Beat the Deadline on the First Time Home Buyer's $8,000 Tax Credit

Hurry up, June 30 is almost here

By Geoff Williams, FrontDoor.com | Published: 9/14/2009

The clock is ticking on your chance to take advantage of the $8,000 tax credit for first-time homebuyers. You've got to enter into a contract for a home purchase by April 30 and close on your purchase by June 30. Tick. Tick. Tick.

If you haven't owned a home in the past three years and you've been on the fence about buying, here's what you need to know to cash in before the cutoff.

Step 1: Know what you can get

The tax credit is worth 10 percent of the home's value, so if you're buying a property worth less than $80,000 (which applies to some foreclosures), you'll receive less than the full amount. And keep in mind that the credit has income restrictions, so ask your tax professional if you qualify and for how much.

In some cases, you can apply your tax credit to closing costs. For more information, visit the IRS Web site or this site by the National Association of Home Builders: www.federalhousingtaxcredit.com.

Step 2: Get pre-approved

It's often the most laborious, agonizing, frustrating part of the homebuying process, so get your official approval out of the way first, suggests Lynn Robbins, a Realtor with Coldwell Banker in Sarasota, Fl. It'll save you a lot of grief later, grief that you don't have time for.

"Know exactly what you can borrow, what your payments will be and that you'll feel comfortable with that," says Robbins. "In the past, I always wanted my clients to get pre-approved, anyway, but in a hot market, it's an edge over the other buyers. The seller, at least, knows that the buyer is already pre-approved."

This is something that everyone is stressing. Steven T. Decker, a real estate attorney at Decker, Decker, Dito & Internicola, LLP in Staten Island, says that you shouldn't just get tacit approval where your bank checks your credit score and debt ratio and offers what the homebuyer can afford. You need to go further. "Get an actual prequalification, which means that all the buyer information has been checked, and the mortgage is approved subject only to a contract of sale and appraisal."

That may require you paying application fees now, adds Decker.

Step 3: Know when to stop looking

You may be wondering at what day you might as well say, "I have no hope of finding a house and buying it before June 30." You can't qualify for the credit unless you have a house under contract by April 30, but to be on the safe side, you'll probably want to have a contract a week or two before that date. It generally takes 30-45 days to buy a house, if you haven't been preapproved yet. There's the appraisal that takes place, the homeowner's inspection, the actual closing and a gazillion other things to consider.

If you buy a house in the traditional sense -- no short sale, for instance -- Robbins says that it's possible to close as quickly as two weeks. But that's if everything goes right.

NEXT: See steps 4-6 to taking advantage of the FTHB tax credit >>

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