Do I Have to Sell My Home to Claim the Home Buyer Tax Credit?

[Nov 20, 2009.]

 

Recent tax law changes are allowing more people to qualify for the home buyer tax credit. The good news is if you plan get a mortgage loan to purchase a new home, you don't have to sell the old one to qualify for the tax credit, according to the Internal Revenue Service.

First-Time Home Buyers

Previously, only first-time homeowners could claim a tax credit of up to $8,000 on their tax returns. First-time home buyers can use the credit as a down payment on a mortgage. The money can also be used to pay mortgage loan closing and settlement costs, and to pay discount points to lower the mortgage interest rate.

Current Homeowners

Changes in the law now allow any homeowner who has lived in their home for at least five consecutive years to claim a tax credit of up to $6,500. Homeowners must have lived in the home as their primary residence. The $6,500 tax credits apply to homes purchased after Nov. 6, 2009.

If you're planning to get a mortgage to move from your current home, don't procrastinate. Home buyers must enter into a contract on a house by April 30, 2010, and close on the purchase by June 30, 2010, to get the tax credit. If you build a new home, the purchase date is considered to be the date you first occupy it.

Mortgage Loan for New Home

The expanded tax credit can allow long-time homeowners to purchase another home without selling the old one. Let's say a person needs to relocate for a job and can't sell her home in this troubled housing market. The homeowner may decide to go ahead and get a mortgage to purchase a new house, but keep the old one to rent out as an investment property.

She would be eligible to claim the tax credit of up to $6,500 as long as she meets all eligibility requirements, including having lived in her current home as a principal residence for five consecutive years during the eight-year period ending on the date the new home is purchased.

Getting a Mortgage in This Economy

Mortgage interest rates are still low, but many homeowners are going to have a tough time qualifying for  mortgage loans without selling their current homes. Even people who plan to sell their properties and move are having a tough time qualifying for mortgages.

But borrowers with a healthy income who want to buy a new home and keep their existing one as a vacation or investment property, should check to see they can qualify for mortgages. They can begin searching for free mortgage quotes here.

 

About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.