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2009 First Time Home Buyer Tax Credit Update

Thursday, July 16, 2009
by Don Roth

Since we are now in the middle of July, I thought it to be important to remind buyers who are considering the purchase of a house that time is running out to take advantage of the credit. If you are going to purchase a home and take advantage of the credit, settlement must occur before December 1, 2009. As a reminder, here are some of the additional eligibility requirements.

  • A first time home buyer is one that has not owned a residence within the last three years.
  • Primary residences include single family homes, condos and townhomes.
  • The $8000 maximum credit is determined by 10% of the purchase price up to $8000. So it is very easy to see that any home purchase over $80,000 would qualify.
  • Single and married buyers with incomes of up to $75,000 and $150,000 are eligible for the full credit. After those limits, there are pro-rations up to a certain dollar amount before the eligibility is no longer available.
  • None of the $8000 can be used for a down payment but can be used for closing costs to finalize purchase.
  • And most importantly, this credit does not have to be repaid.

I have been asked many times by buyers “is the credit going to be extended for 2010?” My answer is I do not know. There are many variables, most political, that will play into any determination whether there is an extension for 2010. But remember, any extension can be changed or modified and could have many unintended consequences for buyers in 2010.

Why is now a good time to consider a purchase? Home prices are beginning to firm somewhat in the Central Pennsylvania market, and by the end of 2009, I think there will be the beginnings of appreciation in the overall market, albeit a small appreciation. And secondly, mortgage interest rates are still extremely attractive, currently in the area of 5.25%, meaning that the principal and interest payment on $100,000 is $552.20 per month.

Finally, if you need any additional information, please contact me at Don@DonRoth.com or if you want an idea of what is available in the market right now, in any price range, please go to my web site and click on the search listings button and you can find the home you have been looking for. Make it a great day.!!

2009 First Time Home Buyer Tax Credit

Monday, June 15, 2009
by Don Roth

Great News
2009 First Time Home Buyer Tax Credit
Revised Guidelines for a Home Purchase

On May 29, 2009 HUD announced improved guidelines to assist first time home buyers for the purchase of a home. Under the guidance, FHA-approved lenders can develop bridge loans that home buyers can use to help cover their closing costs, buy down their interest rate, or put down more than the minimum 3.5 percent.

The loans can't be used to cover the minimum 3.5 percent, senior HUD officials told reporters on a conference call Friday morning.

Thus, buyers applying for FHA-backed financing with an FHA-approved lender that offers a bridge-loan program can get a bridge loan to bring down the upfront costs of buying a home significantly but would still have to come up with the minimum 3.5% down payment.

There remain many sources of assistance for buyers needing help with the 3.5 percent down payment, including many state and local government instrumentalities and nonprofit lenders.

In addition, some state housing finance agencies, such a PHFA in Pennsylvania, have developed their own tax credit bridge loan programs, so buyers in states whose HFAs offer such programs can monetize the tax credit upfront to cover all or part of their down payment. These programs are separate from what HUD announced today.

The first-time homebuyer tax credit was enacted last year--and improved upon earlier this year--to help encourage households to enter the housing market while interest rates are low and affordability is high. The credit is worth up to $8,000 and is available to households that haven't owned a home in at least three years. The credit does not have to be repaid, and is fully reimbursable, so households can get their credit returned to them in the form of a payment

Who Qualifies?

First-time home buyers, who purchase homes between January 1, 2009 and December 1, 2009.

To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.

Which Properties Are Eligible?

The 2009 First-Time Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.

How Much Will the Credit Be?

The maximum allowable credit for home buyers is $8,000. Each home buyer’s tax credit is determined by two factors:

The price of the home—the credit is equal to 10% of the purchase price of the home, up to $8,000 The buyer's income—single buyers with incomes up to $75,000 and married couples with incomes up to $150,000—may receive the maximum tax credit.

If the Buyer(s)’ Income Exceeds These Limits, Can He/She Still Get a Credit?

Yes, some buyers may still be eligible for the credit.

The credit decreases for buyers who earn between $75,000 and $95,000 for single buyers and between $150,000 and $170,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit. Home buyers earning more than the maximum qualifying income—over $95,000 for singles and over $170,000 for couples are not eligible for the credit.

Will the Tax Credit Need to Be Repaid?

No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during the three-year period, the credit will be recouped on the sale.

Depending on the purchasers circumstances please check with a local lender in your area and if you are now sure, please contact me at your convenience.

Source: HUD and The National Association of REALTORS®

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