Use Your Homebuyer's Tax Credit to Help Pay Your Down Payment

It seems there is plenty of good news about the Homebuyer's Tax Credit. First, it has been extended to include properties closed on by June 30, 2010. It has also been expanded to include a credit for move up and repeat home-buyers, too.

The most interesting part, however, is that there are now a number of ways that you can use the Homebuyer's Tax Credit to help you with your down payment and/or closing costs. So, you do not have to wait until after you have purchased your home to benefit from the Homebuyer's Tax Credit. You can actually use your this credit to help purchase your home.

First, if you qualify for an FHA loan, as a first time home-buyer, you can buy your home with as little as 3.5% down. This is the lowest down payment available in today's real estate market.

Next, determine, with certainty, that you qualify for this credit. If you are certain that you qualify for it, then take care to have your withholding from your paycheck adjusted to withhold less tax. This should be up to the amount of your homebuyer's credit. This will give you a larger take-home pay every week. Save up the extra take-home pay for your down payment or closing costs.

You need to be careful with this process. In the event that you do not purchase a home or do not qualify for the Homebuyer's Tax Credit, you will owe extra money to the IRS at tax time. Also, don't forget to adjust your withholding back to their original amounts after you get your tax credit.

In the event that you do not qualify for an FHA loan, you will be using some other sort of financing. You can still change your withholding to get a bigger take home pay based on your Homebuyer's Tax Credit, but the required down payment figure will rise. You can still, however, help to fund the larger down payment with your reduced withholding or use that money for other fees and costs involved in buying your home, like closing costs.

There are also other ways to help fund your down payment, like second mortgages or additional programs and grants available through your state to help first time home-buyers with down payment monies. Check with your state's Housing Finance Agency (HFA) to find out more about help with your down payment.