Understanding The First-Time Home Buyer Tax Credit
Let's put this is basic laymen terms. In May the government rolled out a policy change that allows home buyers to use the tax credit worth up to $8,000 toward closing costs or part of their down payment instead of having to wait for the next tax season to take advantage of the program. It's working and is a huge incentive for homeowners to take the plunge and buy a house.
For homebuyers interested in taking advantage of the loan there are many lenders that can provide assistance with the program and the most active lender is the Federal Housing Administration (FHA). For more information go online to find FHA approved lenders in your area at http://www.fhaoutreach.gov/FHALookup/.
The FHA offers a first time home buyer (you qualify if you have not purchased a home in the last 3 years) loan with a 3.5% down payment. This is probably the most popular loan on the market because of the low down payment and when using the First Time Home Buyer Tax Credit with an FHA loan you will still be required to have the 3.5% down payment from your own funds but you can use the tax credit, which is given as a short term loan, to pay closing costs and prepaid expenses including escrows for taxes, insurance, and community association assessments.
Another creative use of the funds is it can be used as an additional down payment allowing you to "buy down" the interest rate on the mortgage and give you an even lower payment!
Prospective home buyers or real estate investors looking to occupy a new home would be wise to take advantage of the First Time Home Buyer Tax Credit which can be used to purchase a principle residence before December 1, 2009.
Author: Gerald Romine
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