer for the purposes of this program, so if you sold your home in 2005, and didn’t buy another… you are eligible. Obviously, you are also eligible if you actually ARE a first time home buyer.
- It is administered through taxes as a credit, but I would argue about it being a tax credit… It is actually a loan that interest free. In a nutshell, a FTHB (First Time Home Buyer) can get 10% of the purchase price of a principle residence (condo, single family… what ever) back in the form of a refundable tax credit, provided they meet the income requirements and other requirements of the program. Being a FTHB is the toughest one…
- As mentioned, it is actually a loan. It is paid back at the rate of $500/year for 15 years… unless you sell the home prior to that. In that case, you may be forgiven the amount of the loan above the increase in value of the property.
- Income limits for eligibility are $75,000 for single filers and $150,000 for joint filers.
- It is available for both new construction and resale homes.
- The Credit is equal to 10% of the purchase price of the home up to $7,500.
- The payback is $500/year for 15 years… interest free.
- It is scheduled to end July 1st, 2009.
There are a few reasons why this is a good time to start thinking about this. The first reason is that most home buyers spend about a month “in escrow” or waiting to close on their new home. So, people that are looking at homes now might not close until the end of December or even the beginning of January.
You can actually buy the house in 2009 and apply for the credit for the 2008 tax year… but it would need to be done early in the year… before completing your income taxes. So that means that we are entering the prime season for buyers to utilize the FTHB Tax Credit and not have to wait forever to get the money.
Here are a couple of links
- NAHB Special page for the FTHB Credit. This site is well put together and the information is very well presented…
- IRS article about the FTHB Credit. Information is top notch, but a little less readable than the NAHB site above.
- Find Your House here. And then give me a call.
One of my mortgage brokers has come across a couple of programs that allow 100% financing for primary residences. And there are some GREAT deals in the market place right now.
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how is this different from the first time home buyers grant?
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i already filed my taxes for 2008, but i am now looking for a home to buy and my morgage broker told me about the fthb credit but wasn’t sure if i could get it now since i filed me 2008 taxes. would i dtill be eligible for the fthb credit?
Brandy,
you should check with your accountant, but you should be able to file an amended return. Of course, time is limited to be able to get everything done.
Even if you aren’t able to take advantage of it for TY2008, you can still do it on the TY2009 return.
I am glad that the Federal government is giving a hand to first time buyers. I lost my house 2 and a half years ago. I still have to wait a few months to be eligible.
Does this thing work?
Did somebody try it on already?
It is advised to have an attorney who can help you renegotiate the terms of your mortgage. They can significantly lower your monthly payments.
Okay this is all fine & dandy, but what about people who have already defaulted on their credit?
It can be a great help for many first home buyers. $7.500 is not a little amount.
Point very well taken: a recession can be used to one’s advantage especially in real estate.
Thanks,
Mr. LM