Why Right Now Is A Good Time To Buy A House For A First Time Buyer
Why is right now a good time to buy a house for a first time buyer?
Real estate, along with many other investments such as stocks, bonds and mutual funds, can be found right now at prices lower than in recent years. Some would say it’s the best opportunity we’ve seen so far in our lifetime. Couple that with the $8,000 first-time homebuyer credit available if you close on a property and take title before December 1st, 2009, and you have a potentially winning combination.
So, what is a first-time homebuyer anyway? It’s not as restrictive as it sounds. IRS rules say that as long as neither you nor your spouse have owned your own home for at least three years prior to purchasing a new one, then you’re a “first-time home buyer”! If you’re married, and your spouse has owned a home, neither of you can qualify, but if you have a significant other and you’re not married, then you could.
It’s also possible to get less than $8,000, as the credit is equal to 10% of the purchase price up to $8,000. That’s not a problem where I live, but if you live in one of the many states where it’s possible to buy houses for less than $80,000, you should be aware of this restriction.
There are income limitations, which you can’t exceed and still qualify as well. If you’re single, your eligibility for this credit starts to phase out if you make $75,000 or more and goes away completely if you make more than $95,000. If you’re married the phase out begins at $150,000 and the credit is completely gone at $170,000. IRS Form 5405 will help you figure out what you can claim. By the way, those numbers aren’t your gross income; instead they represent Adjusted Gross Income and are found on the last line of the front page of your 1040 form.
Other benefits and restrictions can also apply, so you’ll want to check with your tax preparer. The biggest thing to keep in mind, however, is that you need a place to live, and the prices are very likely to resume going up in the future, so that consideration along with this potential benefit can be to your advantage. By the way, this is not a tax deduction; it is a dollar-for-dollar credit against what you might owe. If you owe $1,000 not counting this credit, you could be eligible to get a $7,000 refund instead!
Last but not least, don’t confuse buying your own personal residence with an investment. If you have more than just a personal residence and you use that for rental income, then you have an investment. My definition of an investment is anything that puts money into your pocket, and your personal residence will take money out of your pocket until you sell it. That’s not “conventional wisdom”, but lots of conventional wisdom isn’t wisdom at all.
Related posts:
- What Does Buying A House Do To My Investment Plan?
- Should I Buy A House Now?
- What’s Wrong With Getting A Big Tax Refund?
- College Investing – Where Do I Start?
- Invest For The Long-Term? What’s That? I’m Young!
