For background see Clues to the $8,000 Homebuyers Credit
I was chatting with some friends this morning and the subject of the new $8,000 homebuyers tax credit came up. I was asked to give a real life example of my statement “you could own a home for free” so here it is.
A family is renting a home for $950.00 a month and have not owned a home, or claimed the mortgage interest deduction on their taxes, in the last three years.
They find a home for sale, lets say in Page, Arizona, for $110,000.
The home qualifies for FHA financing.
Total down payment and closing costs would come to @ $7,000.
The new first-time homebuyers credit is 10% of the cost of the home up to $8,000. This home would qualify for the $8,000 credit, $1,000 more than the total closing costs and down payment.
Payments per month on the home would be @$125.00 less than the rent previously being paid. The new home owner also receives the additional benefit of deductions for the taxes and interest paid.
To clarify another point, the tax credit is refundable. In other words if your tax bill is $5000.00 and your receive the $8,000.00 first time homebuyers credit you would receive a $3,000.00 refund check.
If you have questions feel free to call me at 928-691-6444.