Logo of the Federal Housing Administration.Image via WikipediaFor potential, first time Knoxville area homebuyers, there is now a $7,500 tax credit available to help you get into a home.

But don’t delay, it’s only good until July 1, 2009 and then it goes away.

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The new tax credit can help you own a great new home like this one.
The credit (which is actually a no interest loan because you have to repay it) works like this.

If you buy a new or resale Knoxville area home before the cutoff date of 2009 you can claim the credit on the federal income tax return you file two years from the closing date, i.e. if you close on say, January 1 of 2009 yog get to claim the credit on your 2011 tax return.

And there’s also good news even if you’ve owned a home in the past. The IRS defines a “first time homebuyer” as one who has not owned a home at anytime in the past 3 years. For married couples that includes both you and your spouse.

There’s also an income limit. Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.

Well, that all sounds great but how does a $7,500 credit in 2 years help me buy a house today?

Easy, it can work like this.  If you believe you will qualify for the credit you can simply reduce your withholding amount or your quarterly tax payments and save the difference to use for your down payment and closing costs.

With most FHA insured loans the seller is permitted to make a contribution toward a buyer’s closing costs up to 3% of the purchase price. This is typically almost enough to pay for them so a new home buyer would only have to then come up with the 3% down payment in cash and there’s another new bill in Congress that will bring back gifts to buyers for that amount.

Knoxville Home Center is a great place to pick out a new home.

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