There is no doubt that time is running out for qualified homebuyers to benefit from the extended Home Buyer Tax Credit.  As most of you know, the extension not only includes an $8,000 tax credit for first time home buyers, but also a $6,500 tax credit for homebuyers who have owned and occupied a primary residence for a period of five consecutive years.  To take advantage of the credit, a purchase agreement must be signed by April 30, 2010 and the closing documents signed by June 30, 2010.  Below are a few questions to help you get started. 

What is the definition of a first-time home buyer?

The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase.  For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.

For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit.  However, IRS Notice 2009-12 allows unmarried joint purchasers to allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter.  Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.

What is the definition of a move-up or repeat home buyer?

The law defines a tax credit qualified move-up home buyer (“long-time resident”) as a home owner who has owned and resided in a home for at least five consecutive years of the eight years prior to the purchase date.  For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.  Repeat home buyers do not have to purchase a home that is more expensive than their previous home to qualify for the tax credit.

Feel free to contact one of our Home Loan Specialists for further information or to get pre-qualified for a loan to get you on the road to homeownership!