First-Time Home Buyer Credit Still On For Vets
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While the tax credit for first-time home buyers and sellers largely ended in April, the credit actually continues for active-duty military personnel until April 30, 2011, something that could be important for VA loan borrowers and veteran sellers.
The $8,000 tax credit (along with its $6,500 companion credit for existing homeowners) spurred an uptick in sales and helped prop up the flailing housing market. Down to the wire, buyers scrambled to get under contract as the program’s April 30 deadline neared. The National Association of Realtors’ pending sales index rose 6 percent last month, beating the 5 percent figure estimated by economists in a Dow Jones survey.
In all, more than 2.5 million buyers took advantage of the program to join the ranks of American homeowners. Economists and housing industry experts are now bracing for the inevitable drop-off to follow.
“This is the last hurrah for the housing market for a while,” Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, told Bloomberg’s Businessweek. “There will be a temporary hangover that will last a few months. The recovery will be a slow process that will take a few years.”
While they might not constitute a full-blown “hurrah,” there’s still one group of prospective home buyers waiting to provide their own tax credit-fueled boost to the housing market: Military members.
Special Rule For Active-Duty Service Members
Active-duty service members who were serving outside the U.S. on extended duty while the tax credit program was going have an extra year to take advantage. Those who meet the requirements have until April 30, 2011, to purchase a home and until June 30, 2011, to close while utilizing one of the two tax credits.
Like their civilian counterparts, service members who qualify have to meet the program’s straightforward criteria, including:
- Individuals can’t have an annual income greater than $125,000; married couples who file taxes jointly cannot have an annual income greater than $225,000
- First-time home buyers (along with their spouses) cannot have been homeowners during the past three years
- The purchase price of the home cannot exceed $800,000
Service members may also qualify for the $6,500 seller’s tax credit. They have to have lived in the same residence for five of the previous eight years. Beyond that, all the requirements are the same.
These tax credits represent a uniquely powerful purchasing opportunity for military members, many of whom are eligible for a low-cost loan guaranteed by the Department of Veterans Affairs. VA loans come with no down payment or private mortgage insurance and have helped more than 18 million service members become homeowners since World War II.
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About the author: Chris Birk writes about real estate and the mortgage industry for a host of sites and publications, including Bigger Pockets, Mortgages Unzipped and Scotsman Guide. A former newspaper and magazine writer, he is also content director for a leading VA lender.
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