The 2009 First Time Home Buyer Tax Credit May Make the Difference between Buying or Renting

Figure Out How Much you Can Afford

When thinking about purchasing a home, especially for the first time, it is a good idea to get a realistic idea of how much of a mortgage you can afford. Online mortgage calculators are perfect for this task. At this point, do not include the tax credit or bridge loan in your calculations.

Next, Get Prequalified with Bad Credit Mortgage Lenders

The best deals in the current market are often foreclosed properties, or ones that are about to go into foreclosure. To get one of these properties you must act quickly and decisively which means that you must have your financing already lined up. Fill out our online form to begin the process of securing your financing. You will get up to four bad credit mortgage lenders competing for your loan.

In the Meantime Get Additional Help with Your Bad Credit Mortgage

Start researching what additional funds might be available to you. This article features the 2009 First Time Home Buyers Tax Credit, but your state or local government might have additional programs to help you with a bad credit mortgage. If you are serious about home ownership, leave no stone unturned.

How the 2009 First Time Home Buyers Tax Credit Works

You are entitled to a tax credit of 10 percent of the purchase price of your home, up to $8,000, if you meet these criteria:

• Income guidelines. You are eligible if you do not make over $95,000 as a single taxpayer or $170 as a married taxpayer filing jointly. (If you make over $75,000 as a single taxpayer or over $150,000 married, filing jointly, your tax credit will be less than 10 percent. Consult your lender for details.)
• You must be a first time buyer per HUDs guidelines
• Your home must be in the United States and be your primary residence as this incentive is not targeted to investors
• The tax credit is available for homes purchased between January 1 and December 1 2009 (must close by November 30)

How to Claim your Credit

The simplest way to take advantage of the tax credit is to claim it on your 2009 or 2008 tax return. Or you can ammend your 2008 return. You need to file IRS form 5405, which has more information about the credit along with instructions on how to complete the form.

The Tax Credit as a Bridge Loan

You may be able to access the tax credit immediately by getting a bridge loan. You replay the bridge loan when you get your tax credit refund. While fifteen states offer assistance with tax credit bridge loans, HUD secretary Shaun Donovan indicated in a speech that while HUD allows the credit to be used for closing costs or to increase to increase your down payment, you still have to come up withthe minimum 3.5% required investment. Zero-down FHA loans have performed so poorly in the past that HUD doesn't want to repeat that mistake.

However, certain programs, such as the American Dream Downpayment Initiative (ADDI), may in some areas be available for certain qualified borrowers or those buying HUD-owned homes. There are oView the National Council of State Housing Agencies to see if your state is among them. If your state does not have a program, ask your Realtor or mortgage lender for information. For a partial list of non-profits handling bridge loans see NeighborWorks.

Use an Online Calculator to Determine Best Use of your Bridge

To see how your tax credit as a bridge loan can effect your mortgage, use a mortgage calculator. Simply apply your bridge loan amount as additional down payment money or to buy down your interest rate to determine what works best for you. Or perhaps you will discover that the best use of these funds is to offset some or all of your closing costs.

Note however that you cannot receive cash back from your bridge loan, and one of the conditions of getting a bridge is that your lender must determine that you can repay the amount (although you do not have to repay the IRS, you do have to repay the bridge lender). These and other conditions apply to prevent fraud and to protect you from situations that could cause you potential financial harm.

Term of Tax Credit

Your new home must remain your principal residence for thirty-six months from purchase, otherwise you will have to repay your tax credit. See IRS form 5405 for full details.

Source:

Realtor.org - http://www.realtor.org/home_buyers_and_sellers/first_time_home_buyer_tax_credit_how_to_bridge_loans

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