Ask The Money Coach

Posts Tagged ‘home buyers’ tax credit’

Q: I’m Purchasing a New Home That’s Being Built and I Close in March. Is There a Way to Get Money for Closing Costs Or Other Expenses?

A: There are many opportunities for home-buyers, especially first-time purchasers, to get free money and other resources to buy a house. First, there’s the federal tax credit available for those who close on a home by April 30, 2010 and close by July 1, 2010. The tax credit goes up to $8,000 for first-time buyers and up to $6,500 for repeat homebuyers. You don’t have to wait until you file your taxes to take advantage of this tax credit. It can be applied in advance toward your closing cost or home down payment. Additionally, there are eight overall sources of aid you can turn to for financial and educational assistance in buying a home of your own. The eight sources include:

•    Federal and/or National Programs
•    State Aid
•    County Initiatives
•    Local/Municipal or City Efforts
•    Non-Profit and Community-Based Organizations
•    Lender-Specific Programs
•    Programs Based on Your Job or Occupation
•    Employer Assisted Housing Initiatives

It’s common for there to be overlap between programs. For instance, a state might offer aid to certain workers, such as teachers, fire fighters, or police officers or a community program might work closely with designated lenders or specific types of national mortgage loan programs. As you read about the staggering array of financial assistance initiatives available nationwide, keep in mind an important trend that is emerging in many communities. Lenders are starting to permit borrowers to layer two, three, or more first-time buyer programs. This means you get the benefit of multiple sources of aid – instead of just one – which allows you to offset higher home prices, and enter a new home in a stronger financial position.

Your First Home

For more information, check out chapter 4 of my book, Your First Home: The Smart Way to Get It and Keep It. The entire chapter is devoted to offering details on each of the eight types of homebuyer assistance programs listed above. It also provides specific listings – for every state in the country – of programs that offer free money to homebuyers.

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No matter what your age, gender, income, race, religious, professional, or marital status, being a homeowner affords you a range of financial perks, privileges, and options that simply are not available to renters.

The Upside to the Dollars and Cents of Being a Homeowner

Do you realize that as a homeowner you are legally entitled to write off up to $100,000 a year in mortgage interest on your taxes? This is a huge economic benefit, especially in the first few years after you obtain a mortgage, because most of the mortgage payments you make early on go towards paying interest on your loan, not the principal.

Juicy Tax Breaks

As a homeowner, the federal government also lets you take a tax deduction for property taxes. This is a substantial financial benefit considering that the property tax bills run into the thousands of dollars for millions of homeowners. What’s more first-time homebuyers get a tax credit worth up to $8,000, and current homeowners buying a new or existing home get up to $6,500 tax credit for any home purchased between until April 30, 2010. Additionally, for those of you who will be fortunate enough to watch your home appreciate significantly in value over time, Uncle Sam provides the mother of all tax deductions: if you’re single, and you sell your home, you get to keep up to $250,000 in profits completely tax free; for couples this tax benefit is a whopping $500,000. None of these tax breaks exist for renters.

Will Your Home Be Part of Your Legacy?

Lastly, being a homeowner entitles you upon your death to pass on your home to a spouse completely tax free. Alternatively, you could leave your home to your children, another family member, a friend, or a charity on a tax-advantaged basis if you do some smart financial planning.

I’m going to assume that you already know (or at least suspect in your heart) that you’d be better off owning in the long run instead of renting forever. That’s why anyone considering homeownership needs to consider not just the financial benefits of homeownership, but also the ongoing financial costs associated with being a homeowner. Unfortunately, too many times people think solely about the perks and the “rights” of being a homeowner; they fail to consider the responsibilities and the ongoing expenses that come with this privilege.

So if you want to be a homeowner, my advice is this: focus on the proactive steps you can take – starting today – to get yourself ready for homeownership, and learn how to keep that home, without losing it to foreclosure. Once you cross the threshold into homeownership, you’ll be positioned to enjoy your dream house for all its worth.

By Lynnette Khalfani-Cox, The Money Coach

How is this for positive financial news: Uncle Sam wants to put more money back into your pockets. Lots of it. A slew of tax credits are on the horizon; some new, others continuing — and one or more may have your name written on them. Some of the juiciest tax credits for 2009 include:

• A tax credit, in the form of an interest-free loan, up to $7,500 for new homeowners. (If the 2009 economic stimulus passes, the limit will increase to $15,000, will not have to be repaid, and will extend to other home buyers beyond first-timers. The Senate approved this amendment on February 4, 2009 to up the credit, but the whole stimulus bill would still need to pass before it takes effect.)
  
• A tax credit for up to $1,000 per child for those supporting youngsters under the age of 17 at the end of 2008
• A tax credit for of as much as $4,824 for low-income earners with children. (A lot more people will qualify as “low income” because of layoffs, reduced work hours, or cuts in their pay.)
• A tax credit worth thousands – or even tens of thousands of dollars – for people socked with a big AMT, or Alternative Minimum Tax, bill in the past. (You’re eligible if you have so-called long-term unused AMT credits, or unused AMT credits generated any year prior to 2005)

If you qualify for any of the above tax credits, it would be dollar-for-dollar money in your pocket as tax credits are far more valuable than tax deductions.

Related articles

• Lynnette Khalfani-Cox on The Daily Drum WHUR 96.3 Howard University Radio (askthemoneycoach.com)
• Child Tax Credit (turbotax.intuit.com)
• Video: Learn About the New 2009 College Tax Credit (turbotax.intuit.com)

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By Lynnette Khalfani-Cox, The Money Coach

President Barack Obama has made no secret of the fact that he wants to bring the cost of buying and owning a home down – way down – as a way to jumpstart the economy.

Hope for first-timers and existing home owners

As part of the $885 billion economic recovery plan now being heralded by the Obama administration, new home buyers could get mortgages with interest rates as low as 4%. It’s possible the plan may even extend to existing homeowners who would be able to refinance their current mortgages, also benefiting from lower rates.

For their part, GOP lawmakers are pushing to double an existing home buyers’ tax credit to $15,000, up from the current level of $7,500. Republican leaders even want the home buyers’ tax credit to be made available to all buyers, not just first-time homeowners. (See L.A. Times piece.)

The House has already passed its version of the economic stimulus package; the Senate is currently weighing the bill. While nothing is certain, what is apparent at this point is that there is broad bipartisan support to attack the housing problem. That means real reform is likely to occur this year concerning lower mortgage rates and bigger tax credits for owning real estate.

Fannie and Freddie Extensions

Speaking of owning property, are you struggling with a mortgage you can’t afford? If your bank sold your loan to Fannie Mae or Freddie Mac, you might get some relief from these two agencies, which are the biggest holders of mortgages in the country.

Fannie and Freddie recently opted to extend until March 1^st a foreclosure moratorium on loans it holds. So if you’re behind on your house note, and your original bank or lender sold off your mortgage to Fannie or Freddie, you can breathe a sigh of relief in knowing that those agencies won’t be sending a sheriff to you door anytime soon.

As an added bonus: Fannie and Freddie have launched a new rental option plan to let qualified owner-occupants and tenants have leases so they can rent properties on a month-to-month basis after foreclosures.