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First Time Home Buyer Credit


FIRST-TIME HOME BUYER TAX CREDIT FACT SHEET

 

WHO IS ELIGIBLE

  • The $7,500 tax credit is available for first-time home buyers only.
  • The law defines a first-time home buyer as a buyer who has not owned a home during the past three years.
  • All U.S. citizens who file taxes are eligible to participate in the program. 

INCOME LIMITS

  • Home buyers who file as single or head-of-household taxpayers can claim the full $7,500 credit if their modified adjusted gross income (MAGI) is less than $75,000.
  • For married couples filing a joint return, the income limit doubles to $150,000.
  • Single or head-of-household taxpayers who earn between $75,000 and $95,000 are eligible to receive a partial first-time home buyers tax credit. 
  • Married couples who earn between $150,000 and $170,000 are eligible to receive a partial first-time home buyer tax credit.
  • The credit is not available for single taxpayers who MAGI is greater than $95,000 and married couples with an MAGI that exceeds $170,000.

EFFECTIVE DATE FOR THE TAX CREDIT

  • First-time home buyers would receive a $7,500 tax credit for the purchase of any home on or after April 9, 2008 and before July 1, 2009.  To qualify, you must actually close on the sale of the home during this period.

TAX CREDIT IS REFUNDABLE

  • A refundable credit means that if you pay less than $7,500 in federal income taxes, then the government will write you a check for the difference.
  • For example, if you owe $5,000 in federal income taxes, you would pay nothing to the IRS and receive a $2,500 payment from the government.
  • If you are due to receive a $1,000 tax refund from the government, your refund would grow to $8,500 ($1,000 plus $7,500 from the home buyer tax credit).
  • Buyers can take the tax credit credit in their 2008 or 2009 tax return.
  • If you purchase the home in 2008, the tax credit is taken on your 2008 tax return.  If you buy in 2009, you have the option of taking the credit on your 2008 or 2009 tax returns.

TYPES OF HOME THAT QUALIFY FOR THE TAX CREDIT

·         All homes, whether single-family, townhomes, or condominium apartments will qualify, provided that the home will be used as a principal residence and the buyer has not owned a home in the prior three years.  This also includes newly-constructed homes. 

 

PAYBACK PROVISIONS

·         The tax credit assentially serves as an interest- free loan to be repaid over 15 years.

·         For example, a home buyer claiming a $7,500 credit would repay the credit at $500 per year.  However, the buyer doesn’t have to start repaying the credit until two years after the tax year in which the credit is claimed. 

·         If the home owner sold the home, then the remaining credit would be due from the profit of the home sale. 

·         If there was insufficient profit, then the remaining credit payback would be forgiven. 

 

FOR MORE DETAILS ON THE TAX CREDIT, GO TO www.federalhousingtaxcredit.com  

Article courtesy of Katie Furgeson, Countrywide Home Loans


Seller Funded Gifts and Down Payment Assistence


ABC's of DPA

Charitable downpayment assistance programs, funded in part by home sellers, (DPA) have operated for the past decade with HUD’s full knowledge and participation. DPA has been a proven success for helping low-to moderate-income individuals and families become homeowners. These working families qualify for FHA insured loans in every respect, but are unable to save the needed downpayment. The facts are:

  1. Over 90 percent of loans with DPA are performing well. DPA has not been proven to be a predictor or cause of claims. Claims are caused by job loss, family medical issues and economics of a particular region. Statements noting that DPA-assisted homebuyers go into default, at a higher rate than homebuyers with NO assistance at all, are misleading in two ways. One, it has not been proven that DPA causes a claim and two the group of homebuyers not needing any downpayment assistance is not similar to groups who need downpayment assistance. Similar groups would be homebuyers who need assistance (DPA-assisted) to another group also in need of assistance (government-assisted) in which case there is only a 1% difference in claim rate between government-assisted homebuyers and DPA-assisted homebuyers.
  2. Today, loans with DPA comprise almost 50% of FHA purchase volume. Homebuyers who received the benefit of DPA were able to obtain a safe FHA insured loan and avoid the risky subprime loans.
  3. The success of DPA was accomplished using absolutely no taxpayer dollars. Charitable organizations providing DPA, funded in part by seller participation, have given out over $3.8 billion in money used to make a downpayment on a home.
  4. Two different federal courts took the rare step of striking down the HUD regulation which would have banned seller-funded DPA. The courts’ decisions were made on fundamental substantive reasons citing among other things that HUD’s explanation of the Final Rule reflects a lack of reasoned decision making.
  5. The economic impact of DPA is significant: Over 1 million low and moderate income families have utilized over $3.8 billion in downpayment assistance from charitable organizations to take out $130 billion in mortgage volume.
  6. DPA has always been a program of HUD’s own guidelines. Starting in 1998, Howard Glaser, HUD’s Acting General Counsel, reviewed DPA and analyzed closely the participation of the home seller and determined that the program operated within HUD’s guidelines. This is the same program and process that is adhered to today. Further, before a homebuyer can receive gift funds from a charitable organization providing DPA, the homebuyer must work with an FHA-approved lender, must meet all HUD/FHA loan underwriting qualification (except for having the downpayment requirement), must have a HUD certified appraiser conduct an appraisal on the home using HUD appraisal criteria.
  7. DPA Works! The program has been proven to be a successful program that gives FHA/HUD qualified homebuyers an opportunity for homeownership.

H.R.6694 the new homeownership bill would make non-profit downpayment assistance an allowable gift source for FHA borrowers. The bill further seeks to ensure that providers of the downpayment assistance operate in a transparent manner to guard against conflicts of interest. It also includes language to ensure that the Federal Housing Administration maintains its financial stability by permanently authorizing the Secretary of the Department of Housing & Urban Development to assess premiums based on borrowers’ qualifications.

Article courtesy of SupportHomeOwnership.org