Using Owner Financing with the $8,000 First Time Home Buyers Tax Credit

owner-financingThe government is offering first time home buyers an $8,000 tax credit in an effort to stimulate the ailing real estate market.

Sellers can attract buyers by highlighting the refund in their ads, especially when used in conjunction with owner financing.

Author’s Update: This law was extended and expanded on November 6, 2009.  Be sure to read the update at:

This appealing tax credit is part of the Recovery Act that was expanded for 2009 home purchases. Here are 10 things you must know to make the most out of this program.

1. First Timers Only Please – The $8,000 tax credit is available to first time home buyers only.  This means the buyer (and their spouse if married) must not have owned their principal residence at any time during the three years prior to the date of purchase. (UPDATE: As of 11/6/09 there is also a lower $6,500 tax credit available for qualifying long-time homeowners that are buying a replacement home.)

2. Home Sweet Home – The buyer must live in the home as their primary residence. This means vacation homes and rental homes do not qualify.   The home must be located in the U.S.  However, it can be a house, houseboat, house trailer, cooperative apartment, condominium, or other type of residence.

3. Show Me the Money – The credit is 10% of the home purchase price to a maximum of $8,000.  This means the home price needs to be $80,000 or above for the full $8,000 refund.  The credit is claimed with the federal tax return using IRS Form 5405.

4. Timing is Everything – The increased $8,000 tax credit applies to homes purchased in 2009 that close before December 1, 2009. (UPDATE: Extended for closings through June 30, 2010 provided there is a sales contract in place by April 30, 2010.)

5. It’s Yours to Keep – Rather than a tax deduction the tax credit is fully refundable. This means a qualified buyer could have no taxable income and still receive the refund.  Unlike the earlier $7,500 version from 2008, this 2009 credit does not have to be repaid over a 15-year period.

6. Simon Says, “Don’t Move” – The buyer must continue to live in the property for 36 months after the purchase date.  If they move earlier than the 3 years the credit must be repaid.

7. Limitations Apply -Income limitations also apply based on modified adjusted gross income.  The phase out range is $75,000 to $95,000 for single buyers and $150,000 to $170,000 for married couples filing a joint return. (UPDATE: The revised income limits are $125,000 for single buyers and $225,000 for married couples filing jointly, with an additional $20,000 phase out range.)

8. Why Wait? – There are FHA mortgages that make a portion of the tax credit available at purchase.  This is accomplished through a short-term loan that can be applied to closing costs and a portion of the down payment above the 3.5% minimum.  There is also the possibility of filing an amended 2008 tax return so buyers don’t have to wait for the refund until filing their 2009 return.

9. Think Creatively – If a first time home buyer has difficulties qualifying for a bank loan they might consider purchasing a property with owner financing.  Also known as an installment sale, the seller agrees to “be the bank” and accept payments from the buyer.  This allows a buyer to take advantage of the 2009 tax credit even when banks say no to a mortgage loan.  The IRS might not recognize the closing date on a Contract for Deed so a Warranty Deed from the seller to the buyer with a Note and Mortgage (or Note and Deed of Trust) naming the seller, as the payee might be preferred for this purpose.

(10/20/09 Author’s Update – The IRS has recently addressed the Contract for Deed issue.  For more details please refer to Does Seller Financing Qualify for the $8,000 First Time Homebuyer Tax Credit?)

10. Read the Fine Print – Like any act of Congress there are a few pesky details.  For instance the property can’t be acquired from a related person.  Be sure to review the fine print available online through the Internal Revenue Service web site.  It is also advisable to contact competent tax and legal counsel to avoid any costly mistakes.

The combination of historically low interest rates, large inventory, reasonable prices, and the $8,000 tax credit are making 2009 an excellent time for buyers to purchase their first home.  When sellers also offer to owner finance the property the easy financing and tax credit should entice buyers to get off the fence and consider a home purchase.

Author:  Article written and copyrighted by Tracy Z. Rewey

About Tracy Z

Tracy combines her knowledge of cash flow notes with the power of marketing online to help grow your business! She can be reached at Tracy@NoteInvestor.com 1-888-999-7905 or at Exposure One Marketing.

