I asked Steve Tedrow of Windermere Mortgage Services to give his opinion, along with some of the facts, about the new tax credits available to first time home buyers.  The program is part of The Federal Housing and Economic Recovery Act of 2008.  Here’s what Steve said:

“I think first time homebuyers need to take a serious look at the new tax credit available to them.  This could be very beneficial to many people.  Any individual earning less than $75,000 per year or couple earning less than $150,000 per year can take advantage of the $7,500 credit.  A tax credit means that once you calculate your final tax liability, you reduce that amount by $7,500.  So, if you would have owed $1,500, then you deduct the $7,500 and would receive a tax refund of $6,000.

Some people complain that this is actually a tax free loan since the credit needs to be paid back over 15 years (or when the house sells).  But their analysis would be short-sighted unless they realize that the tax benefits of home ownership are normally much greater than the $500 per year which would get repaid.

For many people, it is difficult to come up with a down payment.  Consider this….a 3% down payment on a $250,000 condo is $7,500.  People should consider borrowing from their 401k or against another asset in the short term, knowing that the loan could be repaid at tax time.

If you are a first time homebuyer, I recommend you take a serious look at the tax credit.  It could be the key to many for getting into their first home.  There are many extraordinary housing deals in the marketplace right now.  Take advantage of those deals before interest rates go up and erode your buying power.”

Steve Tedrow

Windermere Mortgage Services

(425) 576-5461