First-Time Homebuyer Tax Credit Improves for FHA-Insured Mortgages
U.S. Housing and Urban Development Secretary, Shaun Donovan, recently announced that the Federal Housing Administration (FHA) will allow qualified first-time homebuyers to apply the new $8000 first-time homebuyers’ tax credit toward the purchase cost of homes with FHA insured mortgages.
“This announcement is expected to boost the number of first-time homebuyers across the nation and will stimulate the Lehigh Valley real estate market resulting in a boost to our local economy as well,” says Rosemary Scardina, Chief Executive Officer of the Lehigh Valley Association of REALTORS®.
The American Recovery and Reinvestment Act of 2009 previously allowed for the tax credit to be available after the qualified homebuyer filed their next annual tax return with the Internal Revenue Service. The new policy will allow FHA-approved non-profit organizations, state Housing Finance Agencies, and FHA-approved lenders to monetize the anticipated first-time homebuyer tax credit and allow the monies to be used toward down payment or closing costs.
The new policy allows homebuyers using FHA-approved lenders to apply the tax credit to their down payment in excess of 3.5% of appraised value of their closing costs, which can help achieve a lower interest rate.
In addition to the homebuyer’s own cash and tax-credit, FHA allows employers, parents and other governmental entities to contribute towards the down payment.
Qualified first-time homebuyers who close on a home that will serve as their principle residence between January 1, 2009 and on or before November 30, 2009 are eligible for a tax credit of 10% of the home purchase price with a maximum of $8,000 credit.
The definition of first-time homebuyer for the 2009 tax credit is an individual who has not owned a principle residence at any time during the three years prior to the purchase. If an individual and their spouse file a joint tax return, neither spouse may have owned a principle residence or had an ownership interest in another home for that same time period.
FHA warns homebuyers to be aware of mortgage scams and carefully examine exactly what is being offered in regard to tax-credit monetization services. It recommends that homebuyers compare benefits and costs to determine what is best for them since programs vary from organization to organization. The FHA has implemented tracking systems to keep a record of every individual who receives tax credit assistance and the employer identification number of the organization providing the assistance. FHA will use the information to report any questionable practices to the proper authorities.
“The American Recovery and Reinvestment Act of 2009 first-time homebuyers’ tax credit is an improvement over the previous policy. The recent announcement by HUD makes home ownership a reality for a broader base of individuals,” adds Scardina.
If you are interested in searching for your first home, contact a member of the Lehigh Valley Association of REALTORS® who will help you through the home buying process.
This article is provided courtesy of the members of the Lehigh Valley Association of REALTORS®. Visit us at www.lehighvalleyarea.com and check out our open houses at www.lehighvalleyopenhouses.biz