The First-Time Homebuyer Tax Credit of 2008 was introduced in response to the Great Recession to provide new homeowners with financial assistance in the form of an $8,000 refundable credit on their federal income tax returns for the years 2008, 2009, and 2010. It is now available in 2023, with qualified home buyers getting a tax credit up to 10% of their purchase price, up to a maximum of $15,000.
To qualify as a first-time home buyer, you must meet some requirements, such as being 18 years old or older, buying the home from someone other than a relative, purchasing a primary residence, not a second home or investment property, having modest income, having a fully funded emergency fund, and having an ideal down payment of 20%. Additionally, you must be prepared to pay private mortgage insurance (PMI). Finally, your mortgage payment should be no more than 25% of your monthly take-home pay on a 15-year mortgage.
The U.S. Department of Housing and Urban Development (HUD) offers loan and grant options to support and uplift communities, but they are not the best idea for first-time home buyers. The Mortgage Tax Credit Certificate (MCC) is a federal tax credit issued by state housing finance agencies, but it is based on funding availability and has income and sales price limits for buyers. First-time homebuyer loan programs, like FHA, USDA, and VA loans, can help a first-time buyer with a low down payment get a house, but they come with hefty fees and can cost thousands of extra dollars in the long run. When you’re ready to buy a home, stick with a 15-year fixed-rate conventional mortgage and find a tax professional who can help (Kamel, 2023).