Time
is running out for first-time home buyers to take advantage of the $8,000 tax
credit set aside for them this year as part of the economic recovery effort.
Barring a time extension, people looking to cash in must purchase a home by
November 30. Considering it usually
takes 30 days to close on a house, now may be the time to act and Better
Business Bureau offers guidance on how to benefit from the First-Time Home
Buyers Tax Credit.
The
First-Time Home Buyers Tax credit was created to stimulate the real estate
market by encouraging first-time home buyers. The tax credit is equal to 10
percent of the home’s purchase price, up to a maximum of $8,000. Qualifying
participants simply claim the credit on their tax return.
More
than 1.4 million first-time home buyers have taken advantage of the tax credit
so far this year, according to the IRS. The National Association of Realtors
predicts that the tax credit will result in an extra 350,000 sales. There are six bills before Congress that would
extend the tax credit at least until the end of 2009, but there is no guarantee
that any will pass. According to CNN there has already been $14 billion
allocated for the credit and fiscal conservatives are opposed to dedicating the
additional funds that would be required if it were extended.
“With
both interest rates and housing prices at record lows, now is a great time to
buy a house if you can afford it and the tax credit sweetens the deal even more
for first-time home buyers,” said Frank Whitney MidCal BBB CEO “While it is a
buyer’s market, it’s important that first timers don’t rush into buying a house
just to take advantage of the tax credit. It’s better to find that perfect
house and investment later than feel pressured into buying something now just
to get the credit.”
There
are a few requirements for participation and BBB offers the following guidance
on the First-Time Home buyers Tax Credit:
Don’t Rush In. Just because the tax credit is set to expire
on November 30, it doesn’t mean you should rush into buying a house that you aren’t
sure about. Taking the time to find the
right house for you, in the long run, is more important than receiving $8,000
toward the purchase of a house you might end up hating or have a difficult time
reselling.
Defining First-Time
Home Buyer. For the purposes of taking advantage of the
tax credit, a first-time home buyer is defined as an individual who hasn’t
owned a principal residence in the previous three years. An individual
qualifies if they own a vacation home, however. Neither party in a married couple
would qualify if either had owned a primary residence in the previous three
years.
Income
Requirements.
In order to receive the maximum credit, the modified adjusted gross income must
be $75,000 or less for a single buyer and $150,000 or less for a joint couple.
Single buyers earning between $75,000 and $95,000 and couples earning between
$150,000 and $170,000 are eligible for a reduced credit.
Monetizing the Tax
Credit for Use Now. The Secretary of Housing and Urban Development
announced that buyers using FHA-insured mortgages can apply their anticipated
tax credit immediately toward the purchase of a house. This is achieved through
bridge loans by non-profits or an FHA-approved lender.
Prepare to Stay a While. Home buyers must
remain in the house for three years or they must return the credit. There are
exceptions, including death or divorce.
For
more advice on home buying, visit www.bbb.org or check out BBB’s Insider’s Guide to Success on Buying
a Home available at bookstores nationwide and on Amazon.com.