Hopeful first time homebuyer

Dear Joan,

We’re confused and hope you can help. We have seen a lot of news recently about an $8,000 tax credit that is available for first time homebuyers. Can you explain how this credit works and who is eligible? Also, when does it expire? With a lot of homes out there at good prices, and with interest rates still low, we think this is the time to buy.

Signed,

Hopeful first time homebuyer

Dear Hopeful,

There has been some confusion about the $8,000 first time homebuyers tax credit and let me try to be of help. I want to note, however, that this is only a summary of the tax credit provisions and it is best check with a tax professional to see how it applies to your specific situation. In addition, trained professionals such as your local Realtor and various lenders and mortgage brokers are able to help you through the process.

First some “breaking news.” Under guidelines released by the federal Department of Housing and Urban Development (HUD) on May 29, FHA-approved lenders received the go-ahead to develop bridge-loan products that enable first-time buyers to use the benefits of the federal tax credit upfront.

Under the guidance, FHA-approved lenders can develop bridge loans that homebuyers can use to help cover their closing costs, buy down their interest rate, or put down more than the FHA-minimum 3.5 percent. The loans can't be used to cover the minimum 3.5 percent down payment.

It’s important to remember that all eligible first time homebuyers can utilize the tax credit, but if their loan is not with an FHA approved lender, they will receive the benefit of the tax credit after the home is purchased and when they file their tax return. (Read full story)