Home Buying in Tampa>Question Details

Steve, Other/Just Looking in Tampa, FL

How does the 7,500 tax credit work? Can I use it as a part of a down payment on a purchase or closing?

Asked by Steve, Tampa, FL Fri Nov 14, 2008

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Steve,
I can understand Dave's concerns, I worked with a new home buyer (Not me as an agent) who was put into a home that she shouldn't have been able to purchase, that was both an issue the agent and the sub prime mortgage market made possible. She wasn't aware of the tax changes that would affect her monthly payments with a new assessment, her agent should have warned her about that.
I can't say all real estate agents are good, many are not! I suggest when picking an agent, ask for references, and make sure to call them! An agents job is to help you through the process, successful agents get lots of referrals because the service they provide is such a high caliber their past clients are happy to refer business to them. I am sorry for Dave's past experience, but an agent can keep you out of a bad situation.

Russell
1 vote Thank Flag Link Fri Nov 21, 2008
Hi Steve,
http://www.federalhousingtaxcredit.com/faq.php
See the above link. It has tons of info about the tax credit along with lots of Q&A as well.
Let me know if I can be of further help.

Michelle Jordan, PA
Prudential Tropical Realty
Search MLS: http://www.TampaBayDwelling.com
check out our blog at :
http://www.thetamparealestateinsider.com
1 vote Thank Flag Link Fri Nov 14, 2008
It was just announced a few minutes ago that the potential $8000 tax credit offered to first time home buyers CAN now be used as or towards your down payment on the home instead of waiting until next year to be of any use.
Web Reference: http://www.dannidewoody.com
0 votes Thank Flag Link Tue May 12, 2009
If you are buying a home in 2009(before July) you can put the credit on your 2008 taxes. I am planning on filing my taxes and using the return as part of my down payment.
0 votes Thank Flag Link Wed Jan 14, 2009
The $7,500 tax 'credit' is not actually a credit at all but basically an interest free loan you claim as a credit in the year following your home purchase and that must be repaid at the rate of $500 per year over a 15 year period. The good news is there is no interested charged.

You collect your tax 'credit' in the year following your home purchase in the form of a credit off your income tax filings.

It is also a 10% credit up to a maximum of $7500, so if you buy a home with a sales price of $75,000 or more that would probably qualify.

Also, even though it's commonly called a "first time buyers" credit, it actually can by claimed by any qualifying persons who have not owned a home that was their principal residence in the past 3 years.
0 votes Thank Flag Link Sat Nov 22, 2008
Currently, the tax credit cannot be used as a downpayment. The credit, granted with a tax return in 2009 for the 2008 tax year, will be given to any qualifying first time homebuyer (no home in past 3 years) up to 10% of the purchase price, or max of $7500. In subsequent years you are required to pay a percentage back in taxes. It basically amounts to an interest free loan, except, if you sell the home several years after purchase, and if there is not enough money to pay off the $7500, the credit due back is forgiven. (Not sure that was a good idea.)

What I am hoping people do is buy structurally sound homes and use the credit money to update them cosmetically, increasing their value significantly. Another good idea is buying a home and then paying down the principal to reduce of eliminate PMI. OR...banking the money, drawing a wee bit of interest, and knowing you have it there to supplement payments in the event of an emergency. Those are all good ways to utilize the credit. Unfortunately, it does not take a rocket scientist to figure out you can abuse the credit. There is no limitations on what you use the money for.

There is talk of changing the credit eligibility to any principal residence buyer, and they are looking for ways to use this money for upfront costs. There could be changes by early next year. Right now, the credit is due to expire on 7/1/09, meaning you must have a purchase by 6/30/2009.
0 votes Thank Flag Link Sat Nov 22, 2008
Dave,

I understand you're angry and frustrated about the housing mess, we are too. However, I think you are making very unfair assumptions about Russell's intentions, particularly when we know nothing about Steve's personal or financial situation. People inquiring about first-time homebuyer incentives are not evil, nor or the Realtors that are there to serve and protect them. Keep in mind the sub-prime mortgage mess was created largely in part by our government who enacted policies that lenders had to adhere to that REQUIRED that 'everyone be afforded equal access to housing" and this insane mentality that home ownership is a right and not a priveledge. Have a nice day.

Julia Fishel
0 votes Thank Flag Link Fri Nov 21, 2008
Steve,
I don't know what your time line is for buying, but be aware the tax credit option expires summer, 2009, and it can take over a month to go from contract to closing, so you don't want to miss the window. I suggest getting with a great agent who can work all aspects of getting you into a home. That will require negotiating with the seller to help cover your costs, working with your lender to make sure the loan program you choose is going to meet your desires, and make sure the 100+ papers and phone calls that are normal in property transfer are taken care of.
I have a great network of Graduate Real Estate Institute professionals that I could refer you to that have additional training to handle these issues. Just drop me an email and I will hook you up!

Russell Carnahan
Covenant Partners Realty,
San Antonio, TX, 78232
210-557-0079
russellsrealestate@gmail.com
0 votes Thank Flag Link Thu Nov 20, 2008
Those are both good answers. Another option when you get the refund is to put it towards the home. This can get you to your 20% equity quicker. Stop PMI and save thousands. Not to mention the interest you save in the long run.

http://www.ryannewlin.com
Web Reference: http://www.RyanNewlin.com
0 votes Thank Flag Link Fri Nov 14, 2008
Hi Steve,

The $7,500 tax credit came into being as part of HR3221 which was passed into law on July 30th. The credit can't be used as a down payment directly, but it can be in a round about way. One scenerio would be to get $7,500 of gifted funds from a family member or even an IRA. In early 2009, when you get your tax return with your $7,500 refund, there would be nothing stopping you from returning that money to your family member or replenishing your IRA (you have 60 days to replenish an IRA without penalty - but talk to a tax professional for specific advice).

Ideally, you'll be able to come up with the needed 3% downpayment for an FHA loan, have your Realtor negotiate with the seller to pay your 3% closing costs, and then you'll be cash flush again again soon when you get your IRS 'refund'.

As with anything, there are limitations. If you sell sooner than the alloted timeframe, you'll have to repay a portion or all the funds back to the IRS. However, if you're plan to stay in your home 5 years or more, this is a fantastic opportunity. Read here for details

http://pinellaspeach.com/2008/07/30/palm-harbor-real-estate-…

Your best bet is to talk to a proven Realtor and a proven lender that can guide you through all of the various scenerios. Everyone's situation is unique, so it's best to get solid advice tailored specifically for you. When interviewing lenders and Realtors, be sure to ask lots of questions. You want professionals to represent you that are very active in the current market as they will be fully abreast of all of the latest lending changes and negotiation tactics.

Please feel free to call at (727)366-0324 or e-mail at Info@SuncoastDreamHomes.com with questions or for a referral to a great lender or two.

Regards,

Julia & Matt Fishel
Licensed Real Estate Consultantas
Keller Williams Realty
Palm Harbor FL 34683
(727)366-0324 Julia
(727)366-0325 Matt

http://www.SuncoastDreamHomes.com
http://www.SuncoastPartners.net
or Surf our Blog at http://PinellasPeach.com
0 votes Thank Flag Link Fri Nov 14, 2008
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