What happens if...?

I haven't heard of anyone using the credit for the down payment. I understand your concern but I think if the lender qualifies them it's out of our hands.

Hi Marti~  From what I am understanding, if you don't stay in the house for a certain amount of years, you would have to pay it back. 

no legit programs are on the market to use the money for down payment or closing. Some of these loans will go bad. Would still happen without the credit

Tony

Good question but this is just like the ARMs.  "Who cares what will happen in 2 years.  I just want in the house.  We can figure out what will happen later."

People do not change, just the program.

Marte, you alluded to homeowners not being able to pay their mortgages; let me say this at the outset they were merely victims of the high stakes robbery that took place in this country.  The bankers and politicians are to be blamed, not homeowner.  If a normal 30year fixed rate mortgage is given to an individual, I do not see why it would be a problem, unless there was some unforeseen event occurred in his life.  

I think the tax credit is a good program for home buyers and I hope they will continue with it for the foreseeable future

If they don't live in the home for 3 years, I would bet they would owe the irs a lot of money. Default or not.

Every incentive or program has its drawbacks.  The important thing is that buyers be fully informed of their options, the pros and cons, and their individual tax situation before moving forward.

I do not know the answer about the payback but I imagine they will have to "undo" the credit if they do not keep the house for a period of time.  A tax advisor in your state and a lender should give them the right answer.

As agents we can only "pre-qualify" their motive and then direct them to a good lender for financial qualification.  We then find them the best house that their loan/tax credit can buy.

What a GREAT question.  After some quick searching (I'm sure you searched as well) it's interesting to note that on IRS form 5405 (http://www.irs.gov/pub/irs-pdf/f5405.pdf) I couldn't find anything regarding foreclosure.  There isn't anything on foreclosure on the IRS First Time Home Buyer Credit Scenarios page either that I could see (http://www.irs.gov/newsroom/article/0,,id=206294,00.html).  The former financial advisor in me would echo Wayne's comment:  "If this question is important to you Marti, then you need to seek qualified advice from your CPA."

Wow I never looked at it that way. I guess there will be a percentage of higher risk buyers who would not have otherwise entered the market. After all, the lesser then investment, the less they have to lose! =o

Marte and all,

I apologize for this being so long.. but after I started thinking about the questions.... We have an activerain friend who might be able to help.  I hope I have not stepped on any toes.. and if I have or overstepped something I shouldn't do... moderator.. just delete it.. My thoughts are this might help answer questions from a CPA....

Charles Perkins CPA  is a wonderful activerain member and writes posts on tax issues all the time.  He is scheduled to be on my blogtalkradio show on Monday, Dec. 14th at 8:00 Pacific Time which is 9:00 a.m. Arizona time. 

The link takes you to the blog about Charles and a connection to the show.  It would be great if you could all call in and ask your questions on the program!  That way it might be a resource you could use in the future as you can copy the link to that particular program only, once it has aired and share your participation in the conversation.  The widget is great for websites.

If you can't make the show.. create a question list on the blog portion of the blogtalkradio post for the Charles Perkins show under comments and I will ask him your questions on the interview.. we also have a chat room if you do not want to call in and just listen.. you can post your questions in the chat during the show and we will discuss them.....

I am looking to make the blogtalkradio show a place to feature activerain participants across the country where we can talk about what each one does in individual areas and how using the activerain format and social media is working for people. I hope to increase the technology mix by one more level. Please let me know if you would like to be interviewed.

Call into blogtalkradio 347-994-193 on Monday, December 14, 2009 9:00 a.m. MDT

From a personal experience on the 8k credit... My nephew purchased a home this past year in Colorado thinking he would get the 8k credit (the agent AND the lender told him he would).  When he went to apply for the credit...... talking to two different CPA's....since he had owned a mobile home in the past, he did not qualify..I thinkthat rule has been changed.... but he was told he would have to pay back the 8k plus interest..... how that applies to foreclosure... is a GOOD question! 

I am going to send this post to Charles Perkins CPA... a good guy to subscribe to his blog and add as an associate!

Marte,

A taxpayer that purchased a home in 2009 as a first time home buyer and used the credit must use the home as a personal residence for a minimum of three years.  If they lose the home or move before this three year period is completed they will be required to pay the $8,000 credit back on their next tax return in full.

There is an interesting situation that does come up periodically.  If an individual has purchased real estate in the past, but never lived on the property instead they rented the property to others, they would be eligible for the first time homebuyer credit.  That is if they have never owned and used a home for a personal residence.

Marte,

Thanks for the encouragement.. My nephew owned the mobile home with the last 6 months before buying... it was the face that the lender and the Realtor thought a mobile home was not real estate.. the IRS thought it was.. so he is just out of luck.....

Charles.. thanks for coming over to the site.. and answering the quesitons so fast.. bottom line.. pay it back!  I look forward to talking with you in more detail on Monday.

Marte, great post...and I can see you received lots of useful information. What a great forum to get answers from those in the "know." ;-)