Now that time is running out on the First Time Home Buyer Credit–what I call the Realtor Cash For Clunkers program — I came across this comically shameless video produced by one of America’s largest real estate brokerage companies.
But seriously folks, the credit seems like a good idea, but filled with exceptions. From what I can decipher, the basics of how you qualify for the credit are:
- First-time buyer refers to anyone who has not owned a principle residence in the past three years.
- Non-married buyers qualify as long as one person meets the first-time buyer definition. Married tax payers must both be first-timers to qualify.
- The tax credit is equal to 10% of the purchase price, up to a maximum of 8,000 dollars.
- The home must be purchased between January 01, 2009 and December 01, 2009 and remain your primary residence for three years.
- You don’t have to pay it back. (Filing options available from the IRS website).
The confusing part comes into play for those looking to use the tax credit towards their downpayment or closing costs. The basic story is that FHA-approved lenders are able to create an additional loan that would allow you to access this money upfront for the following:
- Assist in covering your closings costs.
- Buy down your interest rate.
- As additional money towards your downpayment.
From what realtors say, the catch is that buyers must still fund a minimum down payment of 3.5% from their own wallets. The tax credit can be used in addition to the 3.5% downpayment but cannot be used to make up any part of the 3.5%. The other catch is apparently these loans are not easily carried out and assistance is not widely available to say the least. Massachusetts just came out with its own program.
Good lord, my head is still spinning from that video. I’ll leave it to the realtors to explain the credit in some fashion of clarity.