The federal government gave many potential home buyers a big incentive to become homeowners earlier this year with an $8,000 tax credit for qualified home purchases through November 30, 2009. Now the Federal Housing Administration has sweetened the deal. Instead of waiting to file their taxes to receive the $8,000 credit, qualifying buyers who use FHA loans can access the funds immediately through short-term bridge loans.
Under the FHA program, buyers can add the amount of their tax credit to their 3.5 percent downpayment, which is required for FHA-insured mortgages; use the money to help cover closing costs; or buy down their interest rate. This new measure should meaningfully impact home sales and values.
Realtors® have advocated monetizing the $8,000 tax credit and are excited about FHA’s actions. This program will increase housing demand, help reduce inventory and allow more families to achieve the dream of homeownership.
The credit is available to first-time buyers and people who have not owned a home in the past three years, with certain income limitations. If the buyer is married, their spouse must also meet those requirements. Only people who purchase a primary residence – including single-family homes, condos, townhomes and co-ops – qualify.
Single buyers who earn up to $75,000 and married couples who earn as much as $150,000 may receive the maximum tax credit. The credit decreases for single buyers earning between $75,000 and $95,000 and between $150,000 and $170,000 for home buyers filing jointly.
A buyer’s first step should be to contact a Realtor® who can help them determine if they qualify for the tax credit under IRS guidelines and assist them through the purchase process.
The buyer must occupy the home for at least three years to realize the full benefit of the tax credit. If the property is sold during the three-year period, the entire credit must be repaid upon sale.
Early summer will be a critical indicator of how home buyers are responding to the tax credit.
The home buying process takes time, and as word continues to spread about the credit, more buyers will likely take advantage of the tremendous opportunities in today’s market and decide to become homeowners.
For more information about the $8,000 home buyer tax credit, visit www.realtor.org/taxcreditbasics.
This article is courtesy of the National Association of Realtors®
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