The Stimulus Bill and the First Time Home Buyer’s Tax Credit…

Earlier this year Congress passed the 2009 Economic Recovery Package. In this bill, Congress included a tax credit for first time home buyers. In my last post I talked about one program for first time home buyers (HPAP) and now I’m going to talk about a federal program meant to promote home buying.

The tax credit is for up to $8,000 or 10% of the cost of the house – whichever is lower - and unlike previous similar programs, this one does not need to be repaid. So for instance if you were buying a condo for $50,000 you would qualify for $5,000, but if you were buying a townhouse for $300,000 you would qualify for the full $8,000. This is only for first time home buyers who are buying a principle residency, aka not for the house on the Bay that you’re looking to purchase, and not for other investment properties either.

There are certain qualifiers, such as the closing date must be between January 1, 2009 and December 1, 2009. Additionally, there are income qualifications. To receive the whole $8,000, you must be a single person who earns $75,000 or less, and if you’re a married couple, the income must be $150,000 or less. To get a scaled down version of the credit a single person can make between $75,000 and $95,000 and a married couple can make between $150,000 and $170,000. If you are a single person making more than $95,000 or a married couple making more than $170,000, you are not eligible for the credit.

The tax credit is applied dollar for dollar. If your tax liability is less than the amount of the credit, you can receive the full credit. However, you must own the house for three years or more with exceptions for death and divorce, otherwise, if you sell it will be captured in the selling amount.

While I'm always open to answer any questions, please consult a professional regarding specific tax issues

The Low Down on HPAP

You’d be surprised how many programs there are in the District of Columbia available to first time homebuyers. Many of these programs, however, are administered by different offices or non-profits and may be hard to navigate, thus making the whole process more overwhelming, stressful and complicated than it already is. Luckily, with a little research, a few phone calls, effort and of course, my expertise you can do it and together, we can find you the ideal home at the ideal price.

One of these programs is HPAP.

HPAP stands for Housing Purchase Assistance Program. This program is specific to District residents that are buying a home for the first time, and has specific requirements to qualify – both income and in some cases special locations – aka economic development zones.

Let's do some math so this all makes a little sense: [see example here].

With HPAP, depending on family size and total household income (in this case under $51,000 for an individual), borrowers can receive up to $77,00 in the form of a 0% interest loan with a life of 35 years of which, the first five years are deferred. Essentially, free money. After those first five years, the monthly payments on a loan of $77,000 would be $213.89. Note that there is a stipulation that the loan must be repaid if you sell the property.

The process for this is grueling and I recommend starting it at least six months before you wish to begin the process. There is a general information session, then you are required to set up an appointment with a counselor where your budget goes under the microscope and is scrutinized to each penny and each latte. Luckily, on these loans there is a 0% default rate. Additionally, this is what is characterized as “character based lending” where good people get houses they can afford.

A similar program is the housing assistance program is available for DC government employees, DC police officers and DC public school teachers. This program provides these qualifying individuals up to a $10,000 grant (note: grants do not need to be repaid).

Some of the organizations throughout the District that provide help are listed [here].

Be sure to research, and if you have any questions, do not hesitate to ask – I am here to help you find the home of your dreams!

Resolution #3- Buy a home

I love the New Year. I get more excited about the New Year than the rest of the holidays. I really get into it with a ton of rituals, including cleaning up my entire house, purging my closet, weeding out my book collection and then the most fun part- writing down my resolutions- in cursive and in a fancy journal- all before the clock strikes midnight on the eve. 

New Years eve, I did not do any of my rituals. Unfortunately, The Coopster (my puppy) got really ill and had to undergo a number of stressful days at the hospital, tons of tests and emergency surgery- which had me in a frenzy. Things have calm down since, and Cooper is getting better. And, I have finally had a chance to put a little more thought into what my resolutions are this year. And for the first time, they are really uncomplicated, and much more fun and achievable. I won't bore you with the details of all my resolutions.

If one of your resolutions is to buy a house this year- I wanted to share some pointers with you:

It is never too early to start planning for the process. I love meeting a client several months before they are planning to move. Planning involves talking to a lender early enough, to strategically place yourself in the best position for the strongest financing available. There are several first time homebuyer/specialized programs that are fantastic, but that may take several months to 'process' since they are ran by the government or non-profit. 

Planning also allows you to get educated on the market. Start looking at listings early. Start checking out open houses. Start watching 'tons of HGTV'. 

If you are ready to take step 1 of working on your resolution, I would be happy to meet you for a coffee sometime. Let's talk!