1st-Time Homebuyers

What is the $8,000 Home Buyer Tax Credit and how can it help you?

• The tax credit is for first-time home buyers only.
• 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.

Contact us now to take advantage of this credit when purchasing your next home.

The first-time homebuyer tax credit was introduced to help on-the-fence buyers take the home-purchase plunge. It got off to a lukewarm start, however, because buyers couldn't collect the $8,000 credit until tax time, rather than at closing time when the money is needed.
 
The program allowed first-time buyers to claim a refundable credit worth $8,000 (or 10% of the home's value, whichever is lower). To qualify for the credit, the purchase must be made before December 1st of this year. To be considered a "first time" buyer, the purchaser may not have owned a home during the past three years. They must also live in the house for at least three years, or they will be obligated to pay back the credit. Additionally, there are income restrictions: to qualify, buyers must make less than $75,000 for singles or $150,000 for couples. 
 
After a disappointing early response, the program was sweetened in May to allow first-time homebuyers to get an advance on the $8,000 tax credit and apply it toward their down payments or closing costs. It is clear we are seeing a boost from the homebuyer tax credit. New and existing home sales have been rising over the past few months, the inventory of unsold homes relative to sales is finally falling, and house price declines have slowed. In addition, these first-time buyer sales have a domino effect, allowing sellers to trade up or down, either way boosting the overall housing market.
 
But if the program does terminate as planned on December 1st, potential buyers are already running out of time. Lenders are reportedly taking at least 60 days to close (even with a great credit record and nothing going wrong), which means that for qualifying buyers who haven’t started searching for a home, the window of opportunity is closing fast. That is what home builders, real estate agents, mortgage lenders and everyone else who is trying to stay afloat this year are worried about. If all this cash being thrown at the housing market is only helping the market find a bottom, what’s going to happen when the program expires?
 
Senator Johnny Isakson (R-Ga.), who used to be in the real estate business, has commanded a lot of media attention as he continues to introduce legislation (see footnote 1) to increase the maximum amount of the tax credit from $8,000 to $15,000, expand the credit to apply to any buyers regardless of income or first-time status, and to extend the tax credit for one year from the date of enactment. His proposal would still allow homebuyers to claim the credit on their 2009 tax return for purchases made in 2010.