Home Buying in Philadelphia>Question Details

Ronnie, Home Buyer in Philadelphia, PA

First-Time Homebuyer Credit Question

Asked by Ronnie, Philadelphia, PA Mon Feb 2, 2009

Regarding the First-Time Homebuyer Credit, I just purchased my 1st home in October '08, which took all of mysavings. I understand that I would have to pay this money back over 15 years. For someone who may not have the savings to pay for this over 15 years, is it a good thing to take advantage of now?

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Anytime one has the opportunity to receive money interest free it is a pretty much a home run. Further, chances are with the Obama stimulus plan, the repayment will probably be scratched.

Congrats on your purchase ! That is great news. The tax credit is a nice bonus for you especially if the repayment gets repealed. Also, the tax credit, as part of the new stimulus package, may be available to all buyers for the rest of 2009 which would be great. I think that it should be $22,500. That is what the Homebuilders are lobbying for.
0 votes Thank Flag Link Tue Feb 3, 2009
Hello, Ronnie,

There is no payback for the first two years. After that, there will be a $500 per year adjustment on your taxes for 15 years until the loan is repaid. There is NO INTEREST.

Once you start the payback it will be approximately $48+/- per month. If you think you will not be able to afford that in 2 years, then you should NOT apply for the credit, in my opinion. The other side of the coin is, there is a movement right now which is trying to make these tax credits be true credits with no repayment. You will have to decide if you want to take the risk, or not.

Carol Murray Cei
ReMax Millennium
0 votes Thank Flag Link Tue Feb 3, 2009
Please make sure you talk to an accountant and visit the department of housing web site http://www.hud.gov before you file your tax returns .as they may modify the plan.
Web Reference: http://www.gitabantwal.com
0 votes Thank Flag Link Tue Feb 3, 2009
Congress is in the process of reviewing the 1st Time Homebuyer Tax Credit. The way it was passed for 2008, calls for a payback over 15 yrs at zero interest, with payments starting the 2nd year after purchase. Since nobody has even gotten any money yet (since they would get it with filing of 2008 Income Tax ) it is still possible that the government may restructure this program. Under the current plan, each year, as the buyer would file their income tax, they would repay 1/15th with their income tax.
Assuming most people get a refund each year, the assumption was that if you would have gotten say- $1500 refund normally, your refund would be $500 less (to pay back your years portion of the tax credit) but you'd still get $1,000 refund.

There is a possibility that this tax credit will be modified - and possibly have the repayment eliminated - or have it made as a "forgivable credit", ie: if you live in the home as your primary residence for say 3 yrs it wouldn't need to be repaid. We won't know until it finally gets passed.

But, for someone who is in the market to buy, finds a good deal, and has the financial means to do so- there are some wonderful buying opportunities. Just make sure you get good guidance from a knowledgable Real Estate Professional in the area you are going to buy.

All the Best!
Web Reference: http://GoPackerUp.com
0 votes Thank Flag Link Mon Feb 2, 2009
Were you aware that this credit is interest free? if you wouldn't have the 7500 savings in 15 years, then you must not have the $ today to cover your regular taxes? Honestly, I would go for it, and just budget accordingly, saving monthly. However, if you know you will struggle paying it back, esp with the home purchase under your belt, there's no reason to jeopardize your financial situation. Just to note - there has been talk of the government deciding not to make those who participate in this loan pay it back, which of course would be even better.
0 votes Thank Flag Link Mon Feb 2, 2009
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