Here are some of the most frequently asked questions on the changes to the Homebuyer Tax Credit
Question: Existing homeowner credit: Must the new house cost more than the old house?
Answer: No. Thus, for example, individuals who move from a high cost area to a lower cost
area who meet all eligibility requirements will qualify for the $6500 credit.
Question: I am an existing homeowner. On October 25, 2009, I signed a contract to
purchase a new home. I have lived in my current home for more than 5 consecutive years
and am within the new income limits. I will go to settlement on November 20. If President
Obama has signed the bill by the time I go to settlement, will I qualify for the new $6500
Answer: Yes. The existing homeowner credit goes into effect for purchases after the date of
enactment (when the bill is signed). There is no reference to the date of contract for the new
credit. The provision looks solely to the date of purchase, which is generally the date of
Question: I am a firsttime homebuyer but was not within the prior income limits at the time
I entered into my contract to purchase on October 30, 2009. I will be covered, however, by
the new income limits. If the new rules have been signed into law by the time I go to
settlement, will I be eligible for a credit?
Answer: Yes. The new income limitations go into effect as soon as the President has signed the
bill. The income limit and other eligibility rules will look to your status as of the date of purchase,
which is the settlement date. So if the new rules have been signed when you go to settlement,
you should be eligible for the credit (or a portion of the credit if you're within the phase out range).
Question: I am an eligible existing homeowner. I have a fair amount of equity in my home.
I have found a home with a nonnegotiable price of $825,000. Will I be able to use any of
the $6500 tax credit?
Answer: No. The $800,000 cap on the cost of the purchased home is firm at $800,000. Any
amount above $800,000 makes the home ineligible for any portion of the credit. The $800,000
is an absolute ceiling.
Question: I owned my home for 10 years, but sold it two years ago year and have been
renting since. If I purchase a home, will I be eligible for the $6500 tax credit if I meet all
the other eligibility tests?
Answer: Yes. Because you lived in the home for more than 5 consecutive years of the previous
8, you will qualify for the $6500 credit. For example, Say John and his wife bought a home in
2000 and lived there until 2008 when he got a divorce. Whether John has been renting or
bought in the interim, he WOULD INDEED be eligible for the credit because he owned a home
and occupied it as his principal residence for 5 consecutive years out of the last 8 years. The
keyword here is "consecutive." As long as he lived in that house for 5 years straight what he
did since 3 years doesn't impact eligibility.
Question: I am an eligible firsttime homebuyer. I entered into a contract to purchase on
November 1, 2009. Do I have to go to closing before December 1? How does the extension
date affect me?
Answer: You do not have to close before December 1. Once the legislation has been signed, it
will be as if the Nov 30 date had never existed. Therefore, so long as the contract settles before
April 30 (or July 1, worst case), the purchaser will be eligible for the credit.