Answers to 23 frequently asked questions about the extended homebuyer tax credit

1. Who is eligible to claim the $8,000 tax credit for first-time buyers?
First-time home buyers who have not owned a home in the past three years and who purchase any kind of home—new or resale—are eligible for the tax credit for 10 percent of the purchase price, up to a maximum of $8,000. To qualify for the current tax credit, a home purchase must occur on or after November 6, 2009 and they must have a binding sales contract in force on or before April 30, 2010.  Purchasers have until June 30, 2010 to close.
 
The full credit is available for married couples filing a joint return whose modified adjusted gross income is $225,000 or less and for other taxpayers who’s MAGI is $125,000 or less.  The credit phases out for buyers earning more than those income limits.

Persons claimed as dependents by other taxpayers or who are under age 18 do not qualify for the tax credit program. Source: National Association of Home Builders, Internal Revenue Service

2. Who is eligible to claim the $6,500 tax credit?
Homeowners who have lived in their current home for at least five consecutive years within the last eight and who want to purchase a different home qualify for a $6,500 tax credit.  Home purchase must occur between November 7, 2009 and April 30, 2010.  The purchaser has until June 30, 2010 to close.
Source: National Association of REALTORS®

3. What is the definition of a first-time home buyer?The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase. If you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. However, IRS Notice 2009-12 allows unmarried joint purchasers to allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.
Source: NAR, NAHB

4. How is the amount of the tax credit determined?
The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000 (See No. 12 for price limits) for first-time buyers and a maximum of $6500 for existing owners.
Source: NAR, NAHB

5. The income limits for claiming the tax credit were raised when the tax credit was extended. Are the higher limits retroactive?
No. The new income limits are only applicable to purchases occurring after November 6, 2009. The income limits for sales occurring  after November 6, 2009 are $125,000 a year for individuals and $225,000 for couples $75,000 for single taxpayers and $150,000 for married couples filing jointly.
Source: NAHB, IRS

6. What is “modified adjusted gross income”?
Modified adjusted gross income or MAGI your total annual income minus adjustments to income.  Examples of adjustments to income are Alimony payments, contributions to an IRA, contributions to health savings accounts, or moving expenses for a new job.
Source: Investopedia, IRS

7. If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
Possibly. It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose MAGI exceeds the phase out limits.
Source: NAHB

8. Can you give me an example of how the partial tax credit is determined?
Just as an example, assume that a married couple has a modified adjusted gross income of $235,000. The applicable phase out to qualify for the tax credit is $225,000, and the couple is $10,000 over this amount. Dividing $10,000 by the phase-out range of $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is a $4,000 credit.

Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $138,000. The buyer’s income exceeds $125,000 by $13,000. Dividing $13,000 by the phase out range of $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.

Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.
Source: NAHB

9. How is this home buyer tax credit different from the tax credit that Congress enacted in early 2009?
For first-time buyers the tax credit’s income limits were increased, the documentation requirements were tightened, and the program's deadlines were extended.  Existing homeowners who buy a new principal residence also now qualify for a credit up to $6500.
Source: NAHB

10. How do I claim the tax credit? Do I need to complete a form or application? Are there documentation requirements?
You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on line 67 of the 1040 income tax form for 2009 returns (line 69 of the 1040 income tax form for 2008 returns). No other applications are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests. Note that you cannot claim the credit on Form 5405 for an intended purchase for some future date; it must be a completed purchase. Home buyers must attach a copy of their HUD-1 settlement form (closing statement) to Form 5405 as proof of the completed home purchase.
Source: NAHB

11. What types of homes will qualify for the tax credit?
Any home that will be used as a principal residence will qualify for the credit, provided the home is purchased for a price less than or equal to $800,000. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.

It is important to note that you cannot purchase a home from, among other family members, your ancestors (parents, grandparents, etc.), your lineal descendants (children, grandchildren, etc.) or your spouse or your spouse’s family members. Please consult with your tax advisor for more information. Also see IRS Form 5405.
Source: NAR, NAHB

12. I read that the tax credit is “refundable.” What does that mean?
The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even the entire amount of the refundable tax credit.

For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).
Source: NAHB

13. Will the tax credit need to be repaid?
No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during this three-year period, the full amount credit will be recouped on the sale.
Source: NAR

14. Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been “purchased” on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after November 6, 2009 and on or before April 30, 2010 (or by June 30, 2010, provided a binding sales contract was in force by April, 30, 2010).

