What you need to know about homebuyer credit

The extended home buyer tax credit program that took effect Nov. 7 expands the popular credit to current homeowners - just not all of them and not as much as for first-time buyers.

Following are answers to some frequently asked questions about the federal program:

Q: How much is the credit?

A: The maximum allowable credit for first-time homeowners is $8,000, and the maximum allowable credit for current homeowners is $6,500. Single buyers with incomes up to $125,000 and married couples with incomes up to $225,000 may receive the maximum tax credit. The credit decreases for single buyers with incomes between $125,000 and $145,000, and the credit diminishes for married buyers with combined incomes between $225,000 and $245,000. Single homeowners earning more than $145,000 and married couples earning more than $245,000 are not eligible for a credit, period.

Q: Who qualifies?

A: First-time home buyers who buy between Nov. 7, 2009, and April 30, 2010, and current homeowners buying a home during the same time period who have used the home being sold or vacated as their principal residence for five consecutive years within the past eight years. To qualify as a first-time homebuyer, the purchaser or spouse of the purchaser may not have owned a residence in the three years before the purchase.

Q: Which properties are eligible?

A: Primary residences, including single-family homes, condos, town homes, co-ops, modular and manufactured homes. The credit may be awarded only on homes bought for $800,000 or less.

Q: What if the sale closes after April 30, 2010?

A: Under the extended homebuyer tax credit, the buyer will have until July 1, 2010, to close as long as he or she has a written, binding contract to purchase in effect on April 30.

Q: Could the buyer get stuck repaying the credit?

A: Not if the buyer occupies the home for three years or more. If the property is sold during the first three years, the full amount of the credit will be recouped on the sale.

Q: What if you buy a multifamily dwelling that you plan to use as your residence?

A: The credit applies to homes with up to four units, as long as the homebuyer uses one unit as a primary residence. The buyer could live in a unit and rent the others.

Q: What if two unmarried individuals buy a home together and only one qualifies for the credit based on income or past homeownership status?

A: The individual who qualifies for the credit can still claim the full credit. The credit even applies if the buyer has co-signers on the mortgage. In the case of married couples, both spouses must qualify.

Source: National Association of Realtors, Certified Mortgage Planning Specialist Institute