Comments

  1. We are doing owner/finance. The owner acts as “our bank” she says, we make our Payment directly into her account. We also used the 8,000 plus an additional 2,000 to make a 10,000 down payment on the home. She asked that we re finance the house as soon as possible. Knowing our credit wasn’t the best she said she would work with us. Now she is demanding we re finance which is still impossible due to credit, and very large closing costs, or she will evict us and not re fund our 10,000 down Payment! Help!!!

    • Hello Jeremy,

      I can understand your situation being very stressful. The legal rights of both you and the seller will depend on what the actual documents state. You will want to pull copies of your documents and review with an attorney. They will look to see what agreement or terms were put in writing. For instance, is there a note and mortgage with an all due and payable date? Was ownership transferred by deed or is this some sort of contract for deed or lease option? We are not attorneys so unable to provide financial advice. You have enough invested in dollars, time, and emotional commitment that it would be in your best interest to get some legal advice.

  2. What if someone needs to move due to a change in family or job status?
    Does the entire 8,000 need to be repaid or is it prorated for the time lived in the home?

  3. I bought my house last year got the $8k credit and all was good. Until, my brothers wife got pregnant and he deployed. So, without knowing about the having to stay in the house for 3yrs after purchase I rented it out to a friend and rented a little larger house to accommodate for my brothers wife and new baby while he’s gone. I really don’t want to give the $8k back. Is there anyway to not let the IRS know about me moving out?

    • Hello Shelly,

      I think you answered your own question. Sorry, but can’t suggest ways for you to evade taxes. You might want to talk with a tax adviser or CPA to see if there are ways for you to minimize the damage based on your individual circumstances.

      Thanks for reading and commenting at Note Investor.

      Tracy

  4. I have a question and I am hoping you can help me. We got a house owner financed to us back in July 2010. We put the contract on the house in April. When we went to get our loan we had to get some debts paid off….so the owner offered to owner finance to us until we could get the debts cleared and get the house in our name. WE are within all the dates for the First Time Home Buyers credit. This is our first home and we want to get the credit. We have recently closed on the house through and actual mortgage company and we paid the balance of the house off. What kind of paper work will the IRS need from the owner showing he owner financed it to us from July 10 til Dec 10 and we got it moved in our name in Jan. 11??? Please help me with this because no one seems to know the answer. Surely I wont penalized because it was owner financing surely I can still get the credit???? PLEASE HELP ME

    • Hello Kelli,

      The Home Buyer’s Tax Credit was extended for closings through June 30, 2010 provided there was a sales contract in place by April 30, 2010. It will be these two dates that determine eligibility. I’m hoping your seller financing was in place by the IRS closing deadline 🙂

      The IRS asks for a copy of the settlement statement to be submitted with the tax return and their Form 5405. This helps to substantiate sale date (i.e. closing date), and other qualifying items for the $8,000 Tax Credit. There is also a provision for alternative documents when a settlement statement might not apply.

      Here is an excerpt from the IRS website for the documentation needed to claim the First Time Home Buyer Credit using Form 5405:

      Q. What do I have to attach to my 2009 or 2010 return to prove that I bought a new home in order to claim the credit?

      A. If you claim the credit on a 2009 (or later) return, you must attach a copy of your settlement statement. For most homebuyers, this will be a properly executed Form HUD-1, Settlement Statement (U.S. Department of Housing and Urban Development) that includes:

      * Names and signatures (if available) of all parties involved,
      * Property address,
      * Purchase price, and
      * Date of purchase.

      If you purchased a mobile home and do not have a settlement statement, you should attach a copy of your executed retail sales contract showing all parties’ names and signatures, the property address, the purchase price and the date of purchase.

      If you are claiming the credit for a newly constructed home and you do not have an executed settlement statement, you should attach a copy of your certificate of occupancy showing the name of the taxpayer, the property address, and the date of the certificate.

      Source: IRS Website at: http://www.irs.gov/newsroom/article/0,,id=218698,00.html

      The newsroom site of the IRS has quite a few helpful Questions and Answers related to owner financing and the First Time Home Buyers Credit. Just click the link above to research further. We also encourage you to seek the help of a tax preparer as we do not provide legal or tax advice.

