$8,000 from Uncle Sam for first-time homebuyers

It may be hard for many to imagine, but Uncle Sam hopes to put a cool $8,000 in many American pockets in 2009. Does that seem crazy? Real Estate Nexus's Scott Card says it is true for would-be homebuyers who qualify as "first-time" buyers.

"A first-time homebuyer is someone who has not purchased a home as a primary residence or had a closing within the last three years. So, if you've owned a home before, you can still be a first-time homebuyer, as crazy as that sounds."

The program is called the American Recovery and Reinvestment Act. It is, admittedly, a complicated program, but Card explained the basics from his office in Edina. "The program basically offers, now, up to $8,000 or 10% of the purchase price. No obligation to pay it back to the government. It's a tax credit."

There was a previous 2008 federal program that offered $7,500 to first-time buyers, but that was a tax credit, in the form of a no-interest loan that had to be repaid over 15 years. This 2009 program adds $500 to the concept and makes the money the equivalent of a grant, since it need not be re-paid. The tax "credit" is a dollar-for-dollar drop in one's federal income tax. That is much more lucrative than a "deduction," which is only a drop in a taxpayer's taxable income, not the actual tax itself.

For some people who actually do not owe any Federal Income Tax at all, the government will send a check to the qualified homebuyer for up to $8,000. Card, and other financial analysts KARE11 News has spoken with, insist it is a remarkable offer and an attempt to jump start the stalled housing sales market.

"It's an incentive, in a time when we do need some incentives. It is to make people comfortable in making large scale investments. If you are fearful of losing your job, large scale purchases, like a home or a car, are probably not gonna be considered until there is more security on the home front."

There are some strings attached to the deal. The homebuyer must "close" on the house between January 1, 2009 and December 1, 2009. The full $8,000 is only offered to single "first-time" homebuyers with Modified Adjusted Gross Incomes (MAGI) up to $75,000 and families with MAGI's up to $150,000. Singles with MAGIs up to $95,000 and families with $170,000 can only receive a portion of the $8,000.

One consideration is that the program applies to both husband and wife. Neither one is allowed to have owned a house in the last three years. So, for example, if the husband did not own a house, but the wife did, in the last three years, they do not qualify. However, owning vacation homes and rental homes do not disqualify someone from the program.

The house must be the buyer's "primary" residence and the house must be occupied by the homebuyer for at least three years or the homebuyer risks refunding all or part of the tax credit. Real Estate Nexus says the program applies to all manner of "primary" residences, from single-family detached homes to condominiums, townhouses and even mobile homes and houseboats.

It is a one-year stimulus deal aimed at convincing nervous Americans to resume buying new and older homes. Of course, this assumes that the program will also help convince reluctant lenders to come across with the rest of the purchase price.

By Allen Costantini, KARE 11 News Read Allen's KAREmudgeon Blog

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