The federal homebuyer tax credit is back in action in a new-and-improved format that will benefit first-time homebuyers and homeowners who want to sell their current home and buy a new one. The credit is reasonably straightforward, but there are some tips for those who want to take advantage of it. Here's what you should know:
Deadline: April 30, 2010
The most important tip is to be aware of the deadline. Buyers who want to use the tax credit must have their new home under contract (i.e., in escrow) by April 30, 2010, and must close the transaction within 60 days after that date.
Credit up to $8,000 or $6,500
Buyers also need to understand that the tax credit is equal to 10 percent of the sale price of the home, which could be less than the maximum of up to $8,000 for first-time buyers and up to $6,500 for repeat homeowners.
For example, if a first-time buyer purchased a small condominum that cost just $70,000, the tax credit would be $7,000. And by the way, if the home costs more than $800,000, the credit now drops to zero.
Homebuyers who want to take advantage of the tax credit should consult the right people for help, including:
A tax preparer, who can help them ensure they meet all the requirements to use the credit.
A mortgage lender, who can help them choose a loan program that will fit their needs.
A Realtor, who can help them locate a home they can afford and want to purchase.
Buyers should be aware that not all loans allow the borrower to finance closing costs or accept a contribution from the seller toward those costs, Bernard says. Many loan programs do allow those options, but that "certainly is not a blanket opportunity," she says. Buyers whose savings won't stretch to cover all the out-of-pocket costs to buy a home should discuss that constraint with their loan officer or mortgage broker.
