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The Temporary $7500 Tax Credit

Mortgage and Lending with NEXA Mortgage NMLS 1320876

Is the new temporary $7500 tax credit good for your customer?  First you have to know who qualifies and how it works.  Then your client can decide if it is in their best interest to take the Tax Credit.

Buyers must be first-time home buyers which also includes anyone who has not owned a home in the past three years.  They cannot earn more than $150,000 for joint filers and $75,000 for individuals.  It is not available for non-resident aliens. 

How does it work?  The credit is the lesser of 10% of the purchase price or $7,500.  Since there are not many homes that sell at or under $75,000 most families can take the full benefit of $7,500.  People who purchase a home between April 9, 2008, and June 30, 2009, qualify for the tax credit.  This is a dollar for dollar deduction against your tax bill.   This means a couple who bought a home, and might have had to pay $3,500 in taxes would now be able to receive a tax credit and a refund of $3,500.  If they were getting a refund of $1,000 before, now could get a refund of $8,500.  Sounds good on the surface. 

The couple would have to pay back this money over 15 years at $500 per year.  There are ways to make this sound good but in essence it is a $7500 interest free loan from the government.  If you sell the house before the 15 years are up, the balance of the home is expected to be paid back.  If the home value is not there, it is to be forgiven.  Also, if you die, it is to be forgiven.  In any case, the buyer gets no benefit from this Tax Credit at closing.

I think as always, it is an individual choice and should be considered on a case by case basis.  Some people could do very well with this while it can really cause serious problems with others.  Always refer your client to an experienced Mortgage Banker who will work out the numbers, disclose the facts and help the client make an informed decision. 

For more indepth information about the Tax Credit or any mortgage question, please do not hesitate to call or write to me.

Comments (4)

LS Rogers Realty
LS Rogers Realty - Richardson, TX

I learn a little more each time this topic is brought up. If I'm fuzzy, I know my clients are as well. Here's to mortgage professionals.!

Sep 24, 2008 03:25 PM
Tony Bolodar
NEXA Mortgage - Plano, TX
Residential Mortgage Loan Originator, #1320876

Dont worry, many of us are fuzzy as well.  Only because what we read on Monday maybe different by Wednesday.  haha.

I am really watching this weekend to see what they do.  If the deal is struck, requirements may be tighter but I think we will see business again!!! 

Stay tuned.

PS: If your looking for someone to partner up with, give me a call.  I am always looking for good Realtors to partner with

Sep 25, 2008 12:25 AM
Lisa Friedman
Alliance Realtors - Bedminster, NJ
Central New Jersey Real Estate

So far I have not heard one single person mention this other than on Active Rain.  It is amazing how much information we learn here on the Rain that we might not hear about in regular life if we miss the news that day.

Oct 14, 2008 12:57 AM
Tony Bolodar
NEXA Mortgage - Plano, TX
Residential Mortgage Loan Originator, #1320876

Thanks Lisa,  I am not so sure this is the best thing for buyers.  They cannot get it at closing and it is something that they will have on their taxes for fifteen years.  It may be good today but it is very much like a zero percent loan.


Oct 14, 2008 11:45 AM