Tax Credit Can Be Turned Into Cash At Closing

Everyone's Dream - $8000 Housing Credit Turns Into $8000 Cash

On May 29, the Obama administration made it easier for many Americans to realize their dream of home ownership. The previously announced $8000. credit for first-time home buyers can now be turned into cash at closing. The buyers, however, must be using Federal Housing Administration mortgage financing (FHA).

The $8000. credit (or 10% of the home's price, whichever is less) has been monetized and can be accessed before closing. Short term loans through approved lenders are available under certain conditions. These loans allow individuals to get cash for to increase their down payment, "buy down" their interest rate, or pay closing costs.

The program will make a huge impact as the FHA handles about 25% of new mortgages. The $8000. credit has already boosted the housing market. This new development is expected to interject new life into the economy.

Who Qualifies For The Program?

You Must Be A First-time Home Owner Using FHA Financing

The term "first-time" owner isn't meant in the literal sense. If you haven't owned a principal residence within 3 years of the purchase, then you are considered a first-time home owner. If you build a home after January 1, 2009 and occupy it before December 1, 2009, you can also be eligible for this program.

Your Income Must Fall Within A Certain Range

The income limit for single taxpayers is $75,000 MAGI (modified adjustment gross income). The income  limit for married taxpayers filing a joint return is $150,000. The credit amount is gradually reduced as incomes rise over $75,000 (single) and over $150,000 (married). The credit ceases to exist at an income of $95,000. (single) and $170,000. (married).
.You Need To Invest In Your Home

Purchasing a home is a huge investment. The Department of  Housing and Urban Development requires a sign of commitment on your part. If you obtain FHA loans through private lenders, you (through savings, gifts, or other) must invest at least 3.5% down payment. If you obtain FHA loans through a state housing agency "tax credit monetization" program, you are eligible to receive a bridge loan to cover the entire down payment.


How To Get The Credit

Start Now

Your closing must occur by November 30, 2009 to be eligible for this credit. This program was only announced in recent days. Every lender may not be ready yet for the process. Many companies, however, are ready for your business. You need to seek out a lender at the very first opportunity. Home sales don't close overnight! You must start now to ensure that you meet the deadline.

Have Your Paperwork In Place

Your lender has to prepare for your business. You have to be ready to meet their requirements as stipulated by FHA guidelines.

Complete IRS Form 5405

Your lender will require a completed IRS Form 5405. You can file for this credit on your 2009 tax return. You can also make amendments to your 2008 income tax return.

Proof Of Eligibility For Total Credit

Your lender needs to know if anything will reduce or cancel out your credit. You have to provide proof that you have no outstanding judgements, unpaid taxes, or other obligations.

Confirmation From Your Employer

Your lender needs to be certain that your credit won't be affected by wage garnishments.

Should I Take Advantage of This Credit?

The National Association Of Home Builders estimates that the credit will be responsible for an extra 160,000 home sales across America. This program can help speed up the process of home ownership. The credit and the market makes it tempting to become a home owner. Owning a home is a big commitment. Is the dream right for you? Only you can make that decision!