Scenario 1
I am an existing homeowner. On October 25, 2009, I signed a contract to purchase a new home. I have lived in my current home for more than 5 consecutive years and am within the new income limits. I will go to settlement on November 20. Since the new law has gone into effect, will I qualify for the new $6,500 tax credit?
Answer: Yes. The existing homeowner credit goes into effect for purchases after the date of enactment (Friday, November 06, 2009 – when the bill was signed). There is no reference to the date of contract for the new credit. The provision looks solely to the date of purchase, which is generally the date of settlement.
Scenario 2
I am an eligible first time homebuyer. I entered into a contract to purchase on November 1, 2009. Do I have to go to closing before December 1? How does the extension date affect me?
Answer: You do not have to close before December 1. Because of the new law, it is as if the November 30 expiration date never existed. Therefore, so long as the contract settles before April 30 (or July 1, worst case), the purchaser will be eligible for the credit.
Scenario 3
I owned my home for 10 years, but sold it two years ago year and I have been renting ever since. If I purchase another home, will I be eligible for the $6,500 tax credit if I meet all the other eligibility tests?
Answer: Yes. Because you lived in the home for more than 5 consecutive years of the previous 8 years, you will qualify for the $6,500 credit. For example, say John and his wife bought a home in 2000 and lived there until 2008 when they got a divorce. Whether John has been renting or bought in the interim, he WOULD INDEED be eligible for the credit because he owned a home and occupied it as his principal residence for 5 consecutive years out of the last 8 years. The keyword here is “consecutive.” As long as he lived in that house for 5 years straight, where he has lived the remaining 3 years does not impact eligibility.
Scenario 4
I am a first-time homebuyer but was not within the prior income limits at the time I entered into my contract to purchase on October 30, 2009. I will be covered, however, by the new income limits. Because of the new law, will I be eligible for a credit?
Answer: Yes. The new income limitations went into effect as soon as the President singed the bill. The income limit and other eligibility rules will look to your status as the date of purchase, which is the settlement date.
Scenario 5
I am an eligible existing homeowner. I have a fair amount of equity in my home. I have found a home with a non-negotiable price of $825,000. Will I be able to use any of the $6,500 tax credit?
Answer: No. The $800,000 cap on the cost of the purchased home is an absolute ceiling. Any amount above $800,000 makes the home ineligible for any portion of the credit.
For more information on the Homebuyer Tax Credit, visit www.irs.gov/newsroom/article/0,,id=206291,00.html
The data in this report is compiled from industry information gleaned mostly from our local mortgage colleagues. We would be glad to refer you to them for further discussion and supply their contact information to you.
Bella Casa Real Estate Group believes the above information is accurate. However, buyers should always perform their own full due-diligence and consult with any legal, accounting, or mortgage professionals to be satisfied for their application of this benefit.
For more information contact your Bella Casa Real Estate Professional:
Bella Casa Real Estate Group
207 NE 19th Street, Suite 100
McMinnville OR 97128
503-437-9005
1-866-281-6653 Fax
[email protected]
www.TheBellaCasaGroup.com
