How does the American Housing Rescue and Foreclosure Prevention Act of 2008 affect first-time home buyers?

By Ayton MacEachern AAA
A:

The passage of the American Housing Rescue and Foreclosure Prevention Act of 2008 at the end of July 2008 made about $15 billion of tax incentives available to Americans impacted by the mortgage crisis. (See our feature Subprime Mortgages for more on the subprime meltdown.)

The largest implication of this act for first time home buyers is the availability of a refundable tax credit. The tax credit, which functions as an interest-free loan, provides first-time home buyers with up to $7,500 to purchase a residence between April 9, 2008, and July 1, 2009; this amount must be paid back over 15 years in equal installments. In order to take advantage of this provision, home buyers must claim the credit on their 2008 or 2009 tax returns.

However, there are a few restrictions on this credit that must be considered. The credit begins to phase out at the $75,000 income level for single tax filers and at $150,000 for joint tax filers. If two single tax filers purchase a home jointly, the tax credit is split between them.

As lending restrictions tightened after the subprime mortgage meltdown, many buyers were pushed out of the market. This provision in the act is intended to stimulate purchases in the real estate market. By taking advantage of this credit, first-time home buyers will be able to make a larger down payment.

Follow our step-by-step First-Time Home-buyer Guide to help make your homeownership dreams a reality.

RELATED FAQS

  1. What do mortgage lenders use the securitization food chain?

    Read about the origins of Chris Ferguson's securitization food chain, and find out how mortgage lenders could package and ...
  2. Do mortgage escrow accounts earn interest?

    Paying down monthly mortgage escrow accounts? Will you receive any interest on this payment? If you are, should you put more ...
  3. What role did securitization play in the U.S. subprime mortgage crisis?

    Learn how the securitization of sub-prime mortgages into asset-backed securities fueled the real estate market crash in 2 ...
  4. How often is interest compounded?

    Understand what compound interest is and how the compounding of interest applies to the benefit of investors or creditors, ...
RELATED TERMS
  1. Total Annual Loan Cost (TALC)

    The projected total cost that a reverse mortgage holder should ...
  2. Commercial Real Estate Loan

    definition of a commercial real estate loan
  3. Working Tax Credit (WTC)

    A tax credit offered to low-income individuals working in the ...
  4. Realtor Property Resource (RPR)

    A National Association of Realtors member benefit providing realtors ...
  5. Housing Choice Voucher Program

    The Housing Choice Voucher Program helps families with very low ...
  6. Forbearance

    A temporary postponement of mortgage payments.

You May Also Like

Related Articles
  1. Stock Analysis

    Can American Capital Agency Maintain ...

  2. Stock Analysis

    How Two Harbors' Derivatives Work?

  3. Stock Analysis

    How Chimera Investment Bear The Brunt ...

  4. Stock Analysis

    How Are Interest Rates Affecting Annaly ...

  5. Investing

    Ready To Invest In Financial Leverage ...

Trading Center