      All the best,

      Tracy Z. Rewey

  5. we missed the April 30 deadline by just a few days – we were renting and the house just came on the market – anyway we are first time home buyers – are there any other credits available for first time buyers

  6. Hi there!

    My father purchased a home on April 29th, 2010 and suddenly passed away October 2nd, 2010. His $8000 first time credit was ready to be processed by Nov 15th by check to his house (but I froze his mail, SS and bank account) so I can let a lawyer disburse anything between me and my siblings (I am the executor). Since my father died, does this mean the IRS will revoke his $8000 if we plan to sell the house within 6 months? I see on the old 5405 IRS form, section h The taxpayer who claimed the credit died in 2009. No repayment of the credit is required of the deceased taxpayer. My father was unmarried/divorced years ago.

    Now when I call the IRS hotline, they say to wait for further notice to receive a letter. Problem: I won’t receive his correspondence for at least another month because the executorship paperwork is being processed intestate probate in Michigan (I am in PA). Can you help?

    Thanks! JMS-C

    • Hello Jill,

      That is an unusual set of circumstances. I have not had previous experience with the situation described so am not much help. Hopefully the estate attorney or a tax consultant can assist.

      Thanks for reading and commenting at Note Investor!

  7. i recently closed on an owner financed home and filed for the tax credit. The owner included an additional loan in my settlement papers for $8000 not to be used towards a down payment towared the purchase of the home or a credit towards the purchase price. I did not realize that at closing. anyway the agreement was for the deed to be transfered in my name, but when i went to get a copy of the deed, i found out the paperwork was never filed. I believe the owner ran a scam on me to get the $8,000 tax credit. I received the credit minus an offset of past taxes but afraid of folking over the remainder to the owner. If i dont he can evict me and i will owe the remainder to to IRS, if i do, i have a bogus contract and still will owe the irs because my contract is only for 2 yrs and i cant qualify for refinancing because there is no escrow account set up to prove i have owner fiancing…. am i still held liable for repaying the $8000 back if my contract was never filed with the court and evicted before 36 months?

    • Hello Renee,

      I suggest you take your paperwork and seek the advice of an attorney. As you pointed out, there are quite a few serious issues that need addressed. Together you might be able to contact the seller to see if there is any explanation or solution that can resolve these concerns.

      In general, when working with a real estate contract (aka land contract or agreement for deed) the warranty deed is not recorded until the contract is paid in full. It is possible to record the Real Estate Contract in most states to evidence your equitable interest. If the owner financing arrangement was evidenced by a promissory note and mortgage (or a note and trust deed) then the deed is recorded upfront giving the buyer fee simple title and the mortgage (or trust deed) recorded to evidence the seller’s lien. The normal document practice can differ by state so we always recommend that the closing takes place through a qualified title company or real estate attorney. They will also be certain that the necessary paperwork is recorded in the county records where the property is located.

      I’m hopeful this is a misunderstanding that can be cleared up between you and the seller. Please let us know how it turns out.

      All the best,

      Tracy Z. Rewey

  8. My brother Richard wants to know if he qualifies for the First Time Homebuyers Credit??
    He was married for 23 years and wife is now deceased.

    His wife owned the house in her name, he helped pay the bills.

    His wife lefft the house to her three adult children and Richard.

    Richard moved out as he couldn’t aford to buy them out. He ended up homeless, as he couldn’t afford another house on a mere 30,000.00.

    We finally found a runned down mobil home for 25,000.

    Thank you

    • Hello Barbara,

      I’m sorry to hear about Richard’s housing challenges. The Home Buyer Tax Credits have expired but were available on qualifying transactions under contract by April 30, 2010 and closed by June 30, 2010.

      I’m not an accountant or attorney so can’t give any specific tax advice. I can help point you in the right direction though! The IRS site does a good job of explaining what it takes to qualify for the tax credits for First Time Home Buyers and Repeat Home Buyers. There are quite a few qualifiers like income, purchase date, and whether the buyer (or spouse) previously owned a primary residence. For all the details please visit irs.gov and type First Time Home Buyers into the search bar.

      Thanks for reading and commenting at Note Investor!

