Bay Area Real Estate Finance

There was first a lot of coverage of the recent housing bill, but I feel like the $7500 is getting some negative press as the fine print becomes more apparent.  CNN just put out an article titled, “Beware the $7500 ‘Tax Credit’” as if it was something to be afraid off. Well don’t be afraid, just be informed.

Bottom Line
To help stimulate the housing economy and hopefully entice home buyers, the recent bill has publicized a tax credit for first time home buyers

Here’s the Scoop

• First-Time Home Buyers or buyers who have not owned a home in three years are eligible
• Individuals must earn less than $75,000 while couples must earn less than $150,000
• Individuals with incomes up to $95,000 and couples with income up to $170,000 are still eligible for partial credit
• A tax credit will be issued for 10% of the sale price up to $7500. Most will receive the $7500 tax credit, but if you purchase a home for less than $75,000 your credit is capped at 10%. (i.e. $55,000 purchase price = $5500 tax credit)
• If you owe less taxes than the tax credit, the remainder will be issued as a refund. (If you owe $10,000 in taxes, you will pay $2500. If you owe $4,500 in taxes, you will receive $3,000)

How it’s Repaid

• Borrowers must start paying back this “loan” after two years and the loan must be paid off within 15 years.
• If the home is sold, the remaining balance is paid for with the profits from sale. If the sale is at a loss, the remaining balance will be forgiven.

So there you have it.  While it isn’t free money as many had thought it to be, it is still a nice incentive for home buyers today. It is essentially a personal loan with zero percent interest with quite flexible terms. Read more about the Rescue Housing Bill including a PDF summary page.