Fresh from hoisting up the banking and automobile sectors, a newly muscular Uncle Sam is now turning his attention to putting the skids on the real estate meltdown. The Obama Administration earlier this year rolled out two major housing initiatives that combine one part stimulation with one part bailout. The stimulus portion awards an $8,000 tax credit to first-time home-buyers, aimed at creating demand that will stabilize the housing market. This is especially beneficial to condominiums, which have become default starter homes for many buyers.
The bailout portion allows some homeowners with mortgages the option of either refinancing at a much better interest rate, or having their mortgage payment modified down to 31 percent of their gross income. The move will help condominiums that are struggling to replace lost income when homeowners in financial troublestop paying their condo fees.
$8,000 in Real Money
The $8,000 tax credit is available to U.S. residents making less than $75,000 a year ($150,000 for couples) who purchase a house, condominium or co-op between January 1 and December 1, 2009.
The home must be a primary residence, be located in the U.S., and can’t be a inheritance, gift or sale from a “related person.” The credit is also limited to $8,000 or 10 percent of thehome’s purchase price, whichever is less. For example, a house purchased for $65,000 would only generate a $6,500 credit.
For 2009 homebuyers, the credit is much more valuable that a mere tax deduction. Unlike a deduction, a credit reduces federal tax liability at a 100 percent rate and will return cold, hard cash to anyone owing less than $8,000.