First Time Homebuyers - In my opinion, this is one of the best times to buy in the last 10 years. Here are a few reasons why.

• Home values are done 10% to 15% in many areas

• Many foreclosures to choose from, possibly getting a better deal

• Mortgage interest rates are just about the lowest in 25 years - interest rates from 4.5% to 5.5%

• $8,000 first time homebuyers tax credit - Up to $8,000 depending on your purchase price
  

The $8,000 tax credit was revised in the 2009 stimulus bill. So how does the first time homebuyers tax credit work and how different is it from last years $7,500 tax credit?  It's very simple and I won't got into full details, just the basics. But let's first define a first time home buyer - someone who had not owned a home 3 years previous to January 1st, 2009. In regards to the $7,500 tax credit, you couldn't own a home from July 2, 2005, through July 1, 2008. This revived tax credit is good for any first time homebuyer buying after December 31st, 2008 and up to November 31st, 2009. 

So what do you need to know?

• The maximum tax credit is $8,000 for either a single taxpayer or a married couple filing jointly. It is 10% of the purchase price. So in order to get the maximum credit, the purchase price must be $80,000 or more.

• This tax credit for first time home buyers is not paid back like the first one of $7,500.

• There are income restrictions which can range from $150,000 to $170,000 for a joint return or from $75,000 to $95,000 for a single return. There are other factors involved when determining the actual income restrictions.

• This $8,000.00 tax credit can't be used if you are buying a home from a close relative, which is to include a spouse, a grandparent, child, or even a grandchild.

• You can only use this tax credit for your primary home, not for a second home or an investment property.

• Purchasers who utilize revenue bond financing can use this credit. With the $7,500 tax credit, this was not allowed.

• If you sell your home within 3 years of the purchase date, the entire credit is recaptured.

There are a few ways to obtain this $8,000 tax credit for first time home buyers. You can certainly file for your monies after you buy your dream house. You can also file an amended return if you buy your home after April 15th. But there is one other way to obtain some of this tax credit before you buy your home. Here is how.

If you believe that you are buying a home prior to the deadline date of December 1st, 2009, you can actually reduce your income tax withholdings. You can reduce up to the amount of the credit allowed, which will allow you to accumulate cash. This is done by raising your take home income, in which the money accumulated can then be applied to the purchase of your new home.

I am not a tax accountant, so it is mandatory that you speak to your accountant. But you would need to adjust your withholdings amount on your W-4 through your employer or if self-employed, through your quarterly estimated tax payments. Here are the rules and guidelines for your income tax withholdings.  IRS publication 919 in how to adjust your withholdings. Keep in mind, if you don't use this money, you will have to repay it back. Overall, the $8,000 tax credit should be thought about when buying a new home.

Disclosure : This information is based on what I have read in regards to the new stimulus bill of 2009 for the $8,000.00 tax credit. Please talk to your tax accountant when it comes to the specifics of this tax credit and in regards to gifts and what is allowed before being taxed.

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For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!

Copyright © 2009 by Jeff Belonger