Federal Government gives Home Buyers "Free Money"

Have you heard about the free money for home buyers from the Federal Government?  Want to know what it is?  It is the tax credit that you may have already heard about.  Here are some facts:

1)    Up to $7500 in a tax credit available based on income and if filing single or joint

2)    Available to “first time homebuyers” (meaning….anyone who has not been on the deed to a property in the last 3 years)

3)    Available if the home closing occurs between April 9, 2008 and July 1, 2009 (if closed on or after 1/1/09, cannot apply for the tax credit until filing federal taxes in 2010 for 2009)

4)    Required to be paid back over the next 15 years at a rate of $500 per year when filing federal taxes but repayment doesn’t start until 2 years after the tax year in which the credit is claimed.

Because the tax “credit” is basically an interest free loan this could be the best time ever to buy a home.  This credit is only available until July 1, 2009.  A buyer can use the tax credit for any purpose, like paying off a car loan, paying off credit cards, pay back anything they may have borrowed on or pulled out of a 401k account, put money in a savings account to build a “safety net,” or any multiple of other things. 

Just a word of warning – VHDA has published a bulletin stating that, if a buyer uses one of their programs to finance their home, they will not be eligible for the tax credit (since VHDA funds their loans with non-taxable bond money).  However, in taking with several CPAS, they are not convinced that this is true.  Therefore, specifically for VHDA clients, they need to seek the advice of their tax account or preparer to confirm if they are eligible for this tax credit.