Much ado has been this year about the Federal government's $8,000 tax credit available to first time home buyers (defined as someone who has not owned a home in the past 3 years.) It's a great program. Meet certain income limits ($75,000 single, $150,000 married) and close on a home that will be used as a primary residence before November 30, 2009 and you'll receive an $8,000 tax credit on your Federal income tax. (Note: if you buy a house for less than $80,000, the tax credit will be 10% of the purchase price, not the full $8,000.)
But the law enabling the tax credit is clear that the sale has to be closed by Nov. 30, 2009. Because it can take 8 to 10 weeks or more to close on a sale here for purchasers using mortgage financing, if you plan to take advantage of the tax credit you should find your house and have an accepted offer on it by mid-September at the latest. One thing buyers cannot rely on is quick mortgage approval. The mortgage financing system this year has devolved into a broken mess this year and a quick mortgage approval from one of the big lenders in particular is about as likely as a Papal child. I expect as we roll into November, and there's a rush of mortgage applications for houses looking to close by the Nov. 30th deadline that the big bank mortgage system will melt down even further. Frankly, anyone starting the process after Labor Day who wants to reliably close by Nov. 30th should seriously consider using one of the smaller, local banks — Ulster Savings, Catskill Hudson, Walden or First Jeff and avoid the big banks like the plague.
While the $8000 Federal tax credit is getting all the attention, first time home buyers may be unaware that New York state has sweetened the pot with the New York State Mortgage Credit Certificate Program. The law creating the credit certificate program was just signed into law on August 10th, and most Realtors I've talked with don't know about it yet. The implementation details, along with the applications and list of participating lenders, are still being worked out.
Basically, the Mortgage Credit Certificate programs works like this. If you're a first time home buyer who meets income eligibility limits, get your mortgage through a participating lender and file some type of application, New York State will issue you a Mortgage Credit Certificate giving you the ability to take 20% of your mortgage interest as a dollar for dollar tax credit (not a tax deduction) on your Federal income tax return. And that tax credit is over the course of the life of the loan, not just one time.
So, say you pay $10,000 in mortgage interest in 2010. The mortgage certificate will enable you to take 20% of that, or $2,000, as tax credit on your 2010 Federal income tax. (Say you owed $6,000 in Federal income tax. After applying the tax credit, you'd only owe $4,000.) The other 80% of that $10,000 can be taken as an itemized deduction, just like most homeowners deduct mortgage interest today. (A lot of folks get confused between a tax credit and a tax deduction, so you may want to do a little reading on it. But a tax credit is more 'valuable' than a tax deduction.)
Note that the income requirements for the credit certficate program are slightly different than for the Federal first time home buyer credit, and there are purchase price limits ($258,690 for a single family home in Sullivan County.) But the credit certificate program can be combined with the $8,000 Federal home buyer credit, and both can be used in conjunction with lower down payment FHA loans. So if you qualify, this is an incredible opportunity. It's one of those 'perfect storms' for a first time homebuyer, kind of like when you shop online and realize that the 20% off coupon code and the $50 off certificate and the free shipping offer all work on the same purchase.
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