      Tracy

  9. Sue Schlesinger says:

    Seller financing/First time Homebuyer $8,000 credit: If I am the seller, what paperwork do I need fto provide at year end for my buyer who purchased my home in March, 2010? What do they need to submit for their taxes, and what do I need to submit (if anything). Thank you.

    PS GREAT Web site/information. Thanks.
    SUE

    • Hello Sue! Thanks for the positive feedback.

      The HUD-1 Settlement Statement signed by both the seller and buyer is the primary document the buyer needs to attach to their 1040 tax return and Form 5405.

      They should also have a copy of the seller financing documents on hand in case they need to prove the deal meets the “benefits and burdens of ownership” mentioned in the first comment pertaining to contracts.

      Here is a helpful Q & A from the IRS website:

      Q. What do I have to attach to my 2009 or 2010 return to prove that I bought a new home in order to claim the credit?

      A. If you claim the credit on a 2009 (or later) return, you must attach a copy of your settlement statement. For most homebuyers, this will be a properly executed Form HUD-1, Settlement Statement (U.S. Department of Housing and Urban Development) that includes:

      * Names and signatures (if available) of all parties involved,
      * Property address,
      * Purchase price, and
      * Date of purchase.

      Source IRS website at: http://www.irs.gov/newsroom/article/0,,id=218698,00.html

      Thanks for reading and commenting at NoteInvestor.com!

      Tracy Z. Rewey

  10. I recieved the 8000 dollar tax credit but I’ve only owned my home for 18 months and now me and my son’s father are breaking up and selling the house.. If i buy a house right after I sell this one is there any way I wouldnt have to pay the 8000 back since i’m still owning a home and “stimulating the economy,” which was the whole point.??

  11. I just closed on my first home June 15, 2010 and signed the sales agreement in April (before the deadline). I have already filled and received my refund from my 2009 taxes that were due by April 2010. Do I have to wait until 2011 to file for my $8,00.00 credit on my 2010 tax returns or can I file for the credit now? If so, how do I go about doing it?

  12. My fiance and I are in the process of buying a condo. We submitted a contract in time for the April 30 2010 contract deadline for the tax credit. Sadly, we received news that our seller died unexpectedly. We do not expect to continue with closing (although we have our mortgage, our title change, etc., all ready) to finish by the June 30 2010 closing deadline. Are there any extenuating circumstances involving this type of occurrence where we would be covered and get an extension for the tax credit?

  13. LUANN STEIGERWALT says:

    WE PURCHASED OUR OWNER FINANCING HOME INSEPTEMBER 2009, STILL WAITING FOR THIS $8000. GOT BULLSHIT RUNAROUND FROM SO MANY IRS AGENTS, THIS IS A NIGHTMARE FOR US, 9 MONTHS AND WAITING.

  14. I have owned my home since 1995, and the deed is only in my name. I was married in 1998, and have recently seperated, (3/15/10) but are still legally married, by state law. Our divorce can not be final until 3/15/11. My wife purchased a home in her name on 4/26/10 and closed on 5/26/10. Can she claim the home buyers tax credit? If so, how much can she claim?

    Thanks

    Howard

    • Hello Howard,

      There is a tax credit up to $8,000 for first time home buyers and $6500 for longtime owners for purchases of a qualifying principal residence that is under contract by April 30, 2010 and closed by June 30,2010. The IRS is pretty strict on both spouses qualifying for the specific tax credit.

      I looked around the IRS site to see if there were any questions and answer scenarios that were similar to your situation. Here are a couple that were in the ballpark:

      Q. I am a long-time resident and current homeowner and my spouse is a first-time homebuyer (has had no ownership interest in a principal residence during the three-year period ending on the date of purchase of a new principal residence) and we purchased a new principal residence. Can we qualify for either the first-time homebuyer credit or the long-time resident homebuyer credit if we purchase a new principal residence?

      A. No. Both you and your spouse must be first-time homebuyers in order to qualify for the first-time homebuyer tax credit. Since you had an ownership interest in a principal residence during the three-year period ending on the date of purchase, neither you nor your spouse qualifies for the credit. Similarly, both you and your spouse must be long-time homeowners of the same previous principal residence in order to qualify for the long-time resident homebuyer credit. Since your spouse is not a long-time homeowner of your current principal residence, neither of you qualify for the credit. (12/14/09)

      Q. I am a long-time homeowner of a principal residence and my spouse is a long-time homeowner of a different principal residence. Can we qualify for the long-time resident homebuyer credit if we purchase a new principal residence?

