First Time Homebuyer Tax Credit: Everything you Need to Know

Congratulations! Seriously considering buying a home – especially your very first one – is an exciting yet daunting venture. As a first-time homebuyer, you have exclusive access to special mortgage plans with low down payments and friendly terms. Even though the tax credit offered by the Housing and Economic Recovery Act ended in 2010, there are other options out there for you. First-time homebuyer programs offer grants towards downpayment – which are not to be repaid – and tax credits, which reduce the money buyers owe the Internal Revenue System.

The good news is there are still plenty of state and national programs specifically designed to help out first-time home buyers. As you shop around for home loans in costa mesa, it is important to research programs that may significantly reduce your costs. The first-time homebuyer tax credit was created by the American Recovery and Reinvestment Act of 2008. 

This credit was further enhanced by the Worker, Home Ownership, and Business Assistance of 2009 that extended and expanded first-time homebuyer credit.  Anyone who purchased a home between 2008 and 2010 would qualify for these programs if they were first-time homebuyers within the scope outlined below. 

Who is a First Time Buyer?

The technical definition of a first-time home buyer goes beyond a person who has never owned a home before. According to the Federal Housing Association, there are other categories of legally qualified persons as first-time homebuyers. For example, if you own a home that is not permanently attached to a foundation, e.g., a mobile home, you are eligible for the assistance available to other first-time homebuyers.

Single parents who have only shared joint ownership of marital property also qualify as first-time homebuyers. If you have not had a permanent residence for the three previous years before the application, it will be favorably considered. If you owned a non-compliant property with building codes and regulations and the property could not be repaired to meet specifications, you can now qualify as a first-time homebuyer.

How to Qualify for First Time Home Buyer Tax Credit.

States have put several measures to exercise control over who gets access to these highly in-demand programs. Most have a strict legal definition of who exactly qualifies to be a first-time homebuyer. Further, some state programs put a cap on maximum income and lowered the credit score barrier to benefit consistent but low-income potential buyers. Other programs require the applicants to attend a specified number of classes for first-time homebuyer counseling before they can qualify. 

Benefits of a First Time Home Buyer Tax Credit Program

As a first-time homeowner, you are qualified to receive various forms of financial assistance and reprieve. These include down payment assistance, closing cost assistance, government loan programs, and tax credits. There are several state and national first-time homebuyer programs to choose from. Research the particulars of your State program as you look around for home buying loans or risk missing out on huge savings and flexible guidelines.  

How to Find First Time Home Buyer Tax Credits

Most states have implemented some policies to replace the federal first-time homebuyer credit. Your state probably has grant money and zero-interest loans to help with a downpayment on your first home. A good number of first-time homebuyer programs offer tax benefits using Mortgage Credit Certificates. They convert a portion of the mortgage interest you pay into a federal tax credit, e.g., in Texas. State programs vary in terms, but most offer interest-free loans and even grants dedicated to down payments. 

National programs are run by the private sector but are regulated to protect gullible first-time homebuyers from being fleeced. A more popular alternative is government-backed loans, the most popular of which is the Federal Housing Administration loan program. It is available to buyers who would be turned away by private lenders due to a low credit score. 

The federal government also offers specialized loans for particularly first-time home buyers. Veterans and people with military connections can apply to the  US Department of Veterans Affairs for home buying loans tailored for their benefit. They assist service members, veterans, and surviving spouses. The US Department of Agriculture offers 100% financing on a rural property by providing lenders with a mortgage guarantee. 

As you consider the myriad of factors that go into buying a home, take your time, do the research and compare all the options available to you. Always dig deeper and do your research on tax credit schemes before you dive in.

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