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Wednesday, June 10, 2009

First-Time Home Buyer Tax Credit - Do you know all the Facts?

Who is a first-time buyer?
The name of the tax credit is misleading. In reality, first-time home buyers are not the only ones who qualify. Anyone who has not owned a residence three years prior to the purchase can qualify for the tax credit.

The home must be purchased between January 1, 2009 and December 1, 2009.

What properties qualify?
The tax credit may be applied to a primary residence.

How much is the tax credit?
The credit is 10% of the purchase price of the home, maxing out at $8,000.

Is the Buyer’s income a factor?
To receive the maximum credit, a single buyer’s income cannot be more than $75,000 and married couple’s joint income cannot be more than $150,000.

A single buyer can still receive a reduced tax credit if his/her income is between 75,000 and $95,000. Joint buyers can also receive a reduced tax credit if their income is between $150,000 and $170,000. However, the tax credit decreases as the income increases.

Buyers that earn over $95,000 (single) and $170,000 (joint) are not eligible for the credit.

Can the Tax credit be used to cover closing costs?
Yes. On May 29, 2009 the FHA announced it will permit its lenders to provide a short-term bridge loan that will allow the tax credit to be used to make a larger down payment above the FHA required 3.5 percent, cover closing costs, or buy down their interest rate. Read the FHA letter that was sent to mortgage lenders. (PDF).

Does the credit need to be repaid?
The 2008 credit needs to be repaid over a 15 year period. However, the 2009 credit does not have to be repaid.

NAR has made a useful 26 point Q&A available (PDF)

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