Wow, the government will be giving away an $8000 prize to first time home buyers this year.  Sounds like the Main Street version of Who Wants to be a Millionaire doesn't it? 

Can you (or your customer) qualify for this prize? Well maybe, but there are a ton of "ifs" that go along with the prize money.

I'll call it prize money because a first time homebuyer who can follow all the rules and regulations has a pretty good chance of getting the money. But as with anything run by the government, there are hidden disqualifers all along the way.

Did anyone tell you that there is no real check? The prize money comes from a tax credit that you can use next time you file. (Oh, and if you make too much money, the prize will be smaller).

So how does it work? Right now, if you go to a MAJOR lender, think Wells Fargo or Bank of America, they will prequalify you for your home loan.  They have IRS forms that you will also fill out, which is the application for the prize money.  These forms may also be available in the IRS site, but it's hard to tell which one to use.

If it appears that you will qualify, these MAJOR lenders will lend you the $8,000 prize money when you sign over your right to the prize (tax credit) to them.  You may use the $8,000 as additional but partial down payment in the purchase of the house--after you have put down 3.5% of your own money (FHA requirement).

First to qualify for the money you need to be a first time homebuyer--meaning that you have not owned y residence (home) for the last three years.

Then, you have to be married, filing jointly. (Sorry, if you are married but file seperately, or are single, the prize goes to $4,000).

Then you have to find a house that you want to buy, and actually close the transaction BEFORE December 1, 2009, meaning that you should schedule the closing on or before Thanksgiving week. So, since in most areas this closing is likely to take a month--you need to have an accepted offer by Halloween. That means you can shop 'til you drop from now until October--basically 3 months. Then make your deal. Then go to closing.

Then you have to not owe taxes, or make too much money so the prize will not be melted by your errors in finances. Oh, and be sure your student, loans are up to date. If the prize melts, you may be on the hook to repay the loan given by your lender.

Of course you need the 3.5% down payment of your own funds to buy the house. Which oddly you would need whether or not you were trying to win the $8,000 prize as well.

Good news/bad news: If you get the prize, but then sell the house within the next 36 months, you'll owe it back. If you stay longer than that, you got the money for nothin'.

So here's my question, since the $8,000 really just lowers the mortgaged amount, not the down payment--and may have to be repaid, will this actually help first time homebuyers?

Dane Hahn, Broker

NH and FL