As you all know, right now is a phenomenal time to buy a home. The best benefit out there is for the First-Time Home Buyer. Not only are home prices the most affordable we have seen in the past 13 years, the government is offering an $8000 tax incentive. Here is a quick Q & A to help understand some of the points on this incentive:
How much is the credit?
The tax credit would be $8,000 or 10% of the purchase price, whichever is less.
What type of purchase is eligible?
Similar to the $7,500 tax credit included in the Housing and Economic Recovery Act of 2008, the $8,000 tax credit included in the 2009 economic stimulus plan is available for the purchase of a principal residence by first-time homebuyers.
Who qualifies for the first-time homebuyer credit?
According to the IRS, any taxpayer who has not owned a home during the 3 years prior to the date of purchase can qualify for the credit.
And I really don't have to repay the credit?
No. This is a change from the previous $7,500 tax credit. However, if the home is sold within three years of purchase, the credit will be reversed.
Are there income limitations on the tax credit?
The tax credit begins to phase out for individuals with adjusted gross income over $75,000 ($150,000 for joint filers).
EXAMPLE: If an individual has a tax liability of $4,000 and was a first time home buyer, they will, instead of paying $4,000 to the IRS, get $4,000 back.
Remember also that when purchasing a home through FHA that the minimum required down payment is only 3.5% and FHA will allow the seller to contribute up to 6% of the sale price for closing costs, pre-paids and impounds. So if the buyer is tight on cash 3.5% is much better than a regular conventional 10% down payment. FHA rates are still in the 5 percent range for a 30 year fixed!
As always, if you or any of your clients have questions regarding any loan programs I would be happy to sit down with you or feel free to give me a call at the number below or shoot me an email.
Jason T. Beckington
Sr. Mortgage Planner
State Financial Services