Get The Most Out of Your Homebuying Tax Credit Programs, states offer ways to get $8,000 break to first-time buyers faster

When it comes to the $8,000 tax credit for first-time homebuyers, it seems there's a new program every week to help tap that money today.  The credit can be claimed on 2008 or 2009 tax returns. Homebuyers who get a loan backed by the Federal Housing Administration can use the money to cover closing costs and other fees, and at least 10 states offer ways to use the tax credit faster. "There are some real neat tax planning strategies you can apply now," said Bob Meighan, vice president of TurboTax. To be eligible, a buyer cannot have owned a home in the past three years. So if you're ready to buy, here are some tips:

INCOME CONSIDERATIONS: The tax credit, for home purchases made through end of November, comes with income thresholds, $75,000 for individuals and $150,000 for joint filers. After those limits, the credit begins to phase out. If you bought a home this year and expect your 2008 income to be lower than next year's, it makes sense to file for the credit this year using a 2008 amended return.  However, if you think your income will decrease, due to job loss, wage cuts or hour reductions, it makes more sense to file for the tax credit on your 2009 tax returns to get the most out of the credit, Meighan said.

TAX WITHHOLDING: Another benefit to waiting until 2009: You can increase your take-home pay. By taking the credit next year, you can change your tax withholding status with your employer now and get more on a paycheck-to-paycheck basis, Meighan said.  You'll be giving up a "fatter" tax refund next year, but each month you'll have more change in your pocket.  Also, don't forget to reduce your federal and state tax withholding to account for the tax deduction you can take on the mortgage interest and property taxes you pay.

BRIDGE LOANS: Ten states (and the list keeps growing) are offering so-called "bridge loans" for the federal tax credit, so homebuyers can take advantage of the $8,000 before the 2010 filing season. Qualified homebuyers in Colorado, Delaware, Idaho, Kentucky, Missouri, New Jersey, New Mexico, Ohio, Pennsylvania and Tennessee can receive a loan with little to no interest and repay it with the tax credit refund next year.  "I see it as an upside," Meighan said. "It gives homebuyers more flexibility," with the money.Each state program varies and some require a minimum down payment contribution from the buyer.  Some nonprofit organizations like NeighborWorks America are also offering bridge loans for the tax credits.

ADVANCE CREDIT: Last month, the FHA said its borrowers can receive advances on the $8,000 first-time homebuyer tax credit from lenders, so they don't have to wait to get the money next year from the Internal Revenue Service.  Borrowers will still have to come up with the FHA's required 3.5 percent down payment, but the advance from the tax credit can be applied toward closing costs, fees or to increase the down payment.  John W. Roth, a senior tax analyst at CCH, believes some lenders won't participate. The process involves more work for lenders, but lenders can only charge an additional 2.5 percent fee for that.

FOR MORE INFORMATION contact Jim Askins CCMB, Fairway Mortgage, toll free 800-326-2100, Colorado 970-731-3100, New Mexico 505-263-7466 or by e-mail  jaskins@colmortgage.com. Web site: www.colmortgage.com.

First Time Homebuyers - $8000 Tax Credit Cannot Be Used for 3.5% Downpayment

I am sure everyone heard about another change to the $8000 tax credit policy. On Friday, HUD Secretary Shaun Donovan announced a policy change that would provide buyers with quicker access to the tax credit. The credit will be issued in advance in the form of a short term loan to the buyer. The buyer will have to be pay the loan back when the buyer receives their tax credit. This new policy only applies to FHA loans.

Here's the kicker: The short term loan CANNOT GO TOWARDS THE 3.5% DOWN PAYMENT!!! The Government still wants the buyer to "have some skin in the game".

In my opinion, buyers should opt to have the closing costs paid by the seller, just like 90% of the transactions out there, and keep the $8000 for themselves when they file their taxes.

So, what does this mean for the First Time Homebuyer? You still need money for a downpayment, and can possibly ask for seller closing cost help.

While pending home sales rose in April, other housing metrics show the market may not have bottomed. The mortgage delinquency rate jumped to 9.12 percent in the first quarter,and the share of loans entering foreclosure rose to 1.37 percent, the Mortgage Bankers Association said last month. Both figures were the highest in records going back to 1972. The economy is still contracting and most forecasters including myself expect that will stop later this year and production will start to pick up but we don’t expect a robust recovery," said Kevin Logan, senior market economist in New York at Dresdner Kleinwort, another primary dealer. "This is pretty well exaggerated." 

"We just want to make sure we don’t repeat the mistakes made in the 1930s and mistakes made by the others like the Japanese in the 1990s, and we don’t withdraw too early," he said in a speech in Lubbock, Texas. Bankers are seeking to cap consumer borrowing rates to ensure the economy recovers. As a result of rising yields, though, 30-year fixed-rate mortgages jumped to 5.45 percent at the end of last week from as low as 4.85 percent in April, according to Bankrate.com in North Palm Beach, Florida. The 10-year Treasury yields rose more than a percentage point to 3.87 percent since mid-March.  At the same time, the economy is likely to expand less than 1.85 percent next year, as the unemployment rate holds above 9 percent, according to a survey of economists by Bloomberg. The Fed last raised rates when unemployment was above 9 percent in 1983, according to data compiled by Bloomberg.