Owning one's home is the dream of every individual. And with the deadline for the first time home buyer tax credit coming up at the end of next month, there is no better time to buy. If you are unfamiliar with the program, the gist of it is that you can get a tax credit or grant of up to $8,000 from the federal government if you enter into a binding agreement by April 30th. This is money in your pocket unless the home you buy stops being your principal residence within the first three years following your purchase. (There are some exceptions to this, however). On top of that, the government will even pay a portion of your down payment. And as you are well aware, mortgage rates have been cut by a couple of percentage points.
So how does one go about qualifying for this lucrative benefit? Well, the first requirement is that you must meet the definition of a "first time home buyer" as per the current legislation. An interesting thing to note here is that you meet this requirement so long as you and your spouse (if applicable) have not purchased a home as your primary residence in the three years preceding your current purchase. Bear in mind that the law does not say that this has to be your first home purchase ever. However, if either of you have, then neither of you qualify! Another key phrase to note here is "primary residence". This means that you may still claim the credit if, for example, you bought a vacation home or summer rental. The type of home you purchase (e.g. houseboat, condo, townhouse, etc) is also irrelevant. The flip side of this is that you are not allowed to claim the credit for a property that is not your primary residence.
The second key requirement is that you must not exceed certain income thresholds. These thresholds vary based on the date you purchased your home. If you are filing as a single tax payer and happened to buy your home between January 1st, 2009 and November 6th, 2009 then your annual income must not exceed $75,000. If you bought your home within this period and are filing jointly with your spouse, then you collectively must not make more than $150,000 per annum. Due to certain changes in the law late last year, the income limits were increased for sales following November 6th, 2009. The revised income limit for single tax filers purchasing homes following this date is $125,000 per year and $225,000 per year for joint filers.
The key provisions for qualifying for the first time home buyer credit seem easy enough to understand but there are caveats that you need to be aware of. Certain factors that you are presently not aware of could significantly impact your eligibility for the tax credit. If, for instance, you buy your home from a close family member such as a spouse, parent, or grandparent then you do not qualify for the credit. Other disqualifying factors include having claimed the Washington D.C. first time home buyer credit or if the cost of your house exceeds $800,000. On the other hand, if you are in the military and under government transfer orders of extended duty service, you do not have to repay the tax credit even if you sell or move out of your principal home within the first three years. You also have until April 30th 2011 to lock into a sales agreement and still claim the credit.
Time is running out for you to take advantage of the first time home buyer tax credit. Now would be the time to start shopping around for houses and mortgage rates. Contact some lenders and compare rates. Make sure you ask relevant questions if something is not clear. Happy Hunting!
Ready to find out exactly if you qualify? Log on to our no nonsense Home Buyer Stimulus guide
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