Ten Facts about the $8,000 First-Time Homebuyer Tax Credit

Ten Facts about the First-Time Homebuyer Credit

Many taxpayers who purchase a home in Maryland this year will qualify for an $8,000 federal tax credit. The refundable first-time homebuyer credit is a major tax provision in the American Recovery and Reinvestment Act of 2009. But time is running out to qualify for this credit.

Here are ten things the IRS wants you to know about the first-time homebuyer credit:

1. To be considered a first-time homebuyer, you – and your spouse if you are married – must not have jointly or separately owned another principal residence during the three years prior to the date of purchase.

2. You cannot claim the credit before there is a completed sale and purchase of the residence. The sale and purchase are generally completed at the time of closing on the purchase.

3. To qualify for the credit, the completed purchase must occur before December 1, 2009.

4. The home must be located in the United States.

5. The credit is either 10 percent of the purchase price of the home or $8,000, whichever is less.

6. The amount of the credit begins to phase out for taxpayers whose modified adjusted gross income is more than $75,000 or $150,000 for joint filers.

7. The credit is fully refundable. A homebuyer with no taxable income, who qualifies for the credit, may file for the sole purpose of claiming the credit and receive a refund. The credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.

8. The credit is claimed on IRS Form 5405, First-Time Homebuyers Credit.

9. Taxpayers can claim the credit for a qualified 2009 purchase on either their 2008 or 2009 tax return. For those who have filed a 2008 return, a Form 1040X, Amended U.S. Individual Income Tax Return can be filed in order to get a refund in 2009.

10. The credit for qualified 2009 purchases does not have to be repaid, as long as the home remains your main home for 36 months after the purchase date.

Qualified taxpayers who have been considering a main home purchase may find extra incentive from this tax credit to buy now so they can complete the purchase before the December 1 deadline.

 

 

For more information on this and other key tax provisions of the Recovery Act visit the official IRS Website at IRS.gov/Recovery.

Links:
First-Time Homebuyer Credit
YouTube Video - First-Time Homebuyer: English Spanish ASL
Audio File for Podcast - First-Time Homebuyer Credit 2009: English Spanish
The American Recovery and Reinvestment Act of 2009: Information Center
Form 5405, First-Time Homebuyer Credit (PDF)
Form 1040X, Amended U.S. Individual Income Tax Return (PDF)

NEW RURAL MORTGAGE LOAN PROGRAM for HARFORD, BALTIMORE COUNTY

The United States Department of Agriculture has introduced a new Mortgage Loan Program for Baltimore County, Harford County and Cecil County Homes called the Guaranteed Rural Housing or GRH program. It offers 100% Financing with NO Mortgage Insurance and allows a 6% Seller Contribution! Income and Property location limits apply. CLICK HERE and provide your contact information and property address you are interested in purchasing. We will help you determine if the property is eligible for this financing option. SPECIAL...SPECIAL.....if you buy your home through our preferred mortgage lender, you will receive a $500 Broker Credit! AND a HOME WARRANTY from our TEAM as a thank you for your business. Robert B. McArtor, REALTOR with Long and Foster Real Estate, Inc. serves the Baltimore, Harford County, Cecil County and Surrounding Areas! Call Now at 410-879-0622 or simply visit Maryland HOMES Team website.

BUYING A HOME IN A WEAK MARKET, MAKING SENSE for MARYLAND HOME BUYERS

BUYING UP IN A WEAK MARKET vs. BUYING UP IN A STRONG MARKET, Making Sense for Maryland Home Buyers
Calculation of Buying Up in a Weak Market in Maryland, Baltimore, Harford and Cecil County
Compared to Buying Up in a Strong Market in Maryland, Baltimore, Harford and Cecil County
First - Moving Up in a Weak Market
Sale Price of Current Home Sale Price of Future Home
$400,000. $600,000.
The difference between the two properties is $200,000.
Moving Up in a Strong Market
This example assumes a price increase of 10%. Prices have increased at rates as high as 24% annually in our market. The market area average annual increase over the last 30 years is 6.9%.
Sale Price of Current Home Sale Price of Future Home
$440,000. $660,000.
The difference in price between the two properties is $220,000.
In this example it costs an individual $20,000 more to move up in a strong market than it does in a weak market.
Real Estate markets fluctuate daily in Maryland just as all economic markets do. The time for a buyer to get the best terms is when the seller is not experiencing much interest. The time to buy is when no one else is. Experienced investors know that.
Rates are very low now. Changing Rates can change the picture a lot.
Interest rates play a part in the cost of home buying as well.
On a purchase of $600,000. with a 10% down payment and a mortgage of $540,000. on a 30 year fixed rate mortgage the principal and interest payment would be:
At 7% $3,593.
At 6.5% $3,413.
At 6% $3,238.
At 5.5% $3,066.
At 5% $2,899.
For example, the difference between a payment at 6% and a payment at 6.5% costs $175. a month or $2100 a year!
The monthly payment at 6.5% (for example) on the extra $20,000 one might have spent in a strong market would be $126. more a month than what might have been paid in a weak market. This is $1512. a year!
The conclusion is that it is better to buy in a weak market and it is even more advantageous to buy when rates are low. Both of those conditions exist right now.

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