$8,000 First-time Homebuyer Tax Credit

In February 2009, the Obama administration passed another stimulus bill into law approving up to $8000 as a refundable tax credit for first-time homebuyers. With home prices falling, interest rates at all time-lows, and the government providing financial support for first-time buyers, there has never been a better time to buy a home.

What does the tax credit do for me?

The American Recovery and Reinvestment Act of 2009 (The official name of the tax credit) has a few key components that home buyers should be aware of. Most importantly … it’s for first-time homebuyers and the credit does not have to be paid back. The credit is equal to 10% of the home's purchase price or a maximum of $8,000.00, and is available for any home bought on or after January 1, 2009 and before December 1, 2009.

Do you qualify for the tax credit?

• You must buy a home between January 1, 2009 and November 30, 2009
• The home is located in the United States.
• The home is your primary residence.
• You cannot have owned a home in the last three years.
• Your modified adjusted gross income (MAGI) needs to be less than $75,000 annually (individual) or $150,000 annually (married). However, even if your salary exceeds these amounts, you may still qualify for a partial tax credit. If an individual makes greater than $95,000 or a couple makes greater than $170,000.00 then the tax credit is reduced to zero. For individuals and couples who’s MAGI falls in between these ranges the tax credit is reduced proportionally.

You need to understand the legal definition of a first-time homebuyer

With all this talk about first-time homebuyers, let's be sure that you understand exactly what the government defines as a first-time homebuyer. The law defines “first-time homebuyer” as a buyer who has not owned a principal residence during the past three-year period prior to the new home purchase. In addition for married couples, the law looks at both parties individually but it affects the couple as one. In other words, if you have not owned a property  in the past three years but your spouse has owned a principal residence, neither you or your spouse qualify for the tax credit.

However, the tax credit can work for unmarried joint purchases where one party can allocate the credit amount to any buyer who qualifies as a first time buyer. So a parent may jointly purchase a home with a son or daughter allowing the child to get the tax credit. In addition, ownership of vacation or rental properties that are not used as primary residence do still qualify as first time home buyers for the tax credit.

MYTH: You will need to repay the $8,000 Federal Tax Credit.

FACT: This is a Credit, Not a Loan!

Unlike the first tax credit enacted in 2008, the new credit does not have to be repaid. The money is yours as long as you do not sell the home in the three years following your purchase. 

Use file IRS Tax Form 5405 to claim the $8,000 First-time Homebuyer Tax Credit. The IRS recently posted a revised version of the original Form 5405. The updated version reflects changes pursuant to the American Recovery and Reinvestment Act of 2009 (commonly known as the 2009 economic stimulus plan) that passed in February 2009.

Form 5405 and instructions can be downloaded in a single PDF file from the IRS website. To access it, go to irs.gov, then click on “More Forms and Publications” on the left side of the page. Under the heading, “Download forms and publications by:,” click on “Forms and Instruction number.” Finally, search for Form 5405 in the Product Number field.

Use Your Tax Credit Towards a Downpayment!

Those who qualify for the $8,000 tax credit will be able to apply for downpayment assistance through the state of Florida or the Federal Housing Administration (FHA) before closing on the purchase of the home; then repay the amount borrowed when they receive their tax credit.

** YOU NEED TO ACT QUICKLY! You only have until November 20, 2009 to find a home, secure financing, and close on the transaction in order to receive your $8,000 tax credit/downpayment assistance. **

QUESTION: What Properties are Eligible?

ANSWER: The 2009 First-time Homebuyer Tax Credit may be applied to primary residences, incluing single-family homes, condos, townhomes and co-ops.

QUESTION: How Much Will the Credit Be?

ANSWER The maximum allowable credit for homebuyers is $8,000. The amount of your tax credit will be determined by the following factors:

1. The Price of the Home (the credit is equal to 10% of the purchase price of the home, up to $8,000.)
2. Your Income (single buyers with incomes up to $75,000 and married couples with incomes up to $150,000 may receive the maximum credit.)

QUESTION: If My Income Exceeds These Limits, Can I Still Get a Credit?

ANSWER: Yes, you may still be eligible. The credit decreases for buyers who earn between $75,000 and $95,000 for single buyers and between $150,000 and $170,000 for homebuyers filing jointly. The amount of the tax credit decreases as income approaches the maximum limit. Homebuyers earning more than the maximum qualifying income (over $95,000 for singles and over $170,000 for joint filers) are not eligible for the credit.

Don't miss out on this once-in-a-lifetime opportunity! 

If you've been thinking about ditching the renter's life, take a look at my listings, check out our HOT Properties, or search for a home on the MLS. If you find the home of your dreams, contact me and we'll go look at it.

Don't worry; I'll help you sail smoothly through the home buying process!

Still Not Sure You Understand the $8,000 Federal Tax Credit for First-time Homebuyers?

I am happy to take the time to answer any questions you may have about the tax credit. Click Here to contact me.

ARE YOU PLANNING TO USE THE FIRST-TIME HOMEBUYER TAX CREDIT FOR YOUR DOWNPAYMENT? Be sure to check ahead with your lender to be sure they accept the tax credit towards downpayment. Keep in mind that even if a lender accepts the credit toward your downpayment, most still want to see assets and that you can bring at least 3.5% cash to closing.

The News the Affects You!

Get the latest news on incentives and programs for new homebuyers:

(Want ALL the news? Click Here!)

$8K tax credit buyers should check fine print IRS spokesman Michael Dobzinski says misconceptions abound, and buyers should understand the details before they close. Read more.

