Uncle Sam Wants to Pay 10% of Your New Home Loan

By Krista Scruggs
If 2009 is the year of your first home purchase, then Uncle Sam is ready to give you a gift that equals up to 10% of your entire purchase price. Known as the homeowner tax credit, the Obama Administration has finally figured out a way to make home buying a much more delectable proposition. Add this to the falling mortgage loan interest rates, the drop in home prices, and it would appear that Uncle Sam not only found a great way to sweeten the deal for aspiring home owners, but also tied it neatly with an irresistible ribbon.

This 10% gift is actually an outcropping for the American Recovery and Reinvestment Act of 2009. Consumers are undoubtedly familiar with the wrangling that had lawmakers debate the intricacies of this unprecedented bailout package in the media and also behind closed doors. As the discussions began to draw to a close, speculations about the actual nature of the mortgage credit were rampant and a lot of misinformation or soon outdated information would hit the blogs, forums and also news websites. Prospective homeowners have been cautiously optimistic that this could finally spell an end to the slow moving real property market.

Finally, upon passage of the act, the details of Uncle Sam's new mortgage plan became known. Prospective homeowners may qualify for the tax credit if the home was purchase in 2009 as a primary residence. In addition, consumers need to be able to prove that it is their very first home purchase. The scope of the tax credit is 10% of the actual purchase price, but it is capped at $8,000. Unlike previous tax incentives under the Bush Administration, the Obama Administration has shied away from making this a repayable incentive loan.

There are of course some limitations; for example, if a single taxpayer seeks to qualify for the new mortgage loan credit but earns more than $75,000 as adjusted gross income, she or he may not be able to take the full amount.

Nevertheless, the $8,000 tax gift has gotten the calculations and speculations going of those who want to maximize their home loan advantage. Some are looking to keep their down payment to a reasonable minimum and then turn around and use the tax credit to pay it toward the outstanding principal balance, cutting down on a significant amount of interest debt. Others see the credit as a useful way of lowering their overall tax bill.

Even those who are not too worried about positioning their tax liabilities in the most advantageous light realize that no matter what, they could end up ahead of the game by $8,000. This is a lot of money, especially for those who had already decided that 2009 would be the year in which they are going to buy their first primary residence. At this juncture the only open questions that remain are where to find a great deal on a home, and also how to find financing in a lending market that seems to have greatly clamped down on offering consumer loans.

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