The recently passed housing bill is chock full of provisions aside from helping those facing foreclosure, from giving the IRS access to Americans' credit card purchases to assisting first-time homebuyers. The legislation is first and foremost considered a bailout bill, but the clause about first-time buyers certainly caught my attention and that of the National Association of Home Builders — they believe it will get buyers back into the housing market.
The government is offering a tax-credit up to $7,500 to qualified first time buyers purchasing homes on or after April 9, 2008, and before July 1, 2009. The money has to be repaid to the IRS over 15 years, but without interest. Personal finance columnist Michelle Singletary must have read my mind when she answered a question about whether or not the credit would be beneficial. Find out the questions she says first-time buyers should ask themselves before jumping on this money when you read more.
Michelle says to think of the tax credit as a 15 year interest-free loan and go from there, and reminds us that selling the house before the loan is paid off will trigger repayment of the entire amount. She recommends asking these questions when considering if you should take the tax credit.
- If someone knocked on your door and said, "I have $7,500 to lend you at zero percent interest, and you can pay me back over 15 years," would you take the money?
- If there are certain items you need, like a lawnmower or furniture, would you take out a 15 year loan (even at zero percent) to pay for them?
- Would you walk into a bank and take out a 15-year loan to pay down an affordable mortgage?