It's a buyer's market for homebuyers, and first-time homebuyers have an even greater incentive to make a purchase. The IRS is offering a credit for homes purchased after April 8, 2008 and before July 1 2009. While called a "credit", it's really more like a long-term loan at zero percent interest.
The "First Time Homebuyer's Credit" is equal to 10 percent of the purchase price of the home but the maximum available is $7,500, whether you're single or married. The credit reduces your tax bill dollar for dollar. Even if you owe no taxes you can take the credit and thus get a tax refund from the government.
The credit is really a loan, because it has to be repaid over a 15 year period. However you're getting the loan with no interest, which can save you a lot of money. Also if the homeowner took the credit and used it to pay down the mortgage he would shorten his mortgage by about 18 months and save over $23,000 in interest over a 30 year mortgage.
The credit is not available for second homes or rental properties, or if you've owned a home during the 3 years prior to purchase of the current home. Also it is phased out for couples with adjusted gross income over $150,000 (and single taxpayers with AGI over $75,000). Still, for those who qualify it is definitely something to take advantage of. For more information click here.
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