      A. No. Both spouses must have owned and used the same previous principal residence for five consecutive years out of the eight-year period ending on the date of purchase of the new principal residence to be eligible for the credit. Since you and your spouse owned and used different principal residences, neither of you qualify. (12/14/09)

      Source: IRS Website First-Time Homebuyer Credit Questions and Answers: Homes Purchased in 2009 or 2010

      Your situation is unique so I would suggest you contact a tax accountant to obtain their professional opinion. I’m not a CPA or tax attorney so can’t provide the legal advice. People have also submitted documentation to the IRS letting them make an official decision.

      Thanks for your comment!

      Tracy Z. Rewey

  15. I have just bought a owner finance property ,, we are due to close on June 25 2010 do I qualify for the 8,000 tax credit ? I bought it through an agent.

    • Hello Hope,

      The Home Buyer’s Tax Credit was extended for closings through June 30, 2010 provided there was a sales contract in place by April 30, 2010. Hopefully your sales contract was in place by the April 30th deadline and you can close before June 30th. You’ll also want to be sure you meet the other IRS guidelines relating to sales price, income, prior ownership, and others mentioned in this article and the IRS website.

      There are quite a few buyers using owner financing and seller-held notes to get their homes closed on or before the June 30th deadline. If the bank is dragging their feet on getting the loan finished then seller financing can offer a temporary solution before time runs out to take the credit.

      As always, please work with qualified legal and tax professionals that are familiar with all details of your situation.

      All the best,

      Tracy Z. Rewey

  16. rebecca says:

    i purchased my home 3/9/2010-owner financed.the irs keeps saying i need a settlement statement but the financer says it is not required.what is correct & what do i do?

    • Hello Rebecca!

      When it comes to the IRS my approach is to keep them happy 🙂

      The IRS now asks for a copy of a settlement statement to help prove sales price, sale date, and other qualifying items for the $8,000 Tax Credit. There is also a provision for alternative documents when a settlement statement might not apply.

      Here is an excerpt from the IRS website for the documentation needed to claim the First Time Home Buyer Credit using Form 5405:

      Q. What do I have to attach to my 2009 or 2010 return to prove that I bought a new home in order to claim the credit?

      A. If you claim the credit on a 2009 (or later) return, you must attach a copy of your settlement statement. For most homebuyers, this will be a properly executed Form HUD-1, Settlement Statement (U.S. Department of Housing and Urban Development) that includes:

      * Names and signatures (if available) of all parties involved,
      * Property address,
      * Purchase price, and
      * Date of purchase.

      If you purchased a mobile home and do not have a settlement statement, you should attach a copy of your executed retail sales contract showing all parties’ names and signatures, the property address, the purchase price and the date of purchase.

      If you are claiming the credit for a newly constructed home and you do not have an executed settlement statement, you should attach a copy of your certificate of occupancy showing the name of the taxpayer, the property address, and the date of the certificate.

      Source: IRS Website at: http://www.irs.gov/newsroom/article/0,,id=218698,00.html

      I suggest giving this official information – straight off the IRS website – to your owner financed seller and see what he or she comes back with. If worse comes to worse, ask the closing company or atttorney to prepare the settlement statement or draw one up yourself and have both you and the seller sign it.

      Thanks for your comments and questions.

      Tracy Z

  17. MARVIN VAN SYOC says:

    mY WIFE AND i LIVED IN AND OWNED A HOME FOR OVER 30 YEAR. i HAVE CANCER AND AM DISABLED FROM MAINTAINING OUR PREVIOUSLY LARGE HOME AND HAD TO DOWNSIZE TO A SMALL CONDO. WE CLOSED ON THE CONDO ON nov 1st, 2009. Our income is under $50,000. Is there any way we can benefit, even though we closed on Nov. 1… still had some furniture left at the old place. We would like to know if we can ammend for property closed on by Nov. 1… Sure could use it… thanks jvsyoc@iowatelecom.net

    • Hello Marvin,

      I’m sorry to hear about your health and can understand the need to downsize. The tax credit was expanded to include existing longtime homeowners that bought a new home after November 6, 2009. Here is a questions and answer from the First Time Home Buyer Tax Credit information published by the IRS:

      Q. I understand that even if I have previously owned a home, I may be eligible for the homebuyer credit. Can you explain the rules?