In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.
Source: NAHB

15. Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
Yes. The tax credit can be combined with an MRB home buyer program. Note that first-time home buyers who purchased a home in 2008 may not claim the tax credit if they are participating in an MRB program.
Source: NAHB

16. I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?
No. You can claim only one.
Source: NAHB

17. I am not a U.S. citizen. Can I claim the tax credit?
Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of “nonresident alien” in IRS Publication 519.
Source: NAHB

18. Is a tax credit the same as a tax deduction?
No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS.

A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $8,000 in income taxes. If the taxpayer receives an $8,000 deduction, the taxpayer’s tax liability would be reduced by $1,200 (15 percent of $8,000), or lowered from $8,000 to $6,800.
Source: NAHB

19. I bought a home in 2008. Do I qualify for this credit?
No, but if you purchased your first home between April 9, 2008 and November 6, 2009, you may qualify for a different tax credit. Please consult with your tax advisor for more information.
Source: NAHB

20. Is there a way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 or 2010 tax return?
Yes. You have several options.
Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the down payment.

Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.

Second, you may claim the tax credit and participate in a program financed by tax-exempt bonds. As a result, some state housing finance agencies have introduced programs that provide short-term second mortgage loans that may be used to fund a down payment. Prospective home buyers should check with their state housing finance agency to see if such a program is available in their community.  Here is a list of state agency loan programs with information on how to apply.  
Source: NAHB, National Council of State Housing Agencies

21. HUD is now allowing "monetization" of the tax credit. What does that mean?
It means that HUD allows buyers using FHA-insured mortgages to apply their anticipated tax credit toward their home purchase immediately rather than waiting until they file their 2009 or 2010 income taxes to receive a refund. These funds may be used for certain down payment and closing cost expenses.

Under HUD’s guidelines, non-profits and FHA-approved lenders are allowed to give home buyers short-term loans of up to $8,000. The guidelines also allow government agencies, such as state housing finance agencies, to facilitate home sales by providing longer term loans secured by second mortgages.

Housing finance agencies and other government entities may also issue tax credit loans, which home buyers may use to satisfy the FHA 3.5 percent down payment requirement. In addition, approved FHA lenders can purchase a home buyer’s anticipated tax credit to pay closing costs and down payment costs above the 3.5 percent down payment that is required for FHA-insured homes. 
Source: NAHB

22. If I’m qualified for the tax credit and buy a home in 2009 (or 2010), can I apply the tax credit against my 2008 (or 2009) tax return?
Yes. The law allows taxpayers to choose (“elect”) to treat qualified home purchases in 2009 (or 2010) as if the purchase occurred on December 31, 2008 (or if in 2010, December 31, 2009). This means that the previous year’s income limit (MAGI) applies and the election accelerates when the credit can be claimed. A benefit of this election is that a home buyer in 2009 or 2010 will know their prior year MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.

Taxpayers buying a home who wish to claim it on their prior year tax return, but who have already submitted their tax return to the IRS, may file an amended return claiming the tax credit using Form 1040X. You should consult with a tax professional to determine how to arrange this.
Source: NAHB

23. For a home purchase in 2009 or 2010, can I choose whether to treat the purchase as occurring in the prior or present year, depending on in which year my credit amount is the largest?
Yes. If the applicable income phase out would reduce your home buyer tax credit amount in the present year and a larger credit would be available using the prior year MAGI amounts, then you can choose the year that yields the largest credit amount.
Source: NAHB

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Tel: +91 124 3295123
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Fax: +91 124 2217833
Email: info@aurumestates.com
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Cosmetic issues are easy to remedy

Home shopping for first-time homebuyers it's an exciting, albeit nerve-wracking, experience. If you're like others in the market for their first home, you probably have in mind exactly how your soon-to-be home will look.

But it's important not to fall into the bad decorating, dingy walls and dirt-bare back yard equals bad-home trap. If you don't see past the hideous wallpaper, funky light fixtures and avocado green carpeting, you may miss out on a home with great potential.

And, if you're looking for a home in a seller's market where homes are being snatched up as soon as they go on the market, you'll come to realize you can't be choosy if you want to make a competitive offer.

One of the first things to do is to get pre-approved for a loan and determine the maximum you can afford to offer for a house. Don't look at homes that are asking for more than 5 percent above your maximum, otherwise you'll be setting yourself up for disappointment if you find the perfect—but outside your budget—home.

So what to do?

The floor plan of the home is extremely important. If a floor plan isn't quite to your liking, consider rearranging it or adding on. If you're looking at an existing home and will need to remodel or expand to suit your needs, the estimated cost of renovation needs to be considered when making an offer.

