It’s Official – The First-Time Tax Credit has been Extended

Here are the details:

WHO QUALIFIES

First-time home buyers are eligible for up to $8,000 tax credit and move-up buyers who have owned their home, as their primary residence, for the past 5 consecutive years are eligible for a reduced credit of up to $6,500.

INCOME RESTRICTIONS

The income limits have been raised.  Individuals whose incomes are $125,000 or below, and families earning less than $225,000

MAXIMUM PURCHASE PRICE

$800,000

EXTENDED UNTIL

Must be under contract by April 30, 2010 and settle before June 30, 2010.

Possible First-Time Home Buyer Tax Credit Extension – Not Final Yet

While not final yet, things are looking good for the first-time home buyer tax credit to be extended.  The plan calls for not only extending the contract/closing date for first-time homebuyers, but also allowing repeat buyers to benefit.  Here is an article from today’s Wall Street Journal that explains the proposal:

By COREY BOLES and JOHN D. MCKINNON

WASHINGTON — Senate negotiators reached a tentative deal to extend a tax credit for first-time home buyers, but its passage remains uncertain.

The agreement would extend the existing credit for first-time home buyers, worth up to $8,000, while offering a new credit of up to $6,500 for some existing homeowners, Senate aides said. The reduced credit would be available to all home buyers who have been in their current residence for a consecutive five-year period in the past eight years.

Tax Credit Update

Last week at this time, there was a flurry of conversation around the fact that the Senate had announced that they had approved a $15,000 tax credit for all individuals purchasing new homes (first time buyers and previous homeowners) in 2009, and that it would be a pure credit (would not have to be paid back like the previous version).  This created an enormous wave of excitement…except for one thing…the House did not see eye to eye with them on this proposal.

Over the course of the last week, the subcommittees from the House and the Senate got together and ironed out a combined version that they could agree on, and felt would pass a vote on both floors.  Unfortunately, the House did not see eye-to-eye on the housing proposal floated by the Senate, and much to the chagrin of the many in our sector, the initial proposal from the Senate was paired down significantly.

$15,000 for homebuyers

Under the Senate’s stimulus bill, homebuyers could receive a $15,000 tax credit if they purchase within a year.

By Les Christie, CNNMoney.com staff writer
February 10, 2009: 7:10 AM ET
NEW YORK (CNNMoney.com) — If you’re thinking of buying a home, there could be a big bonus for you in the economic stimulus bill that’s now before Congress.

The Senate’s version of the plan sweetened the $7,500 homebuyer tax credit provision proposed by the House, doubling it to $15,000 or 10% of the home’s purchase price (whichever is lower). What’s more, the credit applies to all buyers – not just those purchasing their first homes.

The Senate credit also has no income limits. The House version, in comparison, allows only those with incomes up to $75,000 for singles and $150,000 for couples to qualify for the full amount. (In that bill, those earning up to $95,000 and $170,000, respectively, can qualify for a partial credit.)

Also, unlike the tax credit passed last summer as part of the Housing Recovery Act, this one does not have to be repaid. The old credit acted more like a no-interest loan than a true credit and, as a result, had little impact on home sales.

Fed Leaves Rates Unchanged

By BRIAN BLACKSTONE and MAYA JACKSON RANDALL

WASHINGTON — The Federal Reserve on Tuesday held interest rates steady and in a disappointment to Wall Street didn’t appear to signal that rate cuts are forthcoming anytime soon.Though officials continued to warn about inflation risks, they also signaled that economic concerns have intensified in the wake of the collapse of Lehman Brothers Holdings Inc. and a steep selloff in equity markets Monday.

“The downside risks to growth and the upside risks to inflation are both of significant concern to the Committee,” the Fed said in a statement.  (Read the full statement).

The Federal Open Market Committee voted unanimously to keep the target fed funds rate for interbank lending unchanged at 2% for a third-straight meeting. The Fed took no action on the discount rate for loans to brokers and commercial banks, which stands at 2.25%.
It was the first unanimous interest rate decision in one year. Dallas Fed President Richard Fisher, who had dissented in favor of higher rates the previous five meetings going back to January, voted with the majority this time.

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.

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.