Guest Column by Pat Earnhardt
Mortgage Consultant and Senior Mortgage Banker,
The Mortgage Rewards Team of Hearthstone Mortgage
On November 6th, President Obama signed into law an extension of the 2009 First Time Home Buyers Tax Credit, which was set to expire on December 1, 2009. This extension became effective on November 7th. Actually, this isn’t just an extension of the old tax credit law; it is now a “revised” tax credit law. It has been expanded with new benefits and some would say it is an improved version of the tax credit law. Just as it was with the first version, it is important that we understand who is eligible and how this new version of the tax credit law may apply to you.
Let’s look at the improvements:
- The new baseline expiration date is April 30, 2010 giving homebuyers over 5 more months and into the spring house-buying season to find a home, go through home loan approval, and close.
- The income limits have been raised from $75,000 to $125,000 for single buyers, and for married couples the income limit has been raised from $125,000 to $225,000. (There are also diminishing tax credits available for those folks who make more than the income limit caps.)
There are a couple of really big additions to the tax credit extension. Many more Americans can now join in on the benefits of this tax credit boost to buying a home:
- Current homeowners, who have owned and resided in their home for at least 5 consecutive years out of the past 8 years, can qualify for up to a $6500 tax credit.
- Another big change under the extension is that as long as the homebuyer has a binding, written offer-to-purchase in effect as of April 30, 2010, the purchaser will have until July 1,2010 to close on the home.
What we need to remember:
- The tax credits are still at 10% of sales prices up to $6500 for qualifying current homeowners and up to $8000 for first time homebuyers.
- The addition of the current homeowners’ tax credit is for purchases only. It does not cover refinances.
- While the title of this tax credit program has so far been touted as a “First Time Home Buyer Tax Credit”, it has always really been a First Time Home Owner Tax Credit, in order to get up to the $8000. To qualify as a “first timer” the purchaser or his/her spouse may not have owned a residence during the 3 years prior to the purchase.
- Generally speaking this is not a pay back tax credit. If the buyer stays in the home for at least 36 full months (3 years) there is no payback. If the buyer who receives the tax credit sells the property during the first 3 years the full amount of the credit must be paid back and recouped on the sale.
- The tax credit can only be applied to primary residences, no second homes or investment homes. Eligible properties include: single family homes, condos, townhomes and co-ops.
- Under the new tax credit extension, only properties with a sales price of $800,000 or less are eligible.
- In order to get the tax credit, the newly purchased home does not have to have a sales price equal to or higher than the homeowners’ current residence. (This is going to be a big help to many current homeowners.)
- There are still two prevailing guidelines for first timers: buyers’ income and the sales price of the home.
- There are three prevailing guidelines for current homeowners: income, sales price of purchased home, and the number of years residing in current home.
Not everyone in Washington is happy with the extension. Some critics have said that this extension is simply going to accelerate purchases that would have happened anyway and could well help create another artificial housing bubble. Others are concerned with the cost; however, President Obama calls this extension, which is included in an approximate $24 billion stimulus package, revenue neutral and will not increase the deficit.
The addition of allowing current homeowners to participate in the tax credit will answer the prayers of some potential homebuyers who would like to relocate to another area and/or move into a smaller house. It can also help those homeowners who need to sell their current home before they can purchase a new one, those who will not generate the once anticpated revenue from selling their home. (The reduced revenue that has in many cases, been caused by a down turn in many housing markets.)
This is good news! If you would like more details about this new tax credit extension and/or about a mortgage to purchase or refinance a home (could be a great idea but no tax credit on a refinance) you can contact Pat Earnhardt at tnextstep@aol.com.
About our Guest Contributor:
Pat Earnhardt is a Mortgage Consultant and Senior Mortgage Banker for The Mortgage Rewards Team of Hearthstone Mortgage. She holds a Mortgage Loan Officer's license in both North Carolina and South Carolina as well as a Real Estate Broker's License in North Carolina. She can be reached at 919-787-3669 or by email at tnextstep@aol.com.
For more background information and past articles for CarolinaNewswire.com, check out Pat's Archives as well as all our other guest columns at http://www.carolinanewswire.com/expert.php.
CarolinaNewswire.com provides the thoughts and analysis of this columnist as a free benefit to our readers but without any representations or warranties as to the accuracy or efficacy of such thoughts or analysis. The opionions, analysis, and thoughts expressed here are those of the author only and should not be deemed as legal, financial, or tax advice from this publication. Readers with legal, financial, or tax questions should consult a professional.
