Is the first time home buyers tax credit a loan or a grant?
Tuesday, May 25th, 2010 at
8:15 pm
I have the opportunity to buy a house right now, but only if I make the deadline for the $8,000 tax credit. My dad said that it was not a grant, like I thought it was, and that I would have to pay it back. What is the deal with this credit?
Tagged with: 8000 • buy • first time home buyers • first time home buyers tax credit • house • tax credit
Filed under: First Time Home Buyer Loans and Grants
Neither. You don’t receive a check (i.e., grant) and there is no re-payment (i.e., loan).
It is a credit against federal income taxes your would otherwise have to pay this year, or over the next few years. That might mean a bigger federal tax refund check or it might mean you increase your exemptions to decrease your withholding, but it’s a rebate of taxes you would otherwise have paid either way.
Ask any mortgage lender who is active in the area where you are looking to buy. They should be able to give you chapter and verse. They will also be eager to process your application for pre-approval – something sellers like to see before negotiating a contract and which Realtors like to see before spending a great deal of time showing houses.
In addition to the federal tax credit, check around to see if your state has a "first time homebuyer’s" assistance program. Some states actually help first-time buyers with a down-payment. That assistance comes in various forms – could be a grant, could be a loan – but it is always worth exploring.