Saving money.... ouch... In today's market, not as easy for some depending on their situations. I know some people that make a good living, but that they have a large family to support. Sure, define a good living, which would be different for each one of us. But the bottom line is that many of us could use help one way or another when it comes to buying a home.
I wrote a post a few weeks ago about the tax credit for first time homebuyers and giving insight of what it was all about. Before I go further about this tax credit, let's define first time homebuyer. It is someone that has not owned a home in the last 3 years from July 2, 2005, through July 1, 2008. And just a FYI, this tax credit is still good for anyone that buys a home prior to July 1, 2009.
Now, did you realize that you could actually use this first time homebuyers tax credit prior to actually buying a home and filing your tax returns? That's right, you heard it correctly, you can actually tap into this tax credit prior to buying your new home. The 7500 Tax Credit can be a great tool in buying.
So, the main question is : As a first time homebuyer, is there a way that I can access the monies allocated for the tax credit sooner, prior to filing my taxes and buying the home?
The answer to this is YES.... But how? If you believe that you are buying a home prior to the deadline date of July 1st, 2009, you can actually reduce your income tax withholdings. You can actually reduce your tax withholdings, 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 7500 tax credit should be thought about when buying a new home.
FYI - The seller-funded DPA's are back on the talking blocks. For more information in obtaining your dream home, please read : Part 2 - Seller-funced down payment assistance programs might appear again.
Update March 28th, 2009 - $8,000 first time homebuyers tax credit
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For more information on FHA loans, please go to this link. The FHA Expert
For more information about the 2008-2009 Tax Credit for First Time Homebuyers : 2008 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
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Jeff - You and I are birds of a feather my friend. I've been telling that to my low-medium income first timers for awhile. Of course, I always tell them to talk to their tax consultant to find out exactly how much they can afford to tweak their withholdings.
I still get a little amazed at the ones who are reluctant to to do that because then they're afraid they won't get a big return when they file like they always do. I then explain to them that the object is to not get a big return when you file. All that means is that Uncle Sam had your money all year long, interest free. I explain to them that the object is to get as little as possible back.
Personally, I would rather pay $500 then get $500 back. That way I know I had my money all year long, interest free.