The big housing bill of 2008 has the government providing incentives in the from of “Tax Credits” to first-time home buyers who purchase homes between April 9th, 2008 and July 1st, 2009.  Income limits of $75,000 household income for single filers, and $150,000 for couples filing jointly apply.

The credit really amounts to an “interest free loan” from the government that would be repaid in equal installments over a 15 year period.

For example let’s say you are a first-time home buyer and you purchase a home in December of 2008 for $200,000.  At this loan amount you are entitled to receive your $7500 tax credit when you file your 2008 tax returns in early 2009.  Then each year after you would be required to “repay” the credit when filing subsequent tax returns in the years following.  In our example this would equal $500 minimum payment per year and if you sell your home before the 15 years is up you would need to repay the unpaid portion in the year following your sale when filing your tax returns.

What I like about this program is that often I see first-time home buyers drain their savings accounts when coming up with down payments and closing costs when purchasing their home.

This tax credit (loan) would help to replenish this savings account and feel more comfortable.

Also, family members often would like to help each other out when buying a home, but the family member who is loaning the money out is concerned about repayment.  By knowing that the loan may be a shorter term since the home buyer will be receiving a credit they may feel more comfortable in assisting.

The only issue I see with this program is that it intermingles loan origination with tax benefits/consequences and since I am not a licensed CPA I can only tell you to make sure you not only ask questions from your loan officer, but to also seek the advice of a qualified tax professional.