Can it really be true? The government will give you an interest free loan to help you make 100% of your down payment (up to $7,500) to buy your first home. Seems too good to be true? Well it’s not!
Wanted: First Time Homebuyers
In case you have not heard, Congress created the “Housing and Economic Recovery Act of 2008″ and President Bush signed it into law. It stipulates, among other things, that first-time homebuyers shall benefit from a new tax credit to motivate them to buy their first home. And the coolest part of it is anybody who has not had an ownership interest in a principal residence in the previous three years qualifies as a first time homebuyer!
Homebuyers To Get An Interest-Free Loan
In what amounts to an interest-free loan from the Federal Government, people buying their first home can receive up to $7,500 interest free on their personal income tax return in the calendar year following the year that they close on their home. They get to repay the tax credit on equal installments over 15 years! So, let’s look at what that means for one of our clients:
Stanley and Roberta S. are buying a home in Tallahassee. Since they have not owned a primary home in the past three years, the government deems them a first time homebuyer. They were able to find a nice three bedroom – two bath home in Florida priced at $135,000. This means they can maximize the $7,500 tax credit.
Stanley and Roberta will be utilizing FHA financing (3.5% down payment) and we’ll be using our first time homebuyer optimized contract to minimize out of pocket expenses. They will show up to closing with a check for roughly $6,750 (down payment plus closing costs). The next year, they will receive $7,500 back from what they paid in their income taxes (yes, $750 more than they paid at closing).
Each year after that, they will have to repay $500 when they do their taxes until the full $7,500 has been repaid. If they move before that, they have to repay the tax credit from the proceeds of the sale …..
UNLESS THEY SELL THE HOUSE AT A LOSS
If Stanley and Roberta sell the home at a loss, the balance will be forgiven!!! I have to believe that removes the pressure from first time homebuyers who are scared to buy a home right now.
More Information On The Housing and Economic Recovery Act of 2008
If you would like more information on the tax credit available to first time homebuyers, I strongly recommend that you check out the summary page located at the Tallahassee Real Estate Web Site. That site also contains a link which allows the reader to download a great 13 page e-book on the benefits of the Housing and Economic Recovery Act of 2008, compiled by Century 21.
