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Are you trying to figure out how to afford to buy a house?  Does an $8000 gift from the government sound like it might help? 

Are you interested in getting the first time home buyer tax credit to help you buy a home?  Are you wondering how you can use the first time home buyer tax credit to make buying a home more affordable?

Homer Buyer was feeling this way.  He was engaged and planned to buy a home for him and his fiancée to live in after their wedding.

Homer and his fiancée wanted to have children so they wanted to buy a house big enough to raise them.  They didn’t want to have to sell to upgrade their home in an uncertain economy.  They wanted to buy something that they could live with for a long time.

The problem was that they weren’t sure if they could afford the down payment for a house of that size.  Homer thought the first time home buyer tax credit sounded like a great way to help afford it.

When Homer got some more information on the tax credit, he was less hopeful. He found that he could not use the tax credit as part of the down payment. As a matter of fact, the deal had to close before he could apply for the tax credit.  How was this supposed to help him afford a home?
Unfortunately, Congress was not able to find a way to make the tax credit applicable as part or all of the down payment.  To do this would have meant the IRS would have to be involved in the closing process and this could seriously delay the closing process.

Homer found that he could get a loan for $8000 to be repaid when he received the tax credit.  Normally, lenders want to see that the down-payment money has been in your account for some time before they will make a loan. 

They don’t want you to take a cash advance on a credit card to make the down payment because that will affect your ability to repay the mortgage.  In fact lenders don’t like to see any big changes to your financial situation within the months preceding  a home purchase.

But with the $8000 tax credit pending, lenders are now willing to accept a short term loan for this amount as part of a seasoned down payment.  If you have friends of family that are willing to make such a loan, given that you will repay them once you receive the tax credit, this could be used for your down payment.

Another way that the tax credit can help make a home purchase more affordable is to pay for some expenses that can be put off for some time.  Examples of these are:

• A room that needs to be furnished.
• Cosmetic repairs.
• Moving expenses.

Some of these expenses may be put on a credit card and repaid when you receive the tax credit. 

The lawmakers were not able to make the tax credit any more helpful than this.  This may mean that you might have to look at a slightly less expensive house than what you could afford with the tax credit available as a down payment, but you probably shouldn’t be getting into a home purchase that is so close to being unaffordable in any case.

If you need help figuring out how to afford more, a good resource is Money Tree budget software.  It will walk you through setting up financial goals and expense tracking step by step.