Tax Credit for First Time Home Buyers

With the real estate interest rates at historical lows and the various loan products available to buyers, now is a great time to purchase your first home.  The government is offering a tax credit of $7,500 or 10% of the purchase price, whichever is less, for first time home buyers who purchase a primary residence between April 9, 2008 and July 1, 2009.

This looks like a wonderful option because a tax credit is a dollar for dollar decrease in your tax bill which is more valuable than a tax deduction.  But there are a few things that are getting buyers confused so hopefully I will be able to clarify the provisions.

You will have to pay it all back!  This tax credit really functions as an interest free loan because it is required that the loan be paid back in equal installments over 15 years starting in the second year after the home is purchased.  For example, if you buy a home this year and claim a full $7,500 tax credit on your 2008 tax return, then you will have to pay an additional $500 a year in taxes for 15 years beginning in 2010.

If you sell the home before the 15 years has passed then you will have to repay the entire balance.

Also, if your income exceeds certain levels then you won’t be able to qualify for this tax credit.  You’ll want to talk with your mortgage professional to see if you qualify for this tax credit and determine whether or not this is a good option for your needs.  There are still great first time home buyer programs such as CHFHA which has a 100% financing option for qualified borrowers.  In my Northern Colorado real estate market, and specifically the Fort Collins real estate market, there are many community payment assistance programs to help first time home buyers afford a house of their own.

I’d suggest talking with a great mortgage professional and I have two great lenders on my team so if you live in the Northern Colorado region and would like a recommendation then please send me an email: Mike@MikeMalvey.com and visit www.FortCollinsHomesByEmail.com.  For a FREE recorded message on the tax credit, call 888-243-2988 ext. 25

Thanks for reading and please reply with any ideas or suggestions.  Your feedback is always greatly appreciated.

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