Be sure to weigh all your options before rushing in. Photo Credit: Magnificent Properties
The tax credits that are meant to stimulate first-time home buyers into making that move can be a good thing or a bad thing, depending on whether or not you've done your homework. For those who have not assessed their personal situation with a fine-toothed comb, the tax credit can be the adult equivalent of a sugary-sweet cereal commercial aimed at children – it looks so attractive that you’ve just got to buy, but it may do more harm than good. Being mindful of the record number of foreclosures that heralded the housing crisis to begin with can help in avoiding a costly mistake.
However, there’s a definite benefit to a first-time homebuyer who can actually afford the purchase – a 10% refund of the price up to $8,000 for individuals, not to mention the good deal they’ll likely get on a house in this market. The credit is valid up to April 30, 2010, or June 30 with a binding sales contract. Income limits apply: $125,000 for singles, $225,000 if married, filing jointly. A tax credit of up to $6,500 is also now available for current homeowners wanting to buy a second house. Other rules and conditions are in place, including purchase price of the home, additional time guidelines and filing status, but they are easily navigable.
Note that the term “first-time homebuyer” is a bit deceiving. You may have already owned a home and still qualify. If you’re single and haven’t owned a principal residence (your timeshare in Aruba and rental properties don’t apply) in three years, you’re a first-time homebuyer; if you’re married, neither of you can have owned a home in that period.
Choosing to purchase a home now is definitely a case of buyer beware. The government wants to get the flood of houses off the market and get construction jobs back on track, but only fools rush in before ascertaining the economic feasibility of capitalizing on the opportunity.
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