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Time Winding Down for First-Time Military Borrowers To Get Tax Credits

The government’s landmark tax credit program for first-time home buyers is starting to drift back in focus again as tax day approaches.

The unique $8,000 credit for new buyers and $6,500 credit for existing homeowners helped inject stability into the slumping housing market during 2010.

Consumers and some industry observers have pushed for a renewal of the program to prop up the slow-moving economy. While that doesn’t seem likely, the surprising reality is there’s one segment of the public that can still capitalize on the benefits: those who have been serving our country abroad.

Qualified service members who have been on extended duty have until April 30 to ink a purchase agreement and until the end of June to close on the home. Service members must have spent at least 90 days abroad anytime from Jan. 1, 2009, to April 30, 2010.

Beyond that, qualified service members have to meet the same basic requirements as their civilian counterparts. Among those major guidelines:

  • First-time buyers and their spouses have to be exactly that — first timers. To meet the definition, the borrower cannot have owned a home in the last three years.
  • Individuals cannot have an annual income greater than $125,000. Married couples cannot have a joint annual income greater than $225,000.
  • The purchase price of the home cannot exceed $800,000, which is certainly plausible, even with a VA loan, in some of the nation’s more high-cost areas

For the $6,500 tax credit, existing homeowners basically have to meet the same criteria. They also must have lived in their current home for five of the last eight years.

The tax credit can be applied no matter the loan product, be it VA, conventional or FHA. But a VA loan will often represent the simplest, cheapest and most effective path to homeownership for military borrowers.

Military borrowers across the board will likely need a credit score of at least 620 in order to secure financing.

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About the author: Chris Birk writes about real estate and the mortgage industry for a host of sites and publications, from Lenderama and Bigger Pockets to the Huffington Post and Motley Fool. A former newspaper and magazine writer, he is also content director for a leading VA lender. Follow him on Google+.

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