posted by Tim Burrell - The Housing and Economic Recovery Act of 2008 was just signed by President Bush with some amazing benefits for first time homebuyers.  When is the last time someone gave you a $7,500 loan, that has no interest, no payments for two years, and if you do not make enough profit when you sell, you do not have to pay back the loan?  That is what first time homebuyers get.  Call everyone you know who wants to buy their first home, this is too good to miss.

If you have not owned a home in three years, you are a first time home buyer.  If you buy a home after April 9, 2008 and before July 1, 2009, you qualify for a credit.  Call your friends who just bought a home and tell them they may take $7,500 off their tax bill if they qualify.  It has to be your principal residence, so rentals do not count.

The tax credit is 10% of the cost of the home, up to a maximum of $7,500.  So, if the home costs $65,000, your tax credit is $6,500.  If the home cost $100,000, you would get a credit of $7,500.  This is not an additional deduction that lowers the amount of income to be taxed, it is a tax credit.  In other words, you take $7,500 off your tax bill.  What if your tax bill is only $5,000?  The IRS will send you the additional $2,500 as a refund.  When was the last time the IRS sent you a refund because you bought something?

The loan has no interest, and will be paid back over 15 years.  You get the credit on your 2008 taxes, but you start paying it back on your 2010 taxes that are due in 2011, so you get at least two years without a payment.  You pay back 6.67% of the credit each year, so for a $7,500 credit the payment is $502.50 per year.  If you stay put for 15 years, you pay it off with no interest.

What happens if you sell the house?  You pay the balance back at the closing.  So, you get $7,500 now, and pay the rest of it back if you make money on the sale of your house.

What happens if you do not make enough money when you sell your house?  They forgive the rest of the debt.  In other words, get $7,500 now and pay back nothing if your house only breaks even, or loses money, at closing.  When was the last time you got a loan on a speculative venture where the person who gave you the loan forgave the rest of the loan if you did not make enough profit on the sale? 

The risk of loss in buying now is on the government.  In other parts of the country where real estate is going down in value, you can lose 10% of the value of the home (up to $7,500) and the loss is covered by the fact that you do not pay back the tax credit.  The Raleigh real estate that first time buyers can aford is going up in value, so we are not as worried about the risk of loss.  Even a bad buy that does not go up in value is covered by the tax benefit because you get $7,500 no matter what happens.

 Similarly, if you die before repaying the debt, it is forgiven.  There are special rules for sales as a result of divorce or if the government takes your property by condemnation.

There are restrictions on the amount of income that you can make and still get the credit.  But the restriction is $75,000 per year for a single person and $150,000 for a couple filing jointly, so the vast majority of people qualify.   If you make more than that, you can still get some of the tax credit, but there are complicated rules about phasing out the credit as the income goes up.  If you make that much money, you can afford to hire someone to figure out the formula.

The restriction on the location of the property is minimal, it has to be in the United States.  Not too tough, huh?

There are minimal restrictions on the financing.  If you use a loan that is supported by mortgage revenue bonds, you do not get the tax credit.  These loans are normally made by North Carolina housing agencies, but there are not many of them available, and the qualifications limit their use.  In other words, nearly every loan allows you to get the tax credit.

What is the catch?  You have to buy your first house in three years before July 1,2009, not have super high income, not use bond financing and buy anywhere in the US,   Not too difficult, right?

If you know someone who wants to buy a home, call them.  If they want to buy in the Triangle area, have them call us and we will take exceptional care of them.  If they want to buy anywhere in the US, call us and we will find them an exceptional agent anywhere in the US. 

The government gives tax credits to huge companies, here is one for the little guy.  Don't miss it.