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It is the dream of every individual to own their own home. And with the deadline for the first time home buyer tax credit coming up at the end of next month, there has never been a better time to buy. In case you are not familiar with the program, the gist of it is that you can get a tax credit or grant of up to ,000 from the federal government if you enter into a binding agreement by April 30th. This is money you do not have to repay unless the home you buy stops being your primary residence within the first three years following your purchase. (There are some exceptions to this, however). On top of that, the government will even pay a portion of your down payment. And as you well know, mortgage rates have been slashed by a couple of percentage points.

The first question you must be asking yourself is how one qualifies for this lucrative benefit. Well, the first requirement is that you must meet the definition of a “first time home buyer” as per the current legislation. The really interesting thing to note here is that this definition is met so long as you and your spouse (if applicable) have not purchased a home as your primary residence in the three years preceding your current purchase. This does not even have to be the first home you have ever purchased. Regrettably, if either of you have then neither of you may claim the credit. Another key phrase to note here is “primary residence”. This suggests that you are still eligible for the credit if, for instance, you bought a vacation home or summer rental. The type of home purchased (e.g. townhouse, condo, houseboat, etc) is also irrelevant. The other side of this is that you are not allowed to claim the credit for a property that is not your primary residence.

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The housing crisis has virtually brought the housing market to a standstill. Houses are now worth half the price, they were three years ago. Even with the low prices, the recession was so crippling to the economy, that people still would not buy these homes. Prospective home buyers were also in fear that they may lose their jobs, and would not want to commit themselves based on an uncertain future. Banks have frozen lending, and mortgage funding has all but dried up. Thousands of homes went into foreclosure, and many people filed bankruptcy to save their homes. The crisis is so severe, that many real estate

The Banks and mortgage companies have thousand of unpaid mortgages on their books, and many homes that were foreclosed on, in their inventory, that they either have to sell at a loss, or keep the houses until the value is closer to the balances on the mortgage. Even homeowners find themselves in an upside down position. Their homes are valued much less than their mortgages. The housing crisis is at the heart of the recession, and the near collapse of the banking sector. The government as a part of the stimulus package, tried to help the housing industry by offering help to first time home buyers.

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If you are currently looking to buy your first home or the first one in three years, you have likely heard of the federal government’s first time home buyer credit which can award you with 10% percent (up to ,000) of the purchase price of your home.  If you meet the regulatory definition of a first time home buyer, fall within the specified income limits, and are not otherwise disqualified from receiving the credit you are likely wondering how to go about claiming it.  This is what I will describe in this article.

Claiming the credit is a relatively straightforward process but it is important to follow all the steps carefully to avoid making silly mistakes and filing for it in a timely fashion.  The first thing you should bear in mind is that you cannot claim the credit for an intended purchase at some future point in time.  The credit can only be claimed for completed purchases and you will need to submit a copy of your HUD-1 settlement form as proof of the completed transaction.

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