Also, consider the features of a home:

• Walls. While these are among the easiest to remedy, they also make a huge first impression. If the walls need to be painted, are covered in wallpaper or are painted a color you find distasteful, picture them crisp and clean in the color of your choice—that's how they could look after you paint them.
• Floors. Like walls, carpet or floor surfaces that are old or outdated can be easily replaced. You could even ask for a carpet allowance in your bid, especially if you're in a buyer's market.
• View. Things like old, ugly—even dirty—windows and window treatments can make a view appear less desirable. Those things can be improved, so unless the only view you have is of your neighbor's clunker on the side of the house, don't get hung up on what is surely a fixable view.
• Landscaping. Your best bet is a moderately landscaped yard because you can always improve landscaping without spending too much. Worst case, even if you're looking at dirt, landscaping is one of the easier projects to tackle. Plus you get to design it however you'd like if you're starting from scratch.
• Closets and garages. You can never have too much storage space, which is why so many newer homes have three-car garages. But if you encounter a converted garage that is now a bedroom or storage room, don't give up. Converted garages can almost always go back to their original purpose without much cost or labor.
• Kitchen. The most popular room in the house, many homeowners want their kitchen to be large and have modern appliances. Don't let outdated color schemes deter you because there's nothing like a fresh coat (or two) of paint to make a kitchen your own. Plus, if you like the rest of the house enough to make an offer, you can give the kitchen a minor spruce-up with some new appliances or a major overhaul complete with new countertops, cabinets, and flooring.
• The exterior. If the home doesn't have good curb appeal, try to picture it with a fresh coat of paint and revitalized landscaping.
• Pools. If you want a pool, buy a home with a pool already built in. Pools are expensive and you will not get a full return on the cost when you go to sell. Let someone else lose the return. The cost of repairing a pool is less than putting one in, so if you're looking at a home with an old pool that looks like it's in bad shape, it's still a better bet than putting one in later.
  When making an offer, consider what you can't live without, as well as your budget. Also, be sure you hire a professional home inspector to inspect the house. If the home's systems are in good working order and the house has everything you want except a minor item or two, make an offer accordingly.
  Most importantly, keep in mind that unless you're building your dream home from scratch, you'll probably never find the perfect home. But seeing past a previous owner's bad decorating choices to the core of the home and its potential for livability will yield you the home you've always wanted. It may take some work, but hey—it's yours.
  Contact Us
  AURUM ESTATES
  #1-2, Opp. Uniworld Gardens,
  Adjoining indian oil petrol pump,
  Sohna Road Gurgaon
  (Haryana) 122018
  Tel: +91 124 3295123
  Mob: +91 9999997969
  Fax: +91 124 2217833
  Email: info@aurumestates.com
  website http://aurumestates.com
  

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Many issues can be at root of indecision

You've looked at dozens of homes. Your REALTOR® is about to tear her hair out with frustration. You are paralyzed, letting one great home after another pass you by. Why can't you make a decision?

Buying a home can be an overwhelming process. There are so many decisions to make and any of them can mean serious financial consequences. A home, after all, is hardly a liquid asset. Nor is it a growth investment, according to Wall Street definitions. It's your greatest financial debt, even while it puts a roof over your head. As it appreciates, it also needs repairs and maintenance. With all that weighing on you, no wonder you've got commitmentphobia.

Yet, you really want to buy a home. You know that few purchases will provide you the quality of life that a home of your own does. There are plenty of advantages, as well - tax breaks, rising real estate values, a stable environment for the family, to name only a few. So you stifle your worries and keep looking for homes. You just can't find the one that's just right for you.

It might be time to back this train up and examine what is causing the conflict between wanting to buy and being unable to make a decision. There is a cause, and it's name is money. The question is, which aspect of money is stopping you from moving forward?

Fear of spending too much
Lenders will loan you money at the top of your ability to borrow. Realtors will suggest that you will be happier in a "bigger, better" home, eliminating the need to "trade up" in a few years. Stretching to buy the most home you can possibly afford is a good strategy, but only under certain conditions - that you have confidence that your salary will rise, that your income is stable, and that you can handle large surprise expenses.

If you've been pre-qualified, you are already looking at bigger, better, more beautiful homes at the top of your range. But something isn't quite right. Even though you may feel that your income is stable, a feeling is telling you that if you buy in this range, you won't have enough in reserves should something happen. Those are your instincts talking, and you should listen, because your desires have been doing the talking up to now. Your instincts are telling your desires to scale back a little.

That means backtracking. Talk to your Realtor and ask her to show you less expensive homes. You can't go wrong buying slightly under your ability. In fact, many financial advisors tell their clients to budget about 25% of their income for housing in order to position them to build reserves for savings, investments, home improvements, emergencies and dozens of other reasons. That's almost six percent less than lenders will allow you to borrow. Just think what else you can do with six percent of your income. You'll still have your house, you'll just have more to do other things with.

