Were you considering buying a home this year and claiming the first time home buyer’s tax credit? If you were, a recent change to the credit may allow you to use it now rather than waiting until next year’s tax return.
The American Recovery and Reinvestment Act of 2009 allowed for a first time home buyer’s tax credit of up to $8000. This would be money that could be claimed on your tax return. Recent changes now allow a first time home buyer to apply the tax credit toward their down payment or closing costs.
From the US Department of Housing and Urban Development site:
Today’s announcement details FHA’s rules allowing state Housing Finance Agencies and certain non-profits to “monetize” up to the full amount of the tax credit (depending on the amount of the mortgage) so that borrowers can immediately apply the funds toward their down payments. Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5 percent of appraised value or their closing costs, which can help achieve a lower interest rate.
The HUD site also has the Mortgagee Letter detailing the process.
Here’s a rundown of the tax credit:
- This must be a FHA-insured home (your mortgage has to be backed by FHA).
- This can be used towards the down payment or for closing costs.
- As a down payment, the buyer must still put down 3.5% first. The credit would be in addition to the 3.5%.
- The home must close before December 1, 2009.
- The credit does not have to be paid back unless the home is sold before you have lived there for three years.
This should really help stimulate home sales! Not only will it help first time home buyers purchase their home but it will also help current home owners sell their homes and move to new homes (some of the people the current owners will be selling to will be the first time home buyers). This will also help first time buyers get lower interest rates because of a bigger down payment.