Many Californians who will be first time home buyers have their eyes on December 1, 2009, the deadline to purchase a home and get the tax credit created by the Housing and Economic Recovery Act of 2008. “First time” covers more than you would think, since it’s defined to include taxpayers who haven’t owned another principal residence during the last three years before the current purchase date. You won’t be able to qualify for the tax credit if you’re buying a rental property, since the home must be used as your main personal residence. If you buy the home in 2009 (and close by November 30), then you can use the credit to either reduce your tax bill or increase your refund by 10% of the purchase price-up to $8,000 for both single taxpayers and married couples who file returns jointly. If you’re married but file separately, then the government reduces the credit by half. For higher income earners, the credit is reduced or eliminated.
If you already bought your first home in 2008, and after April 8, then you may also be eligible for a tax credit up to $7,500, but the rules change because you’ll be required to repay the credit over 15 years on your future tax returns. While the deal’s not as sweet, you can still benefit because the credit acts like an interest-free loan from the government. Note that even if you purchase your home in 2009, the repayment requirement will kick in if you stop using the home as your principal residence within 36 months of the purchase date. Those interested can visit the IRS website to see how it works and for more details on whether the home you’re buying (or the home you built) will qualify for the credit.
Once you find a home you want to buy, you’ll need to work out the contract details, get inspections done, get your mortgage approved, and have everything else done to prepare for closing. This will usually take up to two months. Senior Financial Analyst Greg McBride suggests in the Wall Street Journal that you get pre-approved for a loan to speed up the purchase once you do find the home you want to buy.
Even with the impending deadline, remember that this is a huge purchase, so don’t skip over important considerations, such as your mortgage options. Compare plans according to your finances and requirements in order to get the best deal. It’s also crucial that you fully understand the terms of the sale. Home buyers and sellers can greatly benefit from our extensive real estate knowledge as we work to protect your interests. We’ll examine whether there’s a title or easement issue, negotiate the terms of the agreement, prepare required documents, and deal with any problems that arise during inspections or at closing. Contact San Diego Law Firm’s real estate lawyers at (619) 794-0243 for help in closing your deal and safeguarding your investment.
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