May 14, 2009: Breaking Real Estate News – Tax Credit Can Be Used for Down Payment
Posted by RealEstate_Guru
In a move that’s sure to have positive reverberations throughout the housing market, the FHA (Federal Housing Administration) is set to allow home buyers to use their $8000 tax credit toward their down payments. This is a significant change from the past rule that delayed receipt of the credit until after buyers filed their federal income tax returns.
According to Shaun Donovan, secretary of the US Department of Housing and Urban Development, the change, long supported by the National Association of Realtors, will “enable FHA consumers to access the home buyer tax credit funds when they close on their home loans.” Donovan announced the policy change at the 2009 REALTORS® Midyear Legislative Meetings & Trade Expo in Washington, DC.
Under the change, FHA-approved lenders are now permitted to monetize the tax credit with short-term bridge loans. These loans will give eligible home buyers the ability to use the funds at the time the loan closes.
There is some fine print, however. Buyers must not have owned a home in the past 3 years to be considered first time buyers under the terms of the rule. In addition, buyers who sell homes purchased under the policy will have to repay the credit if the sale occurs before 3 years have elapsed.
In order to receive the full $8000 tax credit, the value of the home has to exceed $80,000. If you’re single, the adjusted gross income on your federal tax return must be less than $75,000. The credit reduces in steps as income increases. Singles with an adjusted gross income over $95,000 are not eligible for the credit. For married couples filing a joint federal return, their adjusted gross income must be less than $150,000. Again, the credit is reduced in steps until couples who earn over $170,000 are not eligible.
This is great news for home buyers. The boost in income gained from the credit will enable many of them to afford homes they previously couldn’t.
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