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First Time Home Buyers Credit

Questions about the first time home buyers credit?

My fiance and I are looking into buying a house, and we're confused as to how this whole first time home buyers credit works. We'd like to see more information from the government's website to try and figure it all out. And someone explaining it in plain English would help too.

Basically the biggest questions we have are:

Can you use the credit as a down payment? If you can, do you still have to have a certain amount to put down as well?

Do you have to pay the credit back to the government? I'm sure there are strings attached, but what are they?

Are you able to ask the bank for a loan to include repairs and/or appliances, etc. That will be needed to make the house livable? Ref. Source 3

Credit Buyers Home Time First

Name: CleanStar
Country:

Comments: We bought our home last year in March and so we can take benefit of this stimulus tax credit which will help quite a bit.

This tax credit you can not use as a down payment for the loan. For the down payment you will have to come up out of your pocket.
You will file for the tax credit with your next income tax return and it will be added to your return as an one time tax credit. So if you owe taxes you will not receive the full $8000. If you will receive a tax return you will get the $8000 plus what your tax return would be.

Since you will receive this tax credit for buying your first home and if you are not planning on selling the home within 36 month, you won't have to pay this tax credit back.
If you are selling before 36 months so you will have to either pay the full amount or partly amount back. I don't know the rule about that since it anyway wouldn't be any option for us, unless something really major was gonna happen that we had to sell the house or move away from here.

Although we never had on our mind asking for additional money for home repairs or buying appliances included to the total loan I'm sure you could work something out with your loan officer.
In our case we preferred the former owner of the house to put a new roof on the house on his own expenses and also we agreed per contract on him to replace the siding on the front and backside of the house before closing.
In this way you know what had to be done, what was done and you won't have to expect any bad surprises.
Whenever you are planning on buying a used home, especially if it is already a bit older, you better have some backup money for repairs. I can promise you, they will come! So we have faced 3 water leaks within 1 year, totaling costs of about $1000 (plumbing and sheet rock work). That is something that just can't be foreseen but you always will have to expect. Nobody will let you tear off any walls to check on the condition of all water pipes.
Just make sure, when you walk through a home you are interested in buying, that you will look closely on how the former owner has taken care for it. You might think that's hard to find out. But it isn't. Simple things like if the doors are painted or show any damages, if window frames are painted, condition of the fence etc will tell you a lot. If someone didn't want to or couldn't keep up on simple things like that, then I really would be wondering what other major things like electrical lines, water pipes or maybe the roof will look like.
Always try to make the seller taking care to fix problems before closing instead of accepting a lower sales price. The money you might save by lowering the sales price might not cover up the expenses you might face, when it will be up to you fixing those problems.

But back to the tax credit....
when we will receive our tax credit we have planned on using it as an additional payment toward the principal of the house. In this way in the long run it will save us quite a bit of interest we do have to pay on the loan and the house will be paid off sooner than what the mortage term was.
If you are eligible for a fha loan, like we were, so you will have to have a mortage insurance too, which you will have to pay monthly until you have reached a certain percentage of what you are still owing on your home. Using this tax credit will also lower the amount of months we will have to pay that insurance premium. The sooner we won't have to pay that premium anymore, the sooner we can use that money paying it toward the principal again and this again will help reducing interest costs and helps a bit more to get the home paid off sooner.

Since you were asking about a loan for home repairs or appliances so I would recommend you to talk to your house bank about that. You might be eligible for an Home Improvement Loan which has much better conditions than any personal credit loan.

A last few advice for new home buyers...
do not buy a home if this will eat up all your savings and you only to count on the tax credit.
The tax credit is a one time payment you will receive but the payments for your home you will have to come up with for many many years plus all the other expenses they come along with having an own home and property. Do not jump on the first loan offer and shop around and compare and calculate your budget wisely. A lot of people buy big super homes and after 3 or 4 years they find out they can't make the payments anymore. Buy only what you really can afford and improve at a later time. Always take in consideration that other expenses like property tax, your electric or water bills etc might go up too.
Buying an own home is a big step and takes a lot of points to consider. And still, it is the best investment you ever can make.

So good luck and my best wishes on your new home