On November 6, 2009 President Obama signed into law new legislation that extends the first-time home buyer tax credit beyond its Nov. 30 deadline and expands it to a wider group of home buyers.

This video explains the facts and answers many home buyer questions regarding the tax credit.

What Is A Tax Credit?

While the window of eligibility for the Homebuyer Tax Credit doesn’t expire until June, 2010. It’s important to know you will need to have a purchase contract signed by April.

Keep in mind that most people take about 60 days to locate a property and get into escrow. That means you’ll need to begin locating your house by February without being rushed.

That leaves you three months, not six.

It’s a great time to look at homes in or surrounding Whittier as there are more than a few bargains out there. Mortgage rates won’t get any better and home prices are at their lowest levels in many years. Combine this with a tax credit and you’ve got a great opportunity if you’re fortunate enough to have a good job and some savings.

If you’ve tried to time the ‘bottom’ — it’s now — and it’s going to pay off.

A tax credit is a direct, dollar-for-dollar refund from the IRS.

The best way to understand how it works is to imagine you just filed your tax return.

Let’s say you’re expecting to “break even” on your filing this year. In other words, you don’t owe anything to the IRS and you aren’t getting any money back. (I should be so lucky!)

Now, let’s say you bought a home and you qualified for the full IRS Home Buyer Tax Credit. Everything else was exactly the same…

Well, in this case, after you filed your tax return, you would actually get a check from the IRS for $8,000.

Not bad!

Now, let’s say everything we’ve talked about is the same, but you actually owed $500 on your Federal Return… How much would your refund be, in that case?

You guessed it — $7,500.

So, you can see it’s pretty simple, but a very good deal if you qualify.

Here’s some facts from the NAHB website about the home buyer tax credit, and for the most part, all you need to know:

• The $8,000 tax credit is for first-time home buyers only. The $6,500 dollar credit is for move-up buyers.
• The IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase.
• The tax credit does not have to be repaid unless the home is sold or ceases to be the buyer’s principal residence within three years after the initial purchase.
• The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000 — or $6,500 for a move-up buyer.
• The tax credit applies only to homes priced at $800,000 or less.
• The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.
• For homes purchased on or after January 1, 2009 and on or before November 6, 2009, the income limits are $75,000 for single taxpayers and $150,000 for married couples filing jointly.
• For homes purchased after November 6, 2009 and on or before April 30, 2010, the income limits are $125,000 for single taxpayers and $225,000 for married couples filing jointly.