Chris Gmyr

Are you looking to move into your first home? Thanks to an $8,000 tax refund credit being offered to first time home buyers, this is a great time to consider making that move.

If you close on a home between January 1^st and November 30^th this year, you may be eligible for the tax credit when you file your taxes in 2010. This refund, offered by the federal government, will give qualifying buyers 10% , or up to $8,000 back as a tax refund credit. The requirements to claim this credit make it easy for most people to get qualify. You must be a US citizen or legal alien, the home must be closed on before the deadline, and you must make less than $75,000 ($150,000 for couples) a year.

This credit is only for first time home buyers. This includes those who have not owned their own home for three or more years.  This incentive is meant to put more people into homes this year, and start an economic turn-around. And, unlike last years tax credit, offering new home owners $7,500, this amount does not have to be repaid. The only exception to that is if the new home owner moves out of the home within three years of when the home was purchased.

This all sounds great, right? But it would be a lot more helpful to many home buyers if the $8,000 was available now. Well, thanks to HUD (the US Department of Housing and Urban Development) you can take an advance on the $8,000 tax credit, and apply it towards your down payment or closing costs.

Here’s how it works: Your lender will purchase the tax credits from you, and then collect the money in your place during the 2010 tax season. You can then apply that money towards buying your new home. You will still need to provide the 3.5% mandatory down payment on your own, but the extra $8,000 can be used to pay down the amount you still owe, lowering your monthly payments. This is called a bridge loan.

The big downside to using the money right away is that you have to put it towards closing costs or the money you owe on the home. This isn’t a bad thing, as it makes the repayment of your mortgage a little easier, but it doesn’t help you if your home needs renovations. It cannot be put towards fixing up the house you just bought. If you can wait on the money until January, you will have the money to put towards painting, building a new deck, fixing the roof, or any other home improvements you might want. The money is yours to do what you want with.

If you are choosing to wait until tax time to get your refund credit, all you need to do is fill out an extra form. If you would rather apply the money to the amount owed on your home right away, talk to your lender when you are approved for a loan. Your lender can walk you through the paperwork and explain, in detail, how the bridge loan will work for you.

If you are considering entering the market for your first home, is this tax refund credit enough to encourage you to buy now, instead of waiting another year?