This from my Arizona Republic real estate column (permanent link):
The $8,000 first-time home-buyers tax credit just keeps getting sweeter and sweeter.
First, it’s a true tax credit, not a deduction. In other words, if you would have gotten a $3,000 tax refund next April, with the tax credit you’ll get $11,000.
Even better, a first-time home-buyer is someone who has not owned a home in the past three years.
To get the full $8,000, the purchase price of your home must be at least $80,000. But it turns out that $80,000 is a sweet spot in the Phoenix real estate market right now. In many West Valley communities, $80,000 will buy you a very nice house.
But here’s the icing on the cake: As of this week, The Federal Housing Authority may allow borrowers to use the $8,000 for their down payment.
The lender would offer that money through a second note, and you’ll pay it back when you get your tax refund.
Take a moment to reflect on the implications. That’s right, after nearly five long months of stern fiscal responsibility, we’re right back to doing nothing-down home loans.
The tax credit can be no more than ten percent of the purchase price, but an FHA loan requires only 3.5% down payment. How much house can you buy with $8,000 down? How about $228,500?
The sellers will throw in the closing costs — gleefully — so you could buy a great big Phoenix homestead for no money out-of-pocket.
Make your payments on time and you’ll be living the American Dream — in a home that might have sold for $500,000 in December of 2005.
But don’t dawdle. The $8,000 tax credit ends on November 30th — which means your loan must be completely closed by then. Allowing 45 days for underwriting and another 30 days to find the home of your dreams, you should start your home search no later than mid-September. If you want for the kids to be in their new schools in August, you should probably start looking now.
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