Since we have “house brain” Mr. BP and I are reading up on home ownership and all that it entails. Our friends and families know we have been house hunting for many months now and so for my birthday one of my friends bought us USA Today’s “The Essential Guide for First-Time Homeowners” . Honestly, it’s not a real page-turner but it is filled with some great tips for first timers
First time home buyer credit?
As I was reading the other night I came across something that surprised me. Well, in fact after discovering it I was not really surprised about what was happening but more surprised I had not heard anything about this particular aspect. You see, by the time we began our house purchase the first time home buyer “credit” was already long gone.
Now we personally know many people who took advantage of the first time home buyer credit. From what we understood from them and from what we heard through media outlets (again not paying too close of attention) is that the credit was offered to first-time home buyers as an “$7,500.00 credit” that would not have to be repaid. Aside from the extension granted, we did not hear anything else about the first time home buyer credit.
However, as I read my new book I learned there were a number of stipulations regarding the “credit” and that for many people it is not a “credit” at all, but an interest free loan that has to be paid back. I told Mr. BP right away, thinking this was probably common knowledge and I had just been engrossed in other things. But after speaking with him and some extensive online research I found that many people were unaware of the exact parameters set regarding the “credit”.
Michelle Singletary, a personal finance columnist at The Washington Post featured the housing tax “credit” in an article written back in 2008. How is it that we did not know the money, in most cases, has to be paid back? I figured I should go to the source of the “credit” to find out what they are saying about the “credit”.
According to the IRS website, for homes purchased in 2008, the credit, with some exceptions, must be repaid and takes the form of a $7,500 interest-free loan. For homes purchased in 2009 prior to November 7, the credit is for a maximum of $8,000 and, with some exceptions, does not have to be repaid, but it’s only for new homeowners who have not owned a home in the prior three years. And, beginning November 7, 2009, an additional category of new homebuyers, long-time residents (who owned their own homes), was added. The credit for this group is a maximum of $6,500, which, with some exceptions, does not have to be repaid. (1/27/10).
The site continues with numerous caveats including definitions of “first-time homebuyer” and certain income limitations that exclude application for the credit.
First Time Homebuyer Credit or Loan: Conclusion
So, they are not hiding what the “credit” is but they continue to promote it as a “credit” but in some instances it simply is an interest free loan. The National Association of Home Builders website continues to indicate “The tax credit does not have to be repaid unless the home is sold or ceases to be used as the buyer’s principal residence within three years after the initial purchase”. Again, a lot of that depends upon timing.
Did we miss something? Is this common knowledge? Let us know, because we were pretty surprised.