Bailout can help you buy a home
By Steve McLinden and Michelle Lerner • Bankrate.com
President Barack Obama's Economic Stimulus plan includes strategies to help homebuyers and stimulate the U.S. housing market.
• Married couples making less than $150,000 in modified adjusted gross income -- with some sliding reductions beyond that income total -- are eligible. Both spouses must be first-time homeowners, however. For unmarried people making a joint purchase, only one party (the claimant) must be a first-time homeowner.
• Individuals making less than $75,000 in taxable income are eligible, with sliding reductions above that.
• Participants can't have owned a principal residence in the last three years. Individuals who have owned a rental or vacation home in that period may still qualify.
• Condos, townhomes, new-construction homes and mobile homes qualify.
• Participants can get the tax credit for the purchase on either their 2009 or 2008 taxes. Owners can move this savings into the 2008 tax year even if they've already filed for the year, by amending their returns (IRS form 5405). "That way, homeowners can use this early credit to help fund their home purchases," Anderson says.
• Participants must live in the house for three years.
President Barack Obama's Economic Stimulus plan includes strategies to help homebuyers and stimulate the U.S. housing market.
The primary feature of the housing portion of the 2009 Obama Economic Stimulus plan features an $8,000 first-time homebuyer refundable tax credit for qualifying buyers who purchase a home between Jan. 1, 2009 and Dec. 1, 2009. The total tax credit a homebuyer can get in this initiative is equal to 10 percent of the purchase price, or a maximum of $8,000 -- to get the full $8,000 credit, the property must cost at least $80,000.
This is a refundable tax credit, which is far better than a tax deduction. If the total taxes you owe the IRS for the year -- whether withheld from your pay or not -- are less than $8,000, you will get a refund for the balance.
As an example, if you buy a house as a first-time buyer for say $85,000, you are entitled to an $8,000 tax credit. If your total tax owed for the year is $10,000 and you've already paid in $6,000 (still owe $4,000) you will not have to pay the $4,000 and you will get another $4,000 refunded to you.
"If you have been thinking about buying your first home, I can't think of a better time to do so," says mortgage expert Rodney Anderson, managing partner of Plano, Texas-based Rodney Anderson Lending Services.
Anderson says the program differs greatly from last year's $7,500 housing tax-credit program for first-time buyers, which was essentially an interest-free loan that required repayment over 15 years. That was not widely utilized, in part because it was a voluntary for banks. Because the new Stability Initiative rewards banks for participating, the new credit is becoming widely available, Anderson says.
Basics of the tax-credit plan
• Married couples making less than $150,000 in modified adjusted gross income -- with some sliding reductions beyond that income total -- are eligible. Both spouses must be first-time homeowners, however. For unmarried people making a joint purchase, only one party (the claimant) must be a first-time homeowner.
• Individuals making less than $75,000 in taxable income are eligible, with sliding reductions above that.
• Participants can't have owned a principal residence in the last three years. Individuals who have owned a rental or vacation home in that period may still qualify.
• Condos, townhomes, new-construction homes and mobile homes qualify.
• Participants can get the tax credit for the purchase on either their 2009 or 2008 taxes. Owners can move this savings into the 2008 tax year even if they've already filed for the year, by amending their returns (IRS form 5405). "That way, homeowners can use this early credit to help fund their home purchases," Anderson says.
• Participants must live in the house for three years.
While the tax-credit program is enticing, Anderson warns that mortgage qualifications based on income, assets and credit are stricter than the pre-bust years. In early April 2009, most banks needed to see a credit score of at least 620 to lend, he says.
