April 13, 2010 - Interest in the federal home buyer tax credit surged in the first three months of 2010, with the FederalHousingTaxCredit.com Web site reaching a milestone 10 million visits. Spurred by a sense of urgency as the credit’s April 30 expiration date approached, the site logged about a million visits each month in January, February and March. The National Association of Home Builders (NAHB) created the site in July 2008.

“FederalHousingTaxCredit.com provides authoritative, unbiased information about the home buyer tax credits and has proven to be a valuable resource for consumers, members of the housing industry and others,” said NAHB Chairman Bob Jones, a builder and developer in Bloomfield Hills, Mich. “NAHB went live with the site the same day the credit was signed into law in 2008, and it quickly became the Internet’s premier source of information about the credit.”

The $8,000 first-time home buyer credit and the $6,500 repeat buyer credit will expire on April 30. However, if buyers sign a sales contract by April 30, the IRS gives them an additional two months—until June 30, 2010—to close the sale of the home.

The site has recently been updated with a new section on the special rules that apply to the military, the foreign service and members of the intelligence community. For qualified service members who are ordered on a period of official extended duty, the dates are extended for one year, through April 30, 2011.

“Home buyers need to remember, that even though the tax credit is about to expire, conditions remain ideal to buy a home,” said Jones. “There are plenty of existing homes on the market, interest rates are at near-record lows, and prices are very competitive.”

Source: NAHB.org, National Association of Home Builders Website, www.nahb.org

To be able to get the most benefit from the tax credit program, here are some key points for prospective home buyers should be aware of when considering a home purchase.

1. Up to $8,000 of tax credit is available for first-time home buyers purchasing on January 1, 2009 up to April 30, 2010. Sales contract must be signed by April 30, 2010 and home purchase must be completed by June 30, 2010 to qualify.

2. Up to $6,500 of tax credit is available for repeat home buyers who have owned a home for five consecutive years out of the prior eight years. The repeat home buyer tax credit applies to houses sold after November 6, 2009 up to April 30, 2010. Sales contract must be signed by April 30, 2010 and home purchase must be completed by June 30, 2010 to qualify.

3. $125,000 for individuals and $225,000 for married couples filing jointly income limits apply to all sales occurring after Nov. 6, 2009.

4. Homes priced above $800,000 are not eligible for either the first-time home buyer tax credit or the repeat home buyer tax credit.

5. Expanded tax credit benefits apply to members of the military, the foreign service and the intelligence community.

6. Home purchases in 2010 may be claimed on an amended 2009 income tax return.

7. Claimed dependents by a taxpayer or who are under age 18 do not qualify for a tax credit.

8. Home purchases from relatives of the taxpayer or the taxpayer’s spouse do not qualify for the tax credit where IRS defines relatives as ancestors (parent, grandparent, etc.), lineal descendants (child, grandchildren, etc.) and spouses.

9. Married couples whom either of the spouse has previously owned a home are not eligible to claim the first-time home buyer tax credit but would qualify for the repeat home buyer tax credit.

10. Neither the first-time home buyer tax credit nor the repeat home buyer tax credit has to be repaid unless the home is sold or ceases to be used as the buyer’s principal residence within three years after the initial purchase.

11. HUD-1 settlement statement and accomplished IRS Form 5405 must be submitted to claim either the first-time home buyer tax credit or the repeat home buyer tax credit

First-time home buyers reached the highest market share on record during the past year, accounting for a record 47 percent of US home sales between July 2008 and July thius year, up from 41 percent in the prior year period, according to the latest consumer survey of home buyers and sellers according to a study conducted by the National Association of Realtors.

The 2009 National Association of Realtors® Profile of Home Buyers and Sellers is the latest in a series of large national NAR surveys evaluating demographics, preferences, marketing and experiences of recent home buyers and sellers. Among national surveys, NAR’s Profile of Home Buyers and Sellers is unprecedented in size and scope.

The annual survey was very detailed that it also covers from how buyers came up with down payments to how long it took sellers to unload their homes. The latest survey results covered the answers of 9,000 respondents, the trade association said.

“Tax incentives, record high affordability conditions and a pent-up demand brought a record share of first-time home buyers into the market,” said Paul Bishop, NAR vice president of research. “These buyers are critical to housing and a general economic recovery because the market always heals from the bottom up – they absorb inventory, free existing owners to make a trade and stimulate related goods and services.”

"Tax incentives, record high affordability conditions and a pent-up demand brought a record share of first-time home buyers into the market," Bishop added.

Home sales and prices have shown some signs of stabilizing this year, and the survey results affirm the market continued to favor buyers, particularly first-timers.

The profile shows that the median age of first-time buyers was 30 and the median income was $61,600. The typical first-time buyer purchased a home costing $156,000, down from $165,000 in the 2008 study, and plans to stay in that home for 10 years.

Fifty-five percent of entry level buyers reported they financed their purchase with an FHA loan, while another 8 percent used the VA loan program.

First-time buyers who made a downpayment used a variety of sources: 61 percent used savings and 22 percent received a gift from a friend or relative, typically from their parents. Six percent received a loan from a relative or friend, 6 percent tapped into a 401(k) fund, and 6 percent sold stocks or bonds. Ninety-six percent chose a fixed-rate mortgage.

First-time buyers often make financial sacrifices to purchase a home: 39 percent cut spending on luxury items, 38 percent cut back on entertainment and 30 percent cut spending on clothes. Only 12 percent said financing their first home was more difficult than expected, but 13 percent of successful buyers said they had experienced a purchase agreement that was canceled, terminated or fell through; and 8 percent had been rejected by a lender.

The typical repeat buyer was 48 years old, earned $88,100, purchased a home costing $224,500 and plans to stay in that home for 12 years.

The median downpayment of all home buyers was 8 percent, and the number purchasing with no money down fell from 23 percent in 2008 to 15 percent in the current survey; 8 percent of buyers paid all cash for their home.