Time Running Out On First Time Homebuyer Tax Credit

The federal government has sought out numerous ways to revive the economy. The morbid housing market has, of course, been a point of focus. The answer? The federal government created the first time homebuyer tax credit that provides $8,000 in down payment assistance. If you are considering taking advantage of the program, you better hurry. It is about to expire.

The first time homebuyer tax credit is a dozy. It provides a whopping $8,000 in down payment assistance through a tax credit. In typically government fashion, however, the first time buyer doesnt really have to be a first time buyer. Instead, it is simply defined as a person who has not owned a home in the three previous calendar years. Not bad, eh?

The first time homebuyer tax credit has been a raging success. What many potential homebuyers do not realize is it is about to run out. The magic date is December 1, 2009. As I am writing this in late August, that deadline still is three months away. Ah, but there is a very important catch to this deadline. You must CLOSE your purchase before December 1, 2009 to qualify for the tax credit.

Why is this a catch? Well, the issue boils down to how a home purchase works. You, the buyer, makes an offer and the seller counters until the two of you work out a deal. The transaction then is usually given a 30 day period, known as escrow or settlement, when the inspections, title, insurance, repairs, deposits and other necessary items are taken care of by both parties. Only when everything is hunky dory does escrow end or close. Practically speaking, this means a home that is sold on October 5th, would not actually close until November 5th and the buyer would miss out on the first time homebuyers tax credit!

There is always a chance the federal government will extend the first time homebuyers tax credit program, but you cant be sure. To be safe, you need to purchase a home in the month of September if you hope to use a traditional 30 day escrow and still qualify for the $8,000 tax credit.

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