Posted by: rgmorgan | June 3, 2009

First Time Homebuyers Tax Credit

The first time homeowners credit continues to be a hot topic. It is a refundable tax credit and not a deduction so those who are eligible can take advantage of another incentive to home ownership. There are very specific qualifications regarding eligibility.  You must not have owned a primary residence for 3 years, if you are married neither of you may have owned a primary residence for those same 3 years, you must be a U.S. citizen and you must buy a primary residence and close on it before December 1, 2009. This is a fantastic benefit of up to $8,000 to anyone who qualifies. If you are unsure about whether you qualify and for other qualifications please visit:,,id=204671,00.html?portlet7. The credit can have the effect of significantly lowering the cost of home ownership for the first year.

One area that seems to be confusing is if you can use this for the downpayment of your new home. The  answer is no. It can be used for an additional downpayment or to help with closing costs but if you are financing using FHA you must have the 3.5% downpayment independent of the tax credit. Keep in mind the First Time Homebuyer credit is contingent upon closing so if you need the money prior to closing you must obtain some type of loan. Work with your realtor and mortgage lender on the details. Many lenders are not offering any type of bridge loan so another option may be a relative who could lend the money to you if you do need it prior to closing.

HUD just issued a mortagee letter 2009-15  on May 29th, which explains how you may use the money if you choose to work with a lender to get the money in advance of the purchase. For more information please go to

Also, for those of you considering taking advantage of this incentive please remember the deadline is you must close on the property no later than Novemeber 30, 2009 and not the end of the year. The credit continues to evolve so as always please seek the advice of a tax professional if you have specific tax questions.

Please also read earlier post regarding the First Time Homebuyers Tax Credit.


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