A conflict in goals
Many couples purchase homes with the idea that they will have a child, so stretching buying power to have the extra space makes sense. But if you are trying to accomplish two big financial goals at the same time - buying a home and adding to your family, then something has to give.

You can't have it all - peace of mind, a large mortgage, and burgeoning expenses all at the same time. Something has to give and the way to do that is simply to prioritize your goals. In what order of importance do you want things to happen? What is most important to you? Whether you are planning a family, returning to graduate school, paying off a student loan, or buying a new car, you surely realize that your financial pie can only be sliced so many ways. Your mortgage is the largest, and the larger it is the smaller the other pieces.

Problems in the marriage
This is one of the toughest issues to address, and one your Realtor can't help you with. But just as you are listening to your instincts about the amount of money you should spend on your new home, you should be paying even more attention to your feelings about your marriage. And only you can answer the question - will we still be together in five years? You should at least be able to predict being together long enough to pay off the interest on your loan! Or you'll be selling your home without the benefit of building any equity and equity only comes with appreciation and mortgage reduction.

Buying a home will not fix a poor relationship. It will only make things worse. So you have a decision to make and it isn't which house to buy. It is whether or not you want this relationship to survive. If you decide you want the marriage, then you must pour your efforts into fixing its problems, including your share of the blame. Be willing to change some things, compromise on others, or accept many things as they are. If you can't do all of those, then to dissolve the partnership is your only other choice. After you have solved the problems in your relationship, you will find your home more easily.

Fear of the future
Fear takes the fun out of a lot of things, but there is reasonable fear and unreasonable fear. Unreasonable fears have no basis in reality, so there is little you can do beyond getting professional help for your anxiety. Reasonable fears you can handle on your own with a little common sense.

Fear can be tamed by looking at the worst case scenarios compared to the best case scenarios. So examine the questions that are really bothering you.

What if we can't make our payments? This question can be balanced by a best case. What if we manage our money so well that we can make double payments? So the fear here is manageable - it comes down to how confident you are about managing your money. If you aren't sure of yourself, get help. Ask someone whose money management style you admire for advice on how to manage your money better. Then stick with it.

What if the value of our home goes down in value? Would you feel as fearful if you asked yourself whether your property will go up in value? Property can go up or down, but all property requires maintenance or it surely will deteriorate in value. This can be easily prevented by having enough budgeted or in your reserves to perform scheduled and unscheduled maintenance. Look at the properties surrounding the home you are considering. Are they maintained with pride? Are they being updated? Then your chances are good that the neighborhood and your home will retain its value. Rest assured that there will always be a buyer for an attractive, well-maintained property.

Because it is not a liquid asset, real estate is not as volatile as you think. It goes down slowly and rises comparatively slowly. And home values even when depressed may get a resuscitation after a few years. Your best hedge against the future is to keep your property in desirable condition.

You can't predict the future. The only thing you can do is prepare yourself to handle what may happen.

So money isn't the root of all evil, but it is the root of indecision - at least when you are paralyzed about buying a home. Thinking through the money issues can help you get moving one direction or the other. For some of you, just reading this article will put your jitters to rest. For others, you may realize that a home isn't in the cards for you right now, and that's OK. Wait a few days or weeks if you need to. Use the time to regroup. It is far better for you to work through a few obstacles than to jump into the largest investment of your life without confidence. If you can work through your fears, get your finances in tip top shape and proceed, you'll find buying a home doesn't have to be a paralyzing decision. In fact, it can be one of the most exhilarating things you'll ever do.

If you are worried about cash flow, then making disproportionately large house payments will tarnish the joy of home ownership, unless you can find ways to cut down the other pie pieces. Work to improve your cash flow. Accelerate your credit card pay -offs Don't incur new debt. Rebudget your expenses and eliminate unnecessary expenditures. Make compromises - vow to cut down if you can't cut something out. Be willing to move timelines for meeting your goals. Don't be influenced by others to live beyond your means. Set your sights on an affordable home, and you may find your dream home will appear right before your very eyes.

Contact Us
AURUM ESTATES
#1-2, Opp. Uniworld Gardens,
Adjoining indian oil petrol pump,
Sohna Road Gurgaon
(Haryana) 122018
Tel: +91 124 3295123
Mob: +91 9999997969
Fax: +91 124 2217833
Email: info@aurumestates.com
website http://aurumestates.com

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Residential Apartment for Sale in Canary Greens, Sector-73 Gurgaon, by a...

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