Lisa Barton

Here’s how it works:  recall in 2008 (for purchases on or after April 9, 2008 and before January 1, 2009) that the credit was $7,500, but had to be repaid in increments of $500 over 15 years. Thus, it was essentially a zero interest loan. For 2009, the credit has increased to maximum of $8,000, and does not have to be repaid.The home has to be purchased on or after Jan. 1, 2009 and before Dec. 1, 2009, and you have to be a first-time homebuyer (not have owned a home in the past three years), purchasing a primary residence (new or resale). If the home is not used as the primary residence for the first three years, buyers could face a recapture tax. Second-homes and investment properties don’t qualify. Prospective homebuyers who potentially qualify can even reduce their income tax withholdings from their paychecks in order to increase their cash flow. There are income restrictions ($75,000 for an individual, $150,000 for a married couple, for example) and other caveats involved, but overall it’s pretty straightforward. You simply claim the tax credit on your tax return using IRS form 5405. The IRS is even allowing borrowers using bond money to participate.

The National Association of Homebuilders has a great, straightforward site that highlights the ins-and-outs of the program—-see their website at National Association of Homebuilders. Of course the Internal Revenue Service is always great and very thorough.  I’d recommend consulting a tax professional as well for complete clarification. Happy house hunting!

Donald Ster, MBA, is a senior-level mortgage consultant working for Wells Fargo Home Mortgage.  He has been in the industry for almost 6 years, and resides in Jacksonville, Florida with his wife and daughter.