The down payment remains the deepest chuck hole on the road to home ownership. First-time buyers and folks starting over after divorce or bankruptcy, however, now have more workable, flexible loan programs than any other borrower category.

And now, as they say on television, "for a limited time only" first-time homebuyers are eligible for a huge bonus — an $8,000 tax credit, thanks to the recent housing stimulus package. It’s called a "tax credit," but if you read all the details, even if you pay less than $8,000 in taxes, you would get credited back the difference with a check from Uncle Sam next year.

Editor’s note: This is Part 2 of a two-part series. Read Part 1.

The down payment remains the deepest chuck hole on the road to home ownership. First-time buyers and folks starting over after divorce or bankruptcy, however, now have more workable, flexible loan programs than any other borrower category.

And now, as they say on television, "for a limited time only" first-time homebuyers are eligible for a huge bonus — an $8,000 tax credit, thanks to the recent housing stimulus package. It’s called a "tax credit," but if you read all the details, even if you pay less than $8,000 in taxes, you would get credited back the difference with a check from Uncle Sam next year.

In a recent column, we explored how the $8,000 tax credit could now be used for the down payment or closing costs for buyers who apply for mortgages insured by the Federal Housing Administration before Dec. 1, 2009.

This week, we’ll take a look the options the tax credit offers plus check out a few alternatives.

In a nutshell, the new measures announced by HUD would allow FHA-approved lenders, federal, state and local government agencies and FHA-approved nonprofit organizations to supply homebuyers short-term or "bridge loans" up to the amount of the $8,000 first-time homebuyer tax credit.

Longer-term loans secured by second liens can also be used by government agencies and FHA-approved nonprofit organizations to facilitate home sales. Several state housing finance agencies have introduced such programs, and a number of agencies are considering that possibility. Again, some details need to be hammered out at the state level, but the effort is definitely on to get the housing ladder moving.

Here are a few of the most-asked questions regarding how the credit can be used:

1. If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?

Yes. The law allows taxpayers to choose ("elect") to treat qualified home purchases in 2009 as if the purchase occurred on Dec. 31, 2008. This means that the 2008 income limit applies, and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a homebuyer in 2009 will know their 2008 income with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount. …CONTINUED

Taxpayers buying a home who wish to claim it on their 2008 tax return but who have already submitted their 2008 return to the IRS, may file an amended 2008 return claiming the tax credit. You should consult with a tax professional to determine how to arrange this.

2. For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?

Yes. If the applicable income phaseout would reduce your homebuyer tax credit amount in 2009 and a larger credit would be available using the 2008 income amounts, then you can choose the year that yields the largest credit amount.

A phaseout of the credit begins when the taxpayer’s modified adjusted gross income exceeds $75,000 or $150,000 if married filing jointly. The credit is eliminated completely when the taxpayer’s income reaches $95,000 — or $170,000 if married and filing jointly.

Lenders, Realtors and tax consultants continue to preach to youngsters the power of saving — especially if buying this year is not in the cards and the $8,000 tax credit disappears forever in December as scheduled. One lender, who recently spoke to college seniors regarding realistic paths to buying their first home, showed that saving $100 a month for five years would give them a down payment of $6,000, not including interest accrued.

Depending on the loan program, income and credit history, the $6,000 could be all or part of the down payment for a single-family home or a mid-level townhouse or condominium both priced at about $150,000.

Home-loan experts advise setting achievable goals, such as recording expenses or aiming to save an additional $50 a month. Every little bit helps — especially for first-time and low-down-payment homebuyers who can boost their buying power significantly with some bookwork.

If you are a potential first-time homebuyer, make sure you ask a local lender about all first-time buyer programs. You may be able to get into the door of your own home for the amount you are now paying in monthly rent.

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