As part of the economic stimulus bill that was signed by the president early this month, a $7500 "tax credit" is available to first time home buyers who purchase a new home between April 9, 2008 and July 1, 2009. This is not a rebate or a tax deduction, but rather an interest free loan that must be paid back over a period of 15 years. Interesting choice of words, I must say. However, an interest free loan payable over 15 years is better than none at all. Its about $4000 of interest saved if you were to get a 15 year loan for $7500 at 6.5%.
If you decide to purchase a new home, be educated about why you should still consider working with an agent to look out for you best interest instead of going to a builder directly. Just as the "tax credit" is not really a "tax credit," the wording does matter, and having some one look out for your best interest does matter. Be sure to read the article I have written titled "Would I get a better deal from a builder without an agent since they don't have to pay the agent?"Another fallout from this bill is that the Down Payment Assistance (DPA) programs will end on the 1st of October, 2008. DPAs were a way of providing 100% financing by the seller contributing towards the required down payment. The FHA down payment requirement has also been increased to 3.5% from the previous 3%.
If you want to maximize the effects of this, i.e. buy a new home with a Zero down payment AND get a $7500 tax credit (aka, interest free loan payable over 15 years), the time is running out since the DPA is being eliminated as of the 1st of October 2008.
A new website has also been set up by the National Association of Home Builders. Read more about the tax implications of the $7500 tax credit at Forbes.com.