In an attempt to sustain the momentum of the 2009 home buying season, the U.S. government has passed legislation which expands the 2009 First Time Homebuyer Tax Credit to existing homeowners.  The intent is to stimulate the middle tier of the residential real estate market.  Hopefully, homeowners will find the tax credit enough of a stimulus, in addition, to the stabilizing broader economy to trade up their homes. 

Why would this be of interest...?

It is quite controversial.  The purchase of a home initiates a great deal of local economic activity because the new homeowner will often buy furniture, make some improvements, buy new appliances and improve landscaping.  This, in turn, provides local economic stimulation and tax revenue.  For these reasons, the extension has broad support from those in the industry. 

There is some confusion about exactly how to and who qualifies so SpringsBlog.com would like to provide some clarification. 

 Buyer profile:

• Current home owners purchasing a home between November 7, 2009 and April 30, 2010, who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight.
• Individual income may be up to $125,000 and married couple’s income may be up to $225,000.  After these maximums are met, the ability to claim the credit diminishes.

Property profile:

• The Extended Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.
• Sale price of home cannot exceed $800,000.
• New construction qualifies for credit.

Details on the credit:

• Up to $6500 for current homeowners.
• This is a credit and does not have to be repaid.
• Buyer must hold home for at least three (3) years otherwise the credit will be recouped on subsequent tax returns.
• The tax credit can be used as a down payment on FHA loans in the state of Colorado.   Some state housing finance agencies (HFAs) have a product effectively monetizes the tax credit for down payment purposes.   A minimum $1000 cash down payment will be expected in conjunction with the application of the credit.

This tax credit is time sensitive!  The contract must be signed by April 30, 2010 and the deal must be closed by June 30, 2010.  The only scenario for extension of this credit is to actively deployed military personnel.  This is a great program but does not have the political support to get another extension after this one expires.  Contact us for more information and get connected with our mortgage team to qualify for FHA backed or other mortgage products.