(Article originally published June 25, 2009.)
Over the years, first time home buyers faced a plethora of challenges to overcome before owning a home.
Today it’s a whole new world. 2009 is surely “The Year of the First Time Buyer.” Home prices have dropped considerably. Interest rates are still at historic lows. And as part of its plan to stimulate the U.S. housing market, Congress passed The 2009 First-Time Home Buyer Tax Credit. For buyers with good credit, the convergence of these three factors has made it easier than ever before to own a home.
The 2009 First-Time Home Buyer Tax Credit is available to first time buyers who close on their new home between January 1, 2009 and December 1, 2009. It grants buyers a tax credit equal to 10% of the purchase price, up to $8,000. Single buyers with incomes up to $75,000 and married couples filing jointly, with incomes up to $150,000 may receive the maximum tax credit. The tax credit is phased out for incomes above these limits.
Home buyers can access these funds by filing IRS Form 5405 with their 2009 tax returns. Or, buyers who need the funds now in order to purchase, have the following options:
- Increase take-home pay by reducing their federal income tax withholdings (up to the amount of the credit), and save the extra cash.
- Short-term loans of up to $8,000 from non-profits and FHA-approved lenders.
- FHA lenders can purchase a buyer’s anticipated tax credit and apply it towards the down payment and closing costs.
As with most Federal programs, the devil is in the details. For more information about how to utilize this tax credit, contact me. Or, consult a qualified tax advisor.
There is still, one other impediment to buying a home: Some buyers are still sitting on the sidelines. They are waiting for the economy to improve, home prices to drop more, or the stars to align, before they pull the trigger. I remind those buyers that this tax credit expires December 1st. Since it takes time to find a home and close, your opportunity is quickly running out.
Since 1992, Warren Goldberg has helped thousands of clients own their homes, refinance their mortgages, restructure their debts, and invest in real estate. Warren is known for his wide knowledge of mortgage products and wealth-creation strategies.