All About the Federal First-time Homebuyer Tax Credit

Here are some key points about the First-time Homebuyer Tax “Credit”.  It’s not really a credit, but an interest-free loan that must be repaid within 15 years. 

Effective Date

Applies to purchases made on or after April 9, 2008, and on or before June 30, 2009.

Amount of Credit

10% of the cost of the home, not to exceed $7,500.  This is calculated per property, not per individual.

Eligible Properties

Any single family home (inlcuding condos, co-ops, townhomes) that will be used as a principal residence.

Refundable

The tax credit reduces income tax liability for the year of purchase and can be claimed on your tax return for that tax year.

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Home Inspections

Me, my awesome clients, and Brian the home inspector

In my opinion, every buyer should have a home inspection unless you plan on tearing down the property and building something else in its place.  A home is typically the largest investment of a person’s life, and you want to make sure that you know exactly what you are getting into.  It’s a little scary to think that, just a few years ago, buyers had to waive their home inspection contingencies in order to actually get the home.  The market has normalized, and now most sellers allow buyers to conduct not only home inspections, but radon, mold, and lead-based paint inspections.  I want to talk a little bit about what to expect during a home inspection, and give you my tips on how to get the most out of the experience.

Housing Opportunities Commission Offers Big Help for First-Time Homebuyers

With recent news of the termination of down-payment assistance programs such as Nehemiah and AmeriDream, borrowers find themselves having to put at least 3% down from their own funds on a purchase.  That is, unless they are fortunate enough to  have a family member willing to gift them the funds, which is still allowable.

        One exception to the “free money” rule is still available for buyers of primary residences in Montgomery County, MD.  The Housing Opportunities Commission (HOC) offers qualified first time buyers some excellent financing options, including the opportunity to receive a 3% purchase assistance grant from HOC.  The grant may be used for down payment, closing costs, points, escrows, or other prepaid expenses.  The borrowers must demonstrate a true need for the grant in order to be eligible.

Down Payment Assistance Programs to be Eliminated as Part of New Housing Law

 

On July 30, President Bush signed the Housing and Economic Recovery Act into law.  The new bill contains wide sweeping changes for numerous housing related issues.

One of the changes of note, is the forbidding of FHA from insuring mortgages from which the down payment comes directly or indirectly form an interested third party (such as the seller).  This will lead to the elimination of all down payment assistance programs, such as the Nehemiah Program and Ameridream, which currently use a seller donation to fund a borrower’s required down payment for FHA loans. 

This change is to take effect October 1, 2008, meaning any borrower’s planning to use such a program will have until then to receive a loan commitment from a lender.

It has long been suspected that down payment assistance programs were on the chopping block and the new bill provided the forum for their demise.  However, the day after the Housing Bill became law, there was a bill introduced to reform, and therefore, save the down payment assistance programs, but it is still unclear at this point whether that proposed legislation has any chance at success.