The ridiculous thing about the first time home buyer tax credit provision initiated by President Bush and now carried further by President Obama is that the tax credits are being compared to the subprime lending debacle of a few years ago. Are you kidding?
Let’s take a quick look at this comparison to see why this is ridiculous.
Subprime lending initiated some crazy lending programs that required no documentation (except a credit report) for a high risk adjustable rate mortgage that required in some case no money down. Umm, that’s pretty risky stuff.
Now, let’s look at the underwriting lending requirements of the current first time home buyer tax credit program. Well, first of all
- you must have a job, or be able to prove income,
- you must also be able to prove you have some assets,
- you also must have credit scores above at least a 620,
- you must also not have a debt to income ratio greater than41-45%.
Sure the tax credit program offers up to the borrower money for their downpayment, but it does not do this without the borrower coming up with hard core income and asset documentation.
The comparison is being made to the subprime lending of days gone by to that of the tax credit because of some of the defaults that are showing up with first time home buyers who have taken advantage of this program. Well, hello – what is the first indicator in our economy that would suggest a problem with US homeowners making their housing payments – duh – the job market. People are still losing their jobs.
Too bad we can’t make a condition of getting a mortgage something like – once you get a mortgage you are never allowed to be laid off.
Here are the top 10 things the IRS wants you to know about the expanded credit and the qualifications you must meet in order to qualify for it.
- You must buy – or enter into a binding contract to buy a principal residence – on or before April 30, 2010.
- If you enter into a binding contract by April 30, 2010 you must close on the home on or before June 30, 2010.
- For qualifying purchases in 2010, you will have the option of claiming the credit on either your 2009 or 2010 return.
- A long-time resident of the same home can now qualify for a reduced credit. You can qualify for the credit if you’ve lived in the same principal residence for any five-consecutive year period during the eight-year period that ended on the date the new home is purchased and the settlement date is after November 6, 2009.
- The maximum credit for long-time residents is $6,500. However, married individuals filing separately are limited to $3,250.
- People with higher incomes can now qualify for the credit. The new law raises the income limits for homes purchased after November 6, 2009. The full credit is available to taxpayers with modified adjusted gross incomes up to $125,000, or $225,000 for joint filers.
- The IRS will issue a December 2009 revision of Form 5405 to claim this credit. The December 2009 form must be used for homes purchased after November 6, 2009 – whether the credit is claimed for 2008 or for 2009 – and for all home purchases that are claimed on 2009 returns.
- No credit is available if the purchase price of the home exceeds $800,000.
- The purchaser must be at least 18 years old on the date of purchase. For a married couple, only one spouse must meet this age requirement.
- A dependent is not eligible to claim the credit.
For more information about First Time Home Buyer Tax Credits