With all the information coming out about the $8,000 tax credit for first-time home buyers, it might help to recap some of it and clear up some of the more common misconceptions.
A first-timer is deemed to be someone who has had no home ownership in the last three years.
How Much You Get
The tax credit is good toward the purchase of a home that the borrower intends to live in as his or her primary residence.
This means that investment properties are excluded.
The amount of the tax credit can be up to $8,000 or 10% of the purchase price, whichever is less. The buyer of an $80,000 home will get the same benefit as someone buying a $200,000 home.
Buyers must own the property for a minimum of 36 months or will forfeit some or all of the tax credit.
Tax Credit at Closing
Buyers may be under the impression that they will get all or part of this credit at the closing table, thereby helping to pay for closing costs, or even toward a down payment. There is a very small number of instances where this is happening, but this typically occurs when a borrower is working with a non-profit or charitable organization.
Lenders, most of which have been reluctant to adopt these credit-at-closing programs, would in effect be floating the money to buyers, and most if not all are reluctant to do this.
In the current lending environment, buyers can expect to put down at least 3.5% (with FHA) of their own money or gift funds and take the credit when they file their taxes next year.
Where to Get Help
Buyers should check with their tax professional to get specifics on the home buyer tax credit.
They can also visit the IRS website at www.irs.gov.