      A. If you are a long-time resident and owner of the same main home and you buy a new home, the law may allow you to claim the homebuyer credit. You must buy your new home after Nov. 6, 2009, and before May 1, 2010. Alternatively, if you sign a binding contract on or before April 30, 2010, you must purchase or close on the new home on or before June 30, 2010. If you claim the credit as a long-time resident of the same main home, please provide documentation showing you lived in that home for a five-consecutive-year period during the eight years ending on the date you buy the new home.

      Source: http://www.irs.gov/newsroom/article/0,,id=206293,00.html

      You might want to check with a tax adviser to see if they know of any loopholes for extenuating circumstances, but based on the IRS statement it looks like your purchase on November 1, 2009 missed the IRS date by 5 days.

      One of my gripes with the way these credits were implemented is that many people didn’t have a chance to plan ahead with some forewarning. There is also a push to extend the home buyer tax credit past the April and June 2010 deadlines, especially by existing homeowners that need to sell their home in order to afford the purchase of a new one.

      All the best,

      Tracy Z

  18. Question… if somone is seperated, not fully divorced, and wants to purchase a home on her own, will she qualify for the tax credit as a first time homebuyer? She wasn’t on the mortgage with her husband that she is seperated from. However, being married, how does this effect her?

    • Hello Ash!

      Part of the IRS requirement are that the taxpayer and the taxpayer’s spouse not have an ownership interest in a principal residence within the three years prior to the date of purchase. While I’m not a tax accountant, I was able to find this explanation from the IRS website that could be helpful:

      First Time Home Buyer Credit: Scenarios
      IRS #S7 Questions: I am separated from my spouse and considered unmarried, and qualify for the unmarried head of household filing status. If I bought a home on May 1, 2009, that otherwise qualifies, can I claim the first-time homebuyer credit? I did not own a main home in the three years before that, though my spouse did.

      IRS Answer: No. Section 36(c)(1) requires that the taxpayer and the taxpayer’s spouse not have an ownership interest in a principal residence within the three years prior to the date of purchase. While individuals do not have to be married to get the credit, marriage (and legal separation) imputes ownership of a previous home upon the other spouse. The taxpayer may not take the credit even if filed on a separate return.

      Source: IRS First Time Home Buyer Credit: Scenarios

      You might want to check out the IRS link above as there were several scenarios involving separated couples with similar answers.

      Thanks for reading and commenting at http://www.NoteInvestor.com.

      Tracy Z

  19. Tom Stacy says:

    Are first time home owner tax credits transferable, can you sell the credits if you don’t need them?

    • Hello Tom,

      To my knowledge, the home buyer tax credits are not transferable. The credit relies heavily on the individual qualifications of the buyer. Of course qualifying buyers could always claim the credit, collect the cash, and then transfer the cash however they want!

      All the best,

      Tracy Z

  20. Question: How does the $8,000 credit work if buyer wants to apply as part of downpayment on a seller-financed property? How and when does the seller receive the credit? Property is in VA. Thanks.

    • Great question John! There are loan programs offered through FHA lenders and state financing agencies that allow the $8000 first time home buyer credit to be applied to the down payment or settlement costs at closing.

      At present there are no state or federal government programs that facilitate using the tax credit as the down payment with seller financing. A seller financed transaction still qualifies for the $8000 credit but the buyers have to claim on their federal tax return. However, there is a creative solution that motivated sellers might consider.

      When using owner financing the seller could allow the buyer a credit towards the down payment equal to the amount of the First-Time Home Buyer Tax Credit. The seller then carries back a seller financed second lien for that same amount. The due date for the second lien will be around April 15th of next year. When the buyer receives the tax credit they use the funds to payoff the seller financed second lien. The seller could also wrap the down payment credit into an owner financed first lien requiring a lump sum payment in addition to any monthly payments.

