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Three Questions First-Time Homebuyers Should Ask

The recently passed housing bill is chock full of provisions aside from helping those facing foreclosure, from giving the IRS access to Americans' credit card purchases to assisting first-time homebuyers. The legislation is first and foremost considered a bailout bill, but the clause about first-time buyers certainly caught my attention and that of the National Association of Home Builders — they believe it will get buyers back into the housing market.

The government is offering a tax-credit up to $7,500 to qualified first time buyers purchasing homes on or after April 9, 2008, and before July 1, 2009. The money has to be repaid to the IRS over 15 years, but without interest. Personal finance columnist Michelle Singletary must have read my mind when she answered a question about whether or not the credit would be beneficial. Find out the questions she says first-time buyers should ask themselves before jumping on this money when you

.

Michelle says to think of the tax credit as a 15 year interest-free loan and go from there, and reminds us that selling the house before the loan is paid off will trigger repayment of the entire amount. She recommends asking these questions when considering if you should take the tax credit.

  • If someone knocked on your door and said, "I have $7,500 to lend you at zero percent interest, and you can pay me back over 15 years," would you take the money?
  • If there are certain items you need, like a lawnmower or furniture, would you take out a 15 year loan (even at zero percent) to pay for them?
  • Would you walk into a bank and take out a 15-year loan to pay down an affordable mortgage?

Source

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chatondeneige chatondeneige 7 years
I took a copy of it for my best friend who just bought her first house this year, I'll see if I still have it laying around... I copied it in the middle of my move, so it might be living in my car at the moment! ;)
Liss1 Liss1 7 years
Thanks Chatondeneige! Yeah i am not sure if it is worth it.
chatondeneige chatondeneige 7 years
Liss - From what I could tell from an article we got at work, it does come out of your federal tax return for the next 15 years. For example, if you had $1000 more than you owed withheld, you'd only get $500 of that, because you're paying it back. If you had $1000 LESS than you owed withheld, you'd owe $1500. While it's nice that it's interest free, it just seems like a pain for everyone.
ilanac13 ilanac13 7 years
i had the hardest time buying my home the first time. there are so many things out there that are 'incentives' that it's really confusing and i didn't know what was legit - and what would work best for me, and what in the long run was cheaper. i did ok up until the week before i closed on my house and i had mini panic attacks cause it was a big thing - you're taking out a mortgage that's a quarter of a million dollars and that's a LOT of money. i don't know if i would be up for the $7,500 incentive knowing that you'd just have to pay that back as well. it's hard enough to know that you have to make payments to a bank each month - let alone know that you're going to have to pay the government as well.
bellaressa bellaressa 7 years
Sounds great, I won't be buying a home for at least another three to five years. Moreso, five. I hope this credit can help those who want to own a home actually keep their homes or at least ease the burden.
Liss1 Liss1 7 years
I heard about this. You have to pay $500 a year for 15 years. Does the $500 come out of your tax return every year? We are deciding if we want to do this or not. We bought a house on April 30th so we qualify. We want to put in new windows at our house and this would pay for it interest free, instead of taking out a loan to cover the extra $5,000 in expenses.
lawchick lawchick 7 years
my state has a similar incentive (for first-time buyers who make less than a certain amount of money), but you don't have to pay it back if you stay there at least 5 (or maybe 7, can't remember) years. the condition is supposed to discourage flipping. I got like $2500 from the state when I bought my house, and it was a great help!
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