The government is handing out money as a long term loan. Take advantage of this!!!
The Housing and Economic Recovery Act of 2008 produced the 7500 tax credit for First Time Homebuyers. In this case, to be eligible for the tax credit, a first time homebuyer is defined as : someone who had not owned a home from July 2, 2005, through July 1, 2008. In order to become eligible, you have to buy your home after April 8, 2008, and before July 1, 2009. I will go over some of the other guidelines later.
When it comes to buying a home, you can't borrower money to use as a down payment or for closing costs. And you can get county or state assistance under certain programs or grants, to use for your new home purchase. But when it comes to FHA loans, you can actually get 100% gift monies from a relative. It's called a gift because HUD doesn't want the burden of you having to pay back a loan after buying a new home. Hence why this 7500 tax credit is still a great way to help you get into a new home prior to July 1, 2009. And you can still get up to 6% seller help even if you were to get a 100% gift from a family member.
So, how does this tax credit work? Please read below for some details :
- The maximum tax credit is $7,500 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 $75,000 or more.
- This credit is an interest free loan and the credit must be repaid over a 15 year period. This loan must be paid back by including one-fifteenth of the amount credited, or $500, as an additional tax on their 2010 return.
- 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 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.
There are some other restrictions, examples, and explanations to how this tax credit can work. For more information, please read : Tax Credit for First Time Homebuyers
An example of how this tax credit could work :
If you were to receive a $2,000 refund when filing your return, and you were eligible for an additional $7,500 if you choose to receive this credit, this means that your refund will now be $9,500 instead. On the flip side of things, if you were to owe $2,000, you would actually get back $5,500 instead of owing money.
One thing to keep in mind.... you can use this money for anything. How could you use this money?
- You could use it to repay other loans or debts.
- To invest in the market or CD's.
- To buy another property such as an investment property. But you would need to understand the seasoning requirements when putting this kind of money into your bank account.
- Use the money to fix up your new home that you just bought.
- To start a business.... to help a business grow.
- And as mentioned, FHA loans allow for 100% gift monies from a relative. Maybe you could thank them later on and give them the money back down the road. I know I wouldn't want this hanging over my head. As of January 1st, 2009, when buying a home with a FHA mortgage, you now need 3 1/2 percent down of your own money (gift monies allowed).
Feature blog : How to use the tax credit before you even get it !!!!
Lastly, 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.
Update as of March 28th, 2009 - 2009 first time homebuyers tax credit
Happy house hunting. For a creative way to help you finance your new home, please don't hesitate to contact me. There are so many options out there and you need a creative loan officer that knows more than just the basics.
- FHA Loans - USDA Loans - Conventional Loans - VA Loans - Experience & Knowledge at its BEST !!!
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For more information on FHA loans, please go to this link. : The FHA Expert
For more information on how you can obtain your dream home, please click here : Mortgage Financing Options
For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags
Copyright © 2008 by Jeff Belonger
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