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Six things to know about the new $8,000 tax credit

by the zac team @ RE/MAX Greater Atlanta

Below is a summary of six good-to-know items in the new tax credit legislation passed for fist-time home buyers! This is courtesy of Pat Griffin with Greater Atlanta Financial Services, an affiliate of Wells Fargo:

1. Up to $8,000 for new buyers:
The credit is equivalent to 10 percent of the purchase price of the home. It is capped at $8,000 and applies only to first-time home buyers and principal residences. Unlike the previous $7,500 incentive, this credit does not have to be repaid.

2. First time buyers defined:
For the purpose of this legislation, a "first-time home buyer" is someone who has not owned a principal residence for three years before buying a house. (The date of purchase is considered the day that the title is transferred.) That means if you have owned a vacation home - but not a principal residence - within the past three years, you would still qualify for the credit.

3. 2009 buyers only:
Those who purchase a home on or after January 1 and before December 1, 2009 are eligible for the credit. This credit is not applicable for purchases outside of those dates.

4. Income limits:
The tax credit is subject to income limitations. Single buyers need a modified adjusted gross income of $75,000 or less to qualify for the full credit, $150,000 for married couples. Those earning more than these thresholds may be eligible for reduced credits.

5. Refundable:
Because the tax credit is "refundable," qualified buyers can take advantage of it even if they do not have much tax liability. For an eligible purchase in 2009, you can choose to claim the credit on either your 2008 (or amended 2008 return) or 2009 return. For more information visit:
www.irs.gov.

6. Recapture:
Buyers have to own the home for at least three years in order to capitalize on the credit. If they sell the home before then, they will have to return the credit to the government. (Exceptions will be made in certain cases, such as death or divorce.)

Atlanta mortgage rates at historic lows!

by the zac team @ RE/MAX Greater Atlanta

Average mortgage rates have only dipped this low two times since 1972!

Click here for the chart showing the average mortgage rates historiclly versus what they are today. You will find data for 15-year fixed mortgages, 30-year fixed mortgages, and one-year adjustable rate mortgages.

This is another reason why now is a great time to buy a home! Please give us a call at the zac team if you have any questions. We would love to help get you into a home at these rates! You can also sign up for free mortgage alerts at www.patgriffin.net.

$7,500 Federal Tax Credit for First Time Buyers - Make Sure You Understand the Details!

by the zac team @ RE/MAX Greater Atlanta

The Federal government announced a new tax credit program for first-time home buyers this month as part of the Housing and Economic Recovery Act of 2008 (which is great news that we annouced in an ealier blog posting), however, we just want to make sure that everyone has a clear understanding of how the program will work.

Essentially, the "tax credit" works like an interest-free loan from the government to be repaid over 15 years. For those of you not familiar with the program, The Housing and Economic Recovery Act of 2008 offers some amazing benefits for first time homebuyers.  Call everyone you know who wants to buy their first home (or who hasnt owned one in three years) -- this is too good to miss! Its a $7,500 tax CREDIT (not deduction but a credit).

If you have not owned a home in three years, you are a first time home buyer.  If you buy a home after April 9, 2008 and before July 1, 2009, you qualify for a credit.  Call your friends who just bought a home since April 9th and tell them they may take $7,500 off their tax bill if they qualify.  It has to be your principal residence, so rentals do not count.

The tax credit is 10% of the cost of the home, up to a maximum of $7,500.  So, if the home costs $100,000, you would get a credit of $7,500.  This is not an additional deduction that lowers the amount of income to be taxed, it is a tax credit.  In other words, you take $7,500 off your tax bill.  What if your tax bill is only $5,000?  The IRS will send you the additional $2,500 as a refund.  When was the last time the IRS sent you a refund because you bought something?

The loan has no interest, and will be paid back over 15 years.  You get the credit on your 2008 taxes, but you start paying it back on your 2010 taxes that are due in 2011, so you get at least two years without a payment.  You pay back 6.67% of the credit each year, so for a $7,500 credit the payment is $502.50 per year.  If you stay put for 15 years, you pay it off with no interest.

What happens if you sell the house?  You pay the balance back at the closing.  So, you get $7,500 now, and pay the rest of it back if you make money on the sale of your house.

What happens if you do not make enough money when you sell your house?  They forgive the rest of the debt.  In other words, get $7,500 now and pay back nothing if your house only breaks even, or loses money, at closing.  When was the last time you got a loan on a speculative venture where the person who gave you the loan forgave the rest of the loan if you did not make enough profit on the sale? 

The risk of loss in buying now is on the government.  In other parts of the country where real estate is going down in value, you can lose 10% of the value of the home (up to $7,500) and the loss is covered by the fact that you do not pay back the tax credit.  Atlanta real estate that first time buyers can afford is out there, so we are not as worried about the risk of loss.    

Similarly, if you die before repaying the debt, it is forgiven.  There are special rules for sales as a result of divorce or if the government takes your property by condemnation.

There are restrictions on the amount of income that you can make and still get the credit.  But the restriction is $75,000 per year for a single person and $150,000 for a couple filing jointly, so the vast majority of people qualify.   If you make more than that, you can still get some of the tax credit, but there are complicated rules about phasing out the credit as the income goes up.  If you make that much money, you can afford to hire someone to figure out the formula.

There are minimal restrictions on the financing and Pat Griffin, our in-house mortgage consultant with Greater Atlanta Financial Services (an affiliate of Wells Fargo), can help explain those to you. You can visit her website at www.patgriffinloans.com.  Nearly every loan allows you to get the tax credit!

What is the catch?  You have to buy your first house in three years before July 1, 2009, not have super high income, not use bond financing and buy anywhere in the U.S. If you have any questions, please feel free to give us a call at 404.564.7200 or email zac@zac.biz. Thanks!

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Photo of Zac Pasmanick  Real Estate
Zac Pasmanick
RE/MAX Metro Atlanta Cityside
600 Virginia Avenue NE
Atlanta GA 30306
Office: 404-564-7272

 

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