Attention first-time home buyers, you may qualify for a tax credit up to $7,500!

To stimulate the housing market, legislation was recently passed to provide tax credits for up to $7,500 for first-time home buyers.

First-Time Home Buyer Tax Credit Facts

Who is Eligible?

The $7,500 tax credit is available to all first-time home buyers who are tax filing U.S. Citizens. The law defines a first-time home buyer as a buyer who has not owned a home during the past three years.

Income Limits

Home buyers who file as a single or head-of-household taxpayer can claim the full $7,500 credit if their adjusted gross income (AGI) is less then $75,000. If their income is between 75,000 and 95,000 they are eligible to receive a partial tax credit. If the household earns greater then $95,000, they are not eligible to receive the tax credit.

Married couples filing joint returns earning up to $150,000 can receive the full tax credit. Households earning between $150,000 and $170,000 are eligible to receive partial tax credit. If the household is greater then $170,000, they are not eligible to receive the tax credit.

Effective Dates for the Tax Credit

First-time home buyers who purchased a home on or after April 9, 2008 and before July 1, 2009. To qualify, you must actually close on the sale of the home during this period.

Tax Credit is Refundable

A refundable credit means that if you pay less then $7,500 in federal income taxes, then the government will write you a check for the difference. For example, if you owe $5,000 in federal income taxes, you would pay nothing to the IRS and receive a $2,500 payment from the government. If you are due to receive a tax refund from the IRS, your refund would increase by $7,500. If you purchased your home in 2008 you would take your tax credit in 2008. If you buy in 2009, you have the option to claim the credit on your 2008 or 2009 tax return.

Types of Homes that Qualify for the Tax Credit

All homes, weather a single-family or condominium will qualify, provided, that the home will be used as a primary residence and the buyer has not owned a home in the prior three years. This also includes newly-constructed homes.

Payback Provisions

Unlike most tax credits, this tax incentive MUST be paid back. All eligible purchasers who claim the credit will be required to repay it over 15 years. The status specifies that the repayment amount will be 6.67% of the credit amount each year. Thus, a buyer who qualifies for the full $7,500 credit will repay $502.50 each year. There will be no interest charge on outstanding balances.

Source: John Adams Mortgage Company, an affiliated company of Max Broock Realtors and Real Estate One

Fannie Mae Scraps Declining Markets Policy

Daily Real Estate News May 16, 2008

Fannie Mae will no longer require borrowers to put up an extra 5 percent down payment when purchasing homes in areas deemed "declining markets," the country’s largest secondary mortgage market company said Friday.

Fannie Mae had been hearing concerns from REALTORS® and others for months that its declining-markets policy was bad for the housing market because it discouraged consumers from buying homes in markets hardest-hit by foreclosures.

"It stigmatized communities with lower sales and prices," said Dick Gaylord, president of the NATIONAL ASSOCIATION OF REALTORS®.

NAR met several times this spring with Fannie Mae officials and sent letters reflecting members' unease with the policy. “We heard the concerns of NAR and we reviewed and determined that changes in our policy were needed,” Gwen MuseEvans, Fannie Mae vice president for credit policy and controls, said in a statement Friday.

Fannie Mae's announcement comes as more than 8,000 REALTORS® are gathered in Washington, D.C., where Fannie Mae is headquartered, for NAR's 2008 Midyear Legislative Meetings & Trade Expo.

Under the policy change, borrowers can get loans up to 95 percent loan-to-value, even in markets in which prices have been falling. Prior to the change, borrowers could only get loans up to 90 percent to give lenders a 5-percentage-point cushion to protect against possible price declines in the future.

“This new down payment policy reinforces our goal to support successful home-owning,” says Marianne Sullivan, Fannie Mae's senior vice president of credit policy and risk management for single-family homes.

The new policy takes effect June 1.

— By Robert Freedman for REALTOR® magazine online