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About First-Time Home Buyer Tax Credit

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    If you are buying a home this year, it's important to know whether you qualify for the $8,000 tax credit for first-time home buyers.

    Qualifications for $8,000 tax credit:
    • Must purchase a home (close and receive title) on or after January 1, 2009 and before December 1, 2009.
    • Must be a first-time home buyer, which means you cannot have owned a home -- and used it as your primary residence -- for the past three years prior to purchase.
    • Home you purchase must be used as a primary residence. The home cannot be used as a vacation home or rental property.
    • Cannot purchase a home from a close relative such as your spouse, parent, grandparent, child or grandchild.
    • Must make less than $75,000 for a single taxpayer or less than $150,000, if filing jointly. 

    About the $8,000 tax credit:

    • Use as downpayment or closing costs -- Initially, the tax credit was designed as a refundable credit on buyers' tax return next year -- either up to $8,000 or 10% -- whichever came first. Now, a new HUD initiative allows qualifying first-time home buyers to receive these funds upfront to be used as a down payment or money towards closing, as announced by U.S. Housing and Urban Development Secretary Shaun Donovan. This has been referred to as a bridge loan.
    • FHA-approved lenders, only -- At this time, only the Federal Housing Administration (FHA) has issued guidance regarding the monetization of the first-time home buyer tax credit. Home buyers using FHA-approved lenders can apply the tax credit to their down payment.
    • Home buyers must pay the 3.5 percent -- While the $8,000 tax credit can be used for the down payment or closing costs, home buyers must still come up with FHA's required 3.5% down payment on their own.
    For more information on the $8000 tax credit, review these Q&A's from the IRS.

    See more Q&A on the First-time Home Buyer Tax Credit in Zillow Advice

    By Diane Tuman.
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    • Last edited October 12 2012

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