First time purchasers of a principal residence are eligible for an interest free loan from the IRS of up to $7,500.
Selling agents need to advise their buyers that this IRS loan is a refund of taxes the buyer has already paid, and is not available until after he has closed escrow on the purchase of a home. The loan must then be repaid to the IRS in equal annual installments over a 15 year period. Since it is a government loan, funded as a tax credit, it is policed by the IRS as a recourse loan which can not be avoided when filing tax returns.
In California, purchase-assist loans on single family residences are never recourse, and lenders can never enforce collection; they can only take the property in exchange for cancellation of the debt. Be forewarned, the IRS is not bound by such enforcement restrictions on this modest downpayment loan!
The credit discussed in this article implements HR 3221, a homebuyer’s act which first tuesday explores in greater depth in HR 3221: The Unfortunate Housing Act of 2008.