Good Evening, Everyone!

The "As The Stomach Turns" Financial Bailout/Financial Rescue struggle continues.  I think the only ones benefiting from such a struggle are the manufacturers of Pepcid and Mylanta heartburn potions!

But there are little glimmers of hope these days, here and there.

One involves the First Time Homebuyer Incentive - $7,500 of Tax Credit, from the Fed. 

Yes, it needs to be paid back, interest free, over 15 years, or when you sell, whichever comes first.  If you stay in your new home for the full 15-year term, you'll pay back exactly $500 each year, on your annual Income Tax Return.

But, surprisingly, our phone lines and email has included many questions about the new program. 

The First Time Buyer Incentive was part of the massive Housing Relief Package that came out of Congress a few months ago, before the current Crisis Legislation became all-consuming!

Most first time homebuyers qualify for the credit, so long as your total household income is less than $75,000 (for single taxpayers), or $150,000 (for couples filing jointly).  There is also a time limit to the credit - it only applies to homes purchased between April 9, 2008 and July 1, 2009.

Rob Dietz, Director of Tax for the National Association of Home Builders, estimates the average first-time buyer pays $5,000 in federal income tax.   If this is the case, the typical first-time buyer could pay no taxes in the year immediately the home purchase, and still reduce taxes another $2,500 the next year, or receive a tax refund check for the $2,500 difference.

In addition to the U.S. Program, there are several local and state programs that offer incentives to first time buyers.  Some, however, cannot be used in tandem with the Federal Incentive, but a few can.

In Chicago, first-time homebuyers (and non-first timers in certain targeted city neighborhoods), can enjoy a direct income tax reduction of up to 20% of mortgage interest paid, up to a maximum of $2,000 each year, for as long as you own your home.  The maximum allowable family income, for a family with three or more people, is $105,560 in city-target neighborhoods, $86,710 in non-targeted city neighborhoods.

In tax areas, the maximum single-family home purchase price to qualify is $398,315 in targeted areas, $325,894 in non-target neighborhoods across Chicago.

Here's more information on the City of Chicago Tax Smart Mortgage Certificate Program.

The I-Loan Program is similar, for houses throughout Illinois.

Unfortunately, you cannot take advantage of these programs and the U.S. Program together.

Other Chicago-area communities have special Down Payment Assistance Programs available for buyers that purchase their new home within their communities.   These incentives CAN BE COMBINEDwith the Federal First Time Homebuyer Incentive Program.

In Kankakee, about 50 miles south of Chicago, the city offers as much as $7,000 down payment grants, and up to $1,500 in closing cost credits,to first-time buyers in their community.  The family income ceiling, however, is comparatively low - $48,650.  This Down Payment Assistance Program, however, can be used in combination with the U.S. First Time Homebuyer Credit.

Both the Chicago and IL Programs offer lender contacts who offer slight discounts on mortgage interest rates.  In some cases, these local and state programs do not have to be repaid. 

However, both programs include Recapture Provisions - if the subject property is sold within nine years, at a profit, and the owners' household income increases beyond a maximum level allowed, the buyer may have to pay a pro-rated portion of the tax credit earned.

See our post today @ BlogChicagoHomes.com for more information, as well as a link to Marilyn Kennedy Melia's article in last Sunday's Chicago Tribune Real Estate Section.

DEAN & DEAN'S TEAM CHICAGO