Homebuyer Tax Credit

The American Recovery and Reinvestment Act provides for a tax credit equal to ten percent of the cost of the home, up to a maximum credit of $8,000. The credit is available to people who have not owned a home in the past three years for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009. The credit does not require repayment if the buyer remains in the home for three or more years. There are income guidelines on the credit. Individuals with an adjusted gross income up to $75,000 (or $150,000 if filing jointly) are eligible. The credit is phased down for those earning more and is not available for those with an income above $95,000 (or $170,000 if filing jointly.) Most of the mechanics of the credit will be the same as under the 2008 rules: the credit will be claimed on a tax return to reduce the purchaser's income tax liability. If any credit amount remains unused, then the unused amount will be refunded as a check to the purchaser.

First-Time Homebuyer Tax Credit - FAQ's >> - PDF

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Using The First-Time Home Buyer Tax Credit As Down Payment

On May 29, 2009, the U.S. Department of Housing and Urban Development (HUD) announced a program that allows borrowers to use the first-time home buyer tax credit for a down payment or closing costs on a FHA-insured mortgage. Since the announcement NAR has received many inquiries from Members regarding how this impacts first-time homebuyers in their state.

How To Use The Credit

Currently, 11 state housing finance agencies (HFAs) offer a product buyers can use that will effectively monetize the tax credit for down payment purposes. Generally, these programs offer tax credit advances with second liens on the home being purchased. The second lien may be “soft” (silent) or require monthly payments but may not result in cash back to the borrower and may not exceed the total amount needed for the down payment, closing costs, and prepaid expenses. The 11 states offering these programs are Colorado, Delaware, Idaho, Kentucky, Missouri, New Jersey, New Mexico, Ohio, Pennsylvania, Tennessee, and Virginia. Other states are developing programs so members are encouraged to regularly follow up with their respective HFA.

States Without A HFA Program

For all other states where such HFA programs do not exist the tax credit may not be used to fund the 3.5 percent downpayment required for FHA loans. As always, the 3.5 percent down payment may be a gift from a family member, employer or nonprofit, charitable organization. FHA-approved nonprofit organizations and FHA-approved lenders may monetize the tax credit for down payments in excess of 3.5 percent, closing costs and interest rate buy downs. Mortgage industry leaders have indicated that this type of product may not be immediately available to consumers.

To post your own Tax Credit Counter:

• Go to http://www.oneplusyou.com/bb/countdown


• Date is: November 30, 2009


• Text is: THE $8000 TAX CREDIT ENDS


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