Buyer's Bonanza

Because of low home prices and favorable interest rates, housing is more affordable than ever.  Affordability is further increased when you take advantage of assistance programs that can help towards the purchase or renovation of a home.

The Federal Housing Tax Credit program provides incentive in the form of tax credits to both first time and repeat home buyers.  If you are a first time buyer, which is defined as someone who has not owned a principle residence for three year prior to the purchase, you may receive a tax credit of 10% of the home’s purchase price, not to exceed $8,000. If you are a repeat buyer, which is defined as someone who has owned and resided in the same house for at least five consecutive years of the eight years prior to the purchase date, you may be eligible for a tax credit up to $6,500.

And what is important to note is that these tax credits do not simply reduce the amount of income that is taxed, they instead reduce the amount of tax you owe. If your tax credit is more than what you owe the IRS, you will be paid the difference. That’s got to feel good!  It is also important to know that homes can include townhouses, condominiums, mobile homes, and houseboats in addition to single family detached homes as long as they meet certain conditions.

But as with most assistance programs, income is a consideration.  To enjoy the full benefit of this program, a single taxpayer income is limited to $125,000 and the limit for married taxpayers filing jointly is $225,000. People with income that exceeds these amounts may still be eligible for the tax credit but it is paid at a lesser rate than what is available to people within the limits. The cost of the home may also be a limiting factor.

Another financial assistance program available to some home buyers is the Neighborhood Stabilization Program (NSP) that provides assistance to people who purchase foreclosed properties in areas of need. The goal? To stabilize neighborhoods that may become blighted due to foreclosures and abandonment. With healthy and attractive neighborhoods in place, a community will attract business and investments, as well as generate a general sense of well-being.

The NSP program grants funds to state and local governments who in turn develop their own programs that target areas within their jurisdiction. The city of Mesa, Arizona, for example, acquires, rehabilitates, and resells foreclosed and abandoned properties to people who qualify for their NSP program.  The repairs, generally performed by local contractors, may include roof, water heater, window, door, and HVAV replacement. Upon completion, eligible buyers may receive down payment assistance in the form of a no-interest forgivable loan if they agree to remain in the property for 20 years.  If they sell, lease, rent or refinance the property before the 20 year period has elapsed, the buyer will be required to return the down payment assistance in full.

Although each state, county and city program is unique, the NSP grant recipients generally must:

·         Use the funds to buy a house that will become their primary residence

·         Purchase a house that is foreclosed and bank owned

·         Purchase a house located with a specific area designated by the governing authority

·         Meet the minimum Section 8 HUD approved income limits

State, county, and city governments also have other community development programs in place. The City of Corona, California’s HOME program has funds for eligible homeowners that already own their home.  These funds are used towards renovations and repairs. (The Cash for Comfort blog entry contains information about reimbursement for improvements that increase your home’s energy efficiency.) Financial assistance for rent and security deposits may also be issued to renters who qualify for this program.

There are a number of incentive programs that are managed at the various levels of government. The general objective of these programs is to boost local economy by increasing property values, attracting and retaining business and residents, and creating a positive economic and social environment. To find out if you qualify for assistance, visit your city, county, state, and federal websites.  Once there, enter search words such as “home buyer assistance”, “home owner assistance”, “housing services” or whatever words best describes your specific needs.