mortgage

4 ways stimulus helps homeowner, buyer

Homebuyers can take advantage of this filing exception in one of three ways: closing on the home prior to April 15, 2009, getting an extension to file taxes later in the year or filing an amended return.

Some state housing programs are introducing programs that allow homebuyers to access the tax credit money at settlement.

For example, the Missouri Housing Development Commission's Tax Credit Advance Loan Program allows qualified homebuyers to obtain a no-interest second mortgage worth up to 6 percent of the home purchase or $6,750, whichever is less.

This second mortgage can be applied to down payment and closing costs, then repaid with the proceeds from the income tax credit.

The National Association of Home Builders has launched a Web site with detailed information about the first-time homebuyers tax credit.

Credit skeptics

Although Yun and Nicholas are hopeful about the new credit's impact on the housing market, not everyone shares their optimism.

Greg Smith, a Certified Financial Planner with The Wise Investor Group in Reston, Va., agrees the new tax credit may serve as an incentive for some potential homebuyers.

However, he says it's important to be realistic about the credit's potential in light of the increasingly shaky economy and souring job market.

"This incentive only works for people who have complete job security, who know they won't be transferred within three years, who qualify as first-time homebuyers and have the ability to obtain financing," he says. "In addition, they need to live in an area with reasonable home prices."

Michael Dooley, a financial planner with The Patriot Financial Group in Beverly, Mass., is also a skeptic.

"While the theory behind the tax credit is great, I just don't think $8,000 is enough," Dooley says. "The people who would benefit from this the most are looking to survive financially or are even leaving their homes because they can't afford them."

While the tax credit is meant to cover 10 percent of the purchase price (up to $8,000), an $8,000 credit covers only about 4 percent of the purchase price of a home with the 2008 national median single-family price of $197,000, Smith says.

Meanwhile, more affluent homeowners will not be able to take advantage of the new credit, which phases out for individuals with an adjusted gross income of $75,000 or above and for married couples with a combined adjusted gross income of $150,000 or above.

"The conundrum of the tax credit is that the people who can most afford to purchase a home are the ones who are most restricted in taking advantage of the tax credit," Smith says.

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Nicholas cites another shortcoming of the income limitations. He says some of the same places where the housing market has been hit hardest, such as Southern California, are also communities where incomes are high.

Because of the income caps, homebuyers in such markets -- which are most in need of a boost in sales -- will be unable to take advantage of the credit.

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