Post # 1
FI was told yesterday by a friend that you are now allowed to use the $8,000 tax credit as a down payment instead. Well that would make our lives a lot easier but you only have until Dec 1, 2009 and I do not have a job yet plus I need to hash out my large (HUGE actually) amount of student loan debt with my parents since I will NEVER (not exagerating) make enough to even cover the payments plus live. We are worried we won’t be ready by Dec 1 and I am worried that FI is waaaay to picky and he’ll never be happy with a house by then.
Does anyone know if there will be something similar to this in 2010?
Post # 3
From what I understand, the tax credit is not currently being advertised as usable after the Dec. 1st deadline. Also, the tax credit can be applied to the cost of the house immediately instead of waiting for the return next year, but you need to go through an FHA or other non-profit loan. From what our lender explained about a month ago, the money is kinda like a no-interest loan from the government where you get the money now, and then "pay it back" by not collecting the cash when you do your taxes next year. Plus, you still have to come with the cash for a downpayment and closing costs (for FHA the downpayment is only 3.5%, though). Here’s the federal website explaining the tax credit. http://www.federalhousingtaxcredit.com/2009/index.html
As a first-time home buyer, it might be beneficial for you to take a class or a group of classes from your local bank on the home buying process. We took one from Wells Fargo that was super informative; I think it lasted one whole Saturday. Anyway, it would give you a lot of information and answer all your questions so that if you do get to a place where you are ready to buy before Dec. 1st, you have all the paperwork ready to go and you are prepared for the process. Also, you might want to start looking online at the MLS listings for your area. This will give you a better idea of what you will be able to afford: what area, how big, in what condition, etc…
Post # 4
Actually you don’t need to pay the money back if you stay in your house for a certain number of years. I think it’s 3. So if you live in your house for at least that time, you don’t have to pay back the 8,000.
Post # 5
Sorry, my post was probably unclear. 🙂 What I meant to explain was that you get the $8,000 knocked off of the price of the house immediately. Then you don’t re-collect the $8,000 at tax time because you have already spent it. The way my lender explained it was like an interest-free loan meaning you get money you wouldn’t have access to right now in advance. At the point in time when you would have collected the money (tax time) you are "paying off" that loan because your credit goes directly to the money you borrowed in advance.
I’m not sure that made things clearer…
Post # 6
Thank you for the information! The thought of buying a house this year makes me feel rushed but the thought of missing out on $8,000 feels bad too!
Post # 7
Hi, I’m a real estate agent so I thought I’d jump in an offer some advice.
– Right now, it has not been announced if this credit will be extended past December 1 or if there will be a similar program to it. Most of us suspect that if it happens, it won’t be announced until closer to the deadline, or even after it.
– As for using it at the closing table, you would want to check in with your particular lender. It was advertised a few months ago that you could use it as part of your downpayment instead of having to get it after you close by filing a return, however we have been directed to NOT advise our clients of that because not all banks are set up to do that yet. They announced it early without really working out the details as far as how that would work logistically. I am in CT, it may vary based on your state and the banks operating there.
– The $8000 is not a loan, you don’t have to pay it back if you stay for 3 years. If you do NOT use it at closing as part of your downpayment (and none of the agents in my office, all 40 of us, have seen it done because our banks aren’t set up for it yet), you’ll need to file or amend a return to receive the credit.
– Assuming you cannot use the credit towards your downpayment, you would need to come up with at least 3.5% of the purchase price for a downpayment if you utilize FHA. However, you can receive seller concessions up to 6% of the purchase price to put towards your closing costs, so you may not need to come up with closing costs.
– If you end up going FHA, leave yourself plenty of time to get the loan processed. In my neck of the woods, we’re typically seeing 60 days to close an FHA loan because the underwriting is so backed up…largely because most people are going FHA, for a multitude of reasons, right now. It will likely be your best option for the lowest downpayment. Add even more time to that if you end up chasing after a short sale. If you put in an offer on a short sale, you often wait weeks (or even months) to hear back from the seller’s bank as to whether or not they will accept it. At that point, if they do, you still need the 60 days to get your loan going and closed! Time frame will vary based on your particular area, so you may want to check in with an agent in your area for more specific details.
Hope that helps!
Post # 8
Just my 2 cents.. we just purchased a home with the intent to use the tax credit for our down/payment closing closts. If you file an amended return in order to receive the credit.. its takes AT LEAST 12 weeks to receive it. My parents gave us the down-payment money and the seller paid all closing costs so that we could go ahead and close… we still havent received our tax credit and we filed for it the 1st of April!