Many taxpayers - regardless of credit history - jumped last year to take advantage of a $7,500 tax credit for first time home buyers. The advantage of this credit was that it was refundable--even if you didn't owe $7,500 in taxes you got the whole credit. For example if you owed $2,500, your credit covered that debt and the government cut you a check for $5,000. The downside was that over a 15 year period, the credit had to be repaid.
- No appraisal fees or closing costs (2)
- Low interest rates
- Flexibility to use your funds when you need them
Then, Congress passed the American Recovery and Reinvestment Act of 2009. This new bill increases the credit to $8,000 and that $8,000 doesn't have to be repaid. How does this new bill affect those who took the $7,500 credit?
Unfortunately, if you took the $7,500, you can't take the new $8,000 credit. And you still have to repay the $7,500 back over 15 years. But you don't have to start repayment for a couple of years, and the value of getting $7,500 at no interest for many years still comes to about $4,000. So while the $7,500 you got may not give you warm fuzzies, it's better than a sharp stick and still a good deal.
Now for those who have not bought a house yet, there may be all kinds of goodies available to you, depending on your income.
* Mortgage Credit Certificate Programs These create a tax advantage for first-time buyers. It's pretty much free money if you meet the IRS income guidelines and your home purchase doesn't exceed a predetermined amount. An MCC allows you to deduct your mortgage interest and adds a 20% tax credit towards your income tax liability. And the lender will deduct that credit from your house payment when calculating your debt to income ratios, qualifying you for a larger loan than you otherwise could.
* A refundable $8,000 credit for first-time homebuyers. And many folks who have owned property in the past still qualify for "first time homebuyer" status. Check here to see if you qualify. Here are the details:
· The tax credit does not have to be repaid.
· The tax credit is equal to 10 percent of the home's purchase price up to a maximum of $8,000.
· The credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009.
· Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.
· If you have not filed your taxes yet for 2008 and you close on a home before you do so, you may be able to apply it on your 2008 tax return. Check with a tax pro for details.
* Rural Housing Programs You'd be amazed at what's considered rural by the USDA. Programs include zero down payment options for qualifying buyers in qualifying areas. And on February 1st, these rates dropped to 4.375%. Check out the details here.
So 2009 brings a lot of good reasons to buy a home. FHA and USDA lending guidelines are fairly liberal, and first timers can catch a lot of breaks from the IRS. When it comes to home buying, the US government loves newbies. Talk about beginner's luck.
You can start your search by contacting our database of new home loan lenders to request a mortgage prequalification letter from mortgage lenders; if you have a property in mind already, you can request up to four free competing mortgage quotes. If you already have a property, given current low market rates, consider requesting mortgage refinance quotes through our mortgage lender matching service. Good luck!