IRS cracking down on false tax credit claims Not everyone claiming the $8K first-time homebuyer tax credit qualifies, and the IRS is investigating if it suspects fraud. Read more.

Push to expand homebuyer tax credit Realtors and others are lobbying to increase the cap on the $8K tax credit to $15K and extend it into mid-2010. Read more.

Moving mortgage rates cause problems Rates' ups and downs in recent weeks surprised some buyers in the middle of the purchasing process and nixed deals. Read more.

Mortgage rates fall from 7-month high Rates for 30-year home loans fell to 5.38% this week after soaring to a seven-month high last week. Read more.

MBA Supports Proposal for $15,000 Tax Credit for All Home Buyers RISMEDIA, June 17, 2009-David G. Kittle, CMB, chairman of the Mortgage Bankers Association, issued the following statement in support of S. 1230, The Home Buyer Tax Credit Act of 2009: Read more.

Young people find now is time to buy homes Today's economy and the $8,000 tax credit are helping young people who couldn't enter the housing market a few years ago. Read more.

Senate Renews Push to Expand Home Buyer Tax Credit to $15,000 RISMEDIA, June 12, 2009-Lawmakers are pushing to revive legislation in the Senate that would almost double an $8,000 tax credit for first-time home buyers and expand the program to all borrowers. Read more.

NAR backs move to expand tax credit A group representing 1/3 of American businesses wants the $8K tax credit expanded to $15K and applied to all buyers. Read more.

Get the most out of $8K tax credit For some, it's better to wait until 2010 to take the homebuyer tax credit and increase 2009 paychecks. Read more.

DOWNPAYMENT ASSISTANCE BACK ON AGAIN! Details of FHA's $8K downpayment advance
HUD says FHA borrowers need at least 3.5% down, and consumers cannot tap into it until lenders flesh out details. Read more. http://www.floridarealtors.org/NewsAndEvents/n1-052909.cfm

Mortgage rates rise, remain below 5%
Rates on 30-year mortgages rose this week to average 4.9%; most analysts predict more increases. Read more. http://www.floridarealtors.org/NewsAndEvents/n2-052909.cfm

11% of Florida homes in foreclosure process

Florida ranks first nationally for homes in foreclosure and is the only state in double digits. The national rate is 9.12 percent. Read more. http://www.floridarealtors.org/NewsAndEvents/n3-052909.cfm

Make that "Not So Good News": Stimulus Funds Not Available for Down-Payments

HUD ACTION ALLOWS HOME BUYERS TO USE $8,000 TAX CREDIT FOR DOWNPAYMENTS ON FHA-INSURED LOANS

RISMEDIA, May 16, 2009-HUD Secretary Shaun Donovan’s decision to allow consumers to use the $8,000 first-time home buyer tax credit to help cover their downpayment and closing costs on FHA-insured mortgages will be a big boost to the housing market, according to the National Association of Home Builders (NAHB). More ...

DOWNPAYMENT ASSISTANCE

First-time homebuyers will soon have another option if they want to use their $8,000 tax credit toward a downpayment. According to HUD Secretary Shaun Donovan, FHA-approved lenders will soon be able to issue a short-term bridge loan equal to the tax credit. Buyers will then pay back the bridge loan after receiving their tax refund. Donovan hopes to have the details available within a few days.

Read the full story:
http://www.floridarealtors.org/NewsAndEvents/n1-051309.cfm

TWO POINTS

The $8,000 first-time homebuyer tax credit has received a lot of attention lately, but it has also overshadowed another big reason to buy a home now: record-low interest rates. In May, 30-year mortgage rates of 5 percent were widely available. That's down from January's already-low 5.8 percent, and two percentage points less than in August 2008. How important is two points? On a $200,000 home, a buyer could save $257 per month ($3,084 per year) by buying now rather than last August. On a $200,000, 30-year fixed rate mortgage, the monthly payment difference is:
• 7 percent: $1,330 monthly (rates in August 2008)
• 6 percent: $1,199 monthly (rates in December 2008)
• 5 percent: $1,073 monthly (rates in May 2009)

© 2009 FLORIDA ASSOCIATION OF REALTORS®

A COMFORTABLE MORTGAGE

During the real estate boom, many homebuyers were surprised at the amount of money a bank was willing to lend - and many who took the full amount now face foreclosure. As banks struggle to reinvent lending, Bank of America has debuted www.BankOfAmerica.com/HomeLoans . The Web site not only includes a calculator to determine the maximum amount of money a buyer can borrow, it also includes calculators to help buyers determine how much debt they can comfortably take on. Bank of America says it designed the site to be easily understood and to help consumers face a variety of contingencies, including the maximum payment that an ARM could potentially cost. The new site includes BofA products, such as the Flat Fee Mortgage Plus, which has no application fee and a single closing fee; it doesn't always include some standard costs of homeownership, such as property taxes, homeowners' insurance or prepaid interest.

Source: The New York Times, Bob Tedeschi (05/08/2009)
© Copyright 2009 INFORMATION, INC. Bethesda, MD (301) 215-4688

New Homebuyer Tax Break Gets Sudden Life

The Senate plan would provide an additional homestead exemption worth 25 percent of just value, up to $100,000 of value. The proposal would also reduce a nonhomestead assessment cap to 5 percent from 10 percent - a carrot to get the needed 60 percent voter approval in November 2010.

Read the full story: http://blogs.tampabay.com/buzz/2009/04/new-homebuyer-tax-break-gets-sudden-life-in-senate.html