First Time Home Buyer Tax Credit

First Time Home Buyer Tax Credit. – If you are buying a home for the very first time be advised that there are different first time homebuyer programs that are available to you. These programs will help you get your very first home at the best deal possible.

First time home buyer tax credit.

This is an ideal year to buy a home for first time buyers. The Obama’s mortgage program includes an $8,000 tax credit or 10% of the home’s price, whichever is lower, for Americans who are buying a home for the first time.

However, not everyone is eligible for this tax credit. A single homebuyer who makes more than $95000 a year or a married couple who jointly has a yearly income of $150000 will not be able to get the full amount of the tax credit. And a single buyer who makes more than $95K a year and a married couple who makes more than $170K are not eligible for the tax credit at all. However, if your income does not belong to any of the brackets mentioned above, then you are indeed qualified for the full amount of the tax credit.

If you are eligible, the $8,000 tax credit (or 10 percent of the amount of the home) is fully refundable. You can claim this amount on your next tax return if you buy a home this year. Even if the amount of your federal tax liability is less, the total amount of the tax credit should be refunded.

Federal Housing Administration Loans.

With this kind of loan the only required down payment would be 3.5% of the purchase price of the house. Unlike a conventional loan which would require at least 20% down payment. This kind makes purchasing a home for the first time significantly more affordable. This is just yet another mortgage program of the government to make it more affordable for everyone to own a home. Again, not everyone qualifies for this program. In order to be eligible for this loan, your monthly mortgage payments after you have purchased the home should not be more than 29% of your monthly gross income. And for one to get approval, he/she should have a good credit standing.

Special Loans for first time home buyers.

Many lending institutes offer special packages for people who are buying a house for the first time. Included in the package is a considerably lower down payment. At least less than the conventional 20% down payment required by most lenders. Other creditors who will not give you a lower down payment offer a program where you can get a piggyback loan for you to be able to reach the required traditional 20% down payment.

Usually, if you apply for a loan that has a down payment which is less than the traditional 20% of the purchase price of the house, you would be required to get a Private Mortgage Insurance. This is required by creditors for them to use as security in the event that their borrowers suddenly default on their payments. The cost of this insurance is normally 0,5% of the mortgage amount per annum. And usually by the time the borrower has paid 20% of the loan, creditors will allow the borrow to cancel the insurance.

When you are considering purchasing a home for the first time, it would be advisable for you to research on all your options. If you take advantage of the programs mentioned above, you would have saved a couple of thousands of dollars, which can increase your savings significantly. Also, check out your state’s federal program. Some states in the US offer additional grants that can help in making your first time home even more affordable.

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Homeowners can find cash with the homeowners tax credit

Benefits of the tax credit

Homebuyers can find cash today with the $ 8,000 first-time homebuyer tax credit. The credit is the showpiece of the 2009 American Recovery and Reinvestment Act. It was designed by the government to boost housing sales and help spur the market to recovery. Projections are that the plan was successful. Chief economist for the National Association of Realtors Lawrence Yun said, “According to our projections, homebuyers will purchase an additional 300,000 homes in the coming year as a result of the tax credit.”

Overall, the tax credit was a help to the nation’s recovery efforts. Yun said, “We think this year’s tax credit will certainly have a much bigger impact because it is a true tax credit which is also refundable. For instance, if you owe $ 1,000 in taxes and qualify for the first time homebuyers credit, you receive a tax refund of $ 7,000.” Yun believes the credit will continue to bring down housing inventories and stabilize housing costs.

Tax credit for first time homebuyers

There are rules along with the first-time homebuyer tax credit. Here are the main ones:

• It does not have to be repaid unless the home is sold within three years
• It is available to homes purchased between January 1st and December 1st of 2009.
• Restricted to individuals with AGI of $ 75,000 or more and couples with AIG of $ 150,000 or more
• The tax credit is for up to 10% of the purchase price, to a maximum of $ 8,000
• The credit can be taken in 2008
• It applies to first-time homebuyers, or those who have not owned a home in three tax years

The filing exceptions to the tax credit are:

• Those who closed on a home prior to April 15, 2009
• Those who got an extension to file taxes
• Those who filed an amended return

Critics and complainers

Though many financial experts are in support of the tax credit, there is still a portion of analysts who don’t believe it is the easiest way to find cash today. A Certified Financial Planner for the Wise Investor Group, Greg Smith, opines the tax credit is an incentive to buy, but buyers need to be realistic about the benefits of the tax credit. He said, “This incentive only works for people who have complete job security, who know they won’t be transferred within three years, who qualify as first-time homebuyers and have the ability to obtain financing. They must also live in an area with reasonable housing prices.”

Michael Dooley, another financial planner in Beverly, Massachusetts, agrees. He said, “While the theory behind the tax credit is great, I just don’t think $ 8,000 is enough. The people who would benefit from this the most are looking to survive financially or are even leaving their homes because they can’t afford them.” The tax credit was meant to cover 10% of the home’s purchase price, but surveys show that in reality it’s only covering about 4%.

Performance thus far

Although there are detractors to the tax credit who don’t believe it is the answer to finding cash today as easily as it was supposed to, it still is allowing buyers to purchase homes. The real job of the tax credit was to benefit first-time homebuyers and spur them into action. The tax credit has done that and can’t be deemed a failure yet.

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