Frequently Asked Questions – Homebuyer Tax Credit Changes

Question:  Existing home credit:  Must the new house cost more than the old house?

Answer:         No.  Buyers who move from a high cost area to a lower cost area who meet all eligibility requirements will qualify for the $6,500 credit.

I am an existing homeowner.  On October 25, 2009, I signed a contract to purchase a new home.  I have lived in my current home for more than 5 consecutive years and am within the new income limits.  I will go to settlement on November 20.  Will I qualify for the new $6,500 credit?

Answer:           Yes, the existing homeowner credit goes into effect for purchases after the date of enactment (when the bill is signed which is November 7).  There is no reference to the date of contract for the new credit.  The provision looks solely to the date of purchase, which is generally the date of settlement or closing date.

Question:     I am a first-time home buyer but was not within the prior income limits at the time I entered into my contract to purchase on October 30, 2009.  Will I be covered by the new income limits?

Answer:            Yes.  The new income limitations go into effect as soon as the President signs the bill.  The income limit and other eligibility rules will look to your status as of the date of purchase or settlement date.  You should be eligible for the credit (or a portion of the credit if you’re within the phase-out range).

Question:      I am an eligible existing homeowner.  I have a fair amount of equity in my home.  I have found a home with a non-negotiable price of $825,000.  Will I be able to use any of the $6,500 tax credit?

Answer:             No.  The $800,000 cap on the cost of the purchased home is firm at $800,000.  Any amount above $800,000 makes the home ineligible for any portion of the credit.  The $800,000 is an absolute ceiling.

Question:      I am an eligible first-time  home buyer.  I entered into a contract to purchase on November 1, 2009.   Do I have to close before December 1?  How does the extension date affect me?

Answer:             You do not have to close before December 1.  The bill was signed November 7 and is  effective the date of signing.   Therefore, so long as the contract settles before April 30 (or July 1, worst date), the purchaser will be eligible for the credit.

The source of information for this blog is National Association of Realtors® Government Affairs Division.    Let me know if you have any other questions.  Always glad to help.