Home Buyer Tax Credit

Congress passed legislation that:
* Extends a First-Time Home Buyer Tax Credit of up to $8,000 to first-time home buyers until April 30, 2010.
* Expands the credit to grant up to $6,500 credit to current home owners purchasing a new or existing home between November 7, 2009 and April 30, 2010.

If you have specific questions or need additional information, please contact a tax professional or the Internal Revenue Service at 800-829-1040.

Who Qualifies for the Extended Credit?
(1) First-time home buyers who purchase homes between November 7, 2009 and April 30, 2010. To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.
(2) Move Up Home Buyers. Current home owners purchasing a home between November 7, 2009 and April 30, 2010, who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight years.

Which Homes Are Eligible?
The Extended Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.

How Much Is Available?
The maximum allowable credit for first-time home buyers is $8,000.
The maximum allowable credit for current homeowners is $6,500.

How is a Buyer's Credit Amount Determined?
Each home buyer’s tax credit is determined by two factors:
1. The price of the home.
2. The buyer's income.

Price
Under the Extended Home Buyer Tax Credit, credit may only be awarded on homes purchased for $800,000 or less.

Buyer Income
Under the Extended Home Buyer Tax Credit, which is effective on November 7, 2009, single buyers with incomes up to $125,000 and married couples with incomes up to $225,000—may receive the maximum tax credit.
These income limits have changed from the 2009 First-Time Home Buyer Tax Credit limits.

If the Buyer(s)’ Income Exceeds These Limits, Can He/She Still Get a Credit?
Yes, some buyers may still be eligible for the credit.

The credit decreases for buyers who earn between $125,000 and $145,000 for single buyers and between $225,000 and $245,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit. Home buyers earning more than the maximum qualifying income—over $145,000 for singles and over $245,000 for couples are not eligible for the credit.
Can a Buyer Still Qualify If He/She Closes After April 30, 2010?

Under the Extended Home Buyer Tax Credit, as long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close.

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.

FHA Requirements:

CRAWL SPACE

* Must have access to all of the crawl space areas.
* Major water build-up in the crawl space is not allowed and must be remedied.
* Any areas of wood rot must be removed and repaired.
* Ventilation & vapor barrier are required.
* At least 18" clearance is required from the floor joist to the ground.
* If the crawl space has been dug out, the earth cannot be disturbed within 1 foot of the stemwall or pier supports. If the earth has been disturbed, then a retaining wall should be installed.
* If a sump pump is used, it MUST be hard wired. Extension cord hook-ups are an extreme safety hazard and cannot be used.

ATTIC SPACE

* Access must be provided (except where there is no attic space such as with some vaulted ceilings or in mobile homes).
* The attic access opening cannot be smaller than 14" x 22".
* Attic must be adequately ventilated, providing positive airflow with no dead airspace.

ROOFING MATERIAL

* The roof must have at least 3 years of remaining life.
* Estimated life expectancies:

Rolled roofing:....................NOT acceptable for FHA.
Composition roofs:............average life 15-20 years
Wood shingle:.....................average life 16-22 years
Built-up roofs:....................average life 10-13 years
Torch down roofs:.............acceptable w/certification that roof was installed per manufacturer's specifications.
Metal roofs:.........................acceptable w/certification that roof was installed per manufacturer's specifications.

* Roofing on slopes of 2 1/2:12 or less MUST be installed by a licensed roofer using built-up roofing that meets the Uniform Building Code. Rolled roofing is not acceptable.
* FHA will accept a maximum of 3 layers of roofing material. If more than two layers of roofing exist and re-roofing is required, all of the old roofing must be removed as part of the re-roofing. The placement of composition shingles over wood shake shingles is not acceptable.

ELECTRICAL

* A single main shut-off breaker is required.
* If more than one breaker must be tripped to disconnect the power, a new service panel is required.
* The main service must be at least 100 amp. If it is less, a new service is required.

NOTE: These electrical requirements eliminate most pre-1960 homes that have not had an electrical upgrade. If FHA is the only financing option, then a 203K program should be considered to finance the improvement.
HEATING

* The heating and cooling system must have at least 2 years of remaining life.
* Wood stoves or solar heating are not acceptable as the sole heat source. NOTE: Coal or wood stoves with automatic stokers are acceptable.

NOTE: These heating requirements may eliminate most pre-1960 homes that have not had a heating system upgrade. If FHA is the only financing option, then a 203K program should be considered to finance the improvement.
HOT WATER HEATER

* MUST have an installed Safety Release Valve (SRV).
* The SRV must have a discharge line that drains to the outside of the home. It cannot be reduced in size from the valve outlet. In the case of a basement installation with a drain the discharge line must exhaust 6" to 24" from the floor.

NOTE: The Safety Release Valve upgrade is usually under $20 for the valve plus installation.
LEAD-BASED PAINT

* All properties built prior to 1978 should be considered as target housing for lead-based paint hazards. Defective peeling/flaking paint on any interior or exterior surface must be identified and repaired following the EPA guidelines.

SEPTIC SYSTEMS

* Homes with septic systems are acceptable.
* Evidence of septic tank pumping within the last 5 years is required.

WINDOWS FOR SLEEPING ROOMS

* Escape or rescue windows shall have a minimum net clear openable area of 5.7 square feet. The minimum net clear openable height is 24" and width is 20". The maximum escape window sill height is 44".

NOTE: These window egress requirements may eliminate most pre-1960 homes that have not had a window upgrade. Small basement windows can be enlarged and upgraded. It has been my experience that most FHA Appraisers overlook this requirement unless the windows are inoperable or are set into an underground basement with 60" plus sill height. If FHA is the only financing option, then a 203K program should be considered to finance the improvement.

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