Tax Credit for First Time Buyers
How the tax credit works:
- must be a first time home buyer (haven’t been a homeowner in the past 3 years)
- it is a clean refundable credit. If the &8,000 is greater than the tax you paid, then you will get a refund check for the difference. Example: you owe $2,000 in taxes on April of 2010. But, if you bought a houose before the stimulus expiration (Dec. 1, 2009) then you will get a tax refund check for $6,000 from the IRS. Some individuals variations will apply, so consult with a tax expert.
Even if you are not a first time buyer, this tax credit can have a positive affect on the ability to sell your home in a soft market. If you own what is considered a move up home, you too should feel the affects of this stimulus on the sale of your home. If the buyer who want to purchase a more expensive home need to do it subject to the sale of their current property, they may be relying on the tax credit to bring more buyers to look at their home. Hopefully this large tax credit (that does not need to be paid back) will give first time buyers confidence to purchase a home. The lower interest rates also make buying a home more affordable. Buyers have to make sure that their credit is in good standing or it will be nearly impossible to get approved for a mortgage. However, there are many potential buyers out there who have been holding off on purchasing real estate because of fear of losing their jobs. They have good credit and savings; they need a boost of confidence to make the move.
For those that need or want to buy a bigger home and/or more expensive home, this may be your opportunity. The lower interest rates can give you more buying power, and it may be easier to sell your current home if there is an influx of buyers coming into the marketplace.
Something to keep in mind is the deadline of the tax credit. The property must close by December 1, 2009. That seems far away now ,but it will close in fast if buyers don’t begin to get out in the marketplace soon. If there is a long line of contingencies starting with a first time buyer, the time needed to close all of these transactions can be lengthy. It may be a good idea to get your house on the market sooner than later. If it takes you 60 days to get a contract on your home and it is contingent on the sale of another property, it may be another 60-90 days before it closes. That is five months from now.
Use this tax credit to your advantage whether you are a first time buyer or a seller looking to find the buyer. But, the government put a deadline on it for a reason- to boost the economy and restore consumer confidence. Don’t wait until June to put your house up for sale because you just may lose out on the benefits of the tax credit.