      There are of course risks with this approach. Should the buyer fail to use the First-Time Home Buyer Tax Credit to pay the owner financed down payment credit the seller might be forced to initiate foreclosure proceedings. A seller would also want to be certain the buyer qualifies for the full tax credit. A qualified tax professional and real estate attorney can help provide protection for the seller.

  21. Hello Stormy! The first step to using the $8,000 First Time Home Buyers Credit is to be certain your home purchase meets all the IRS qualifications. The next step is to decide how you want to finance the home (bank loan or seller financing).

    If you are working with a real estate agent they can help guide you through the process. If you are handling on your own, you can directly contact a local title company or real estate attorney to take care of the paperwork and closing.

    The final step will be claiming the credit on your tax return filing. The irs.gov site has quite a bit of information including frequently asked questions. You are smart to be thinking about this now as the credit currently applies to homes closed by December 1, 2009.

  22. I am trying to use the 8,000 dollar rebate for the purchase of the home that i am already in. The only problem is I don’t even know how to get started and neither does my landlord. I need help on how to get started!!!

  23. I clicked the link for the IRS website to see the article for owner financing question #9 posted by Ric Thom on July 31st, 2009. It went to the IRS website but it showed an error page saying “this page does not exist”. Did the IRS take the page down? Does owner financing still qualify for the tax credit? Thanks!

    • Hello Tamaysha! The same answer regarding seller financing qualifying for the First Time Home Buyers Tax Credit is still on the IRS website. They have moved some pages so sometimes the links don’t stay active. I double checked today and found it at this location: http://www.irs.gov/newsroom/article/0,,id=206291,00.html
      If for some reason you can’t reach the link just go to http://www.irs.gov and search for First-Time Homebuyer Credit Questions and Answers. It is the 15th question on that page.
      All the best,
      Tracy Z. Rewey

  24. My mortgage company is treating the home that I am trying to buy as a second home. Can it still qualify for the $8000 tax credit? My wife and children will live in it while I live in a rental in another state due to work obligations. How is the tax credit calculated?

    • Hello Peter! The best (and safest) way to answer that timely question is to take the answer straight from the IRS website. Here is one of the questions and answers from their First-Time Homebuyer internet pages:

      Q. Which home purchases qualify for the first-time homebuyer credit?

      A. Any home purchased as the taxpayer’s principal residence and located in the United States qualifies. You must buy the home after April 8, 2008, and before Dec. 1, 2009, to qualify for the credit. For a home that you construct, the purchase date is considered to be the first date you occupy the home.

      Taxpayers (including spouse, if married) who owned a principal residence at any time during the three years prior to the date of purchase are not eligible for the credit. This means that you can qualify for the credit if you (and your spouse, if married) have not owned a home in the three years prior to a purchase. If you make an eligible purchase in 2008, you claim the first-time homebuyer credit on your 2008 tax return. For an eligible purchase in 2009, you can choose to claim the credit on either your 2008 or 2009 income tax return.

      For more information visit http://www.irs.gov.

  25. Thanks Ric! Your comments are always well researched and provide great value to our blog readers.

  26. In reference to #9: I checked the IRS website http://www.irs.gov/newsroom/article/O,,id=206291,00.html, and this is what they said: “If the taxpayer obtains the benefits and burdens of ownership of a residence in a seller financing arrangement, than the taxpayer can claim the credit even though the seller retains legal title. Factors that indicate that a taxpayer has the benefits and burdents of ownership include;
    1. The right of possession, 2. The right to obtain legal title upon full payment of the purchase price, 3. The right to construct improvements, 4. The obligation to pay property taxes, 5. the risk of loss, 6. The responsibility to insure the property and 7. The duty to maintain the property. (New 7/2/09). So, the answer is yes, you can get a $8000 tax credit when you use seller financing.

    Write your senator and tell them to exempt seller financing from HR 1728 before the Senate restricts or makes it almost impossible to use seller financing.

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  1. […] criteria for taking the $8,000 tax credit.  For more details be sure to read the original post Using Owner Financing with the First Time Home Buyers Tax Credit. Filed Under: HeadlinesTagged: 8000 First Time Home Buyers Tax Credit, contract for deed, […]

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