A New York real estate broker, who’s name we’ll leave off, writes to his clients.
The $8,000 pretty-much free-and-clear gift the Federal government is offering to New Yorkers and others buying a principal residence who have not owned one in the previous three years is due to expire at the end of November.
Known as the The First Time Homebuyer Credit, a part of the American Recovery and Reinvestment Act of 2009, the credit is not just for first-time homebuyers. In order to qualify you must not have owned a principal residence in the previous three years. You may have owned a rental property in that period and still qualify.*
Essentially, the credit gives an $8000 tax credit — not deduction — to those who qualify. In other words, your tax bill is reduced by $8,000. If your tax bill is less than $8,000, or even if you pay no taxes, the government will pay you the $8,000, if you qualify. The credit is actually for 10% of the cost of home, up to a maximum home value of $80,000. So purchasers of homes costing more than $80,000 (just about everyone in New York City) can apply for the maximum of $8,000. The benefit starts to phase out for taxpayers whose modified adjusted gross income — not actual income, but modified adjusted gross income — exceeds $75,000 if single or $150,000 for a couple. The credit is yours to keep as long as you don’t sell your new home within another three years.
That is $8000 in your pocket that can be used to increase the amount available for down payment, closing or any other costs. Or you can possibly magnify it by using it to “buy down” points on your mortgage and reduce your interest rates over the course of your mortgage.
BUT, in order to qualify, your home purchase must close before midnight Nov. 30th of this year. Since it can easily take up to 2 or 3 months to close from the time you’ve found a home and agreed on a deal with the seller, that leaves about 6 weeks from today to find a home you can feel fairly sure will close in time, 12 weeks if you like to cut things close and live on the edge.
To those of you who are considering buying a home in the next year or so, you may want to consider taking advantage of this gift from the government and look for a home this summer. Now happens to be a very good time to buy in any event, since we are still in a strong buyers’ market, many sellers have gotten realistic and adjusted their expectations, and interest rates remain relatively low. I am aware of many extraordinary values in all price ranges throughout the city. Please do not hesitate to call me at xxx xxx xxxx if I can answer any questions or help you or someone you know buy, sell or rent a home here.
Our take: Oh, come on, you know the government is going to extend this.
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