As a first time home buyer, I'm sure you're going to hear all about the new $7,500 First Time Home Buyer Tax Credit. With that in mind, I think it's important that you and other first time home buyers understand that this "tax credit" must be repaid and will not help you with your down payment although, some may say that mortgage lenders will take the credit into consideration, making it easier for buyers to get a loan.
In essence, it’s actually an interest-free loan that buyers must start paying back within two years, at a rate of no more than $500 a year for 15 years. When the the home is sold, any outstanding balance will be repaid from the profit; if it’s sold at a loss and the difference will be forgiven.
Here's how it works:
Buyers who have not owned a home in the past three years can take a tax credit worth 10% of a home's sale price, up to $7,500, whichever is smaller. To qualify for the full $7,500, individuals must earn less than $75,000 annually, while couples may earn up to $150,000. Individual buyers with income of up to $95,000 and couples with income up to $170,000 are eligible for a partial credit.
The credit is good for homes closed on after April 9, 2008 and before July 1, 2009, and can be taken on taxes filed during 2008 or 2009. Even buyers who bought a home before the bill passed, but after April 9, can claim the credit.
Unlike tax deductions, which only offset taxes by lowering taxable income, the tax credit is a straight dollar-for-dollar deduction of your tax bill. So a buyer who would ordinarily pay $8,000 in taxes would pay just $500.
It’s also “refundable,” which means if a buyer’s taxes are less than $7,500, the government will send them a check for the difference. For example, if a couple’s income generates a tax bill of $5,000, the government will refund all of that plus $2,500.
As far as finding a mortgage broker; you can ask your real estate agent/broker for a recommendation but also get referrals from family, friends, colleagues and other recent buyers. Try to interview at least three potential candidates before making your choice.
As far as where to begin, how to proceed, etc..., HUD offers a wealth of good advise in their "Nine steps to buying a home"
http://www.hud.gov/buying/
I hope that helps...Best of luck in your search!
Richard
- Sun Aug 31 2008, 12:57