"Why the $8,000 First Time Home Buyer Tax Credit Helps ALL Home Owners

"Why the $8,000 First Time Home Buyer Tax Credit Helps ALL Home Owners"

By Brent Sute

Most Americans are not happy about the current state of affairs in our economy OR the fact that our government is getting bigger and bigger. The fact that our Federal government is having to basically print money and take large stakes in the American companies to prevent our economy from falling deeper into trouble would have been unimaginable only a couple of years ago. However, the $8,000 tax credit for first time home buyers is a positive step to restoring our beleaguered housing market and will hopefully spark our economy from deep recession.

Housing led our economy into the current funk and it will help lead the economy out of recession. Even though the $8,000 tax credit is only available for consumers buying their first home (or consumers who have not owned a home in the past 3 years), all home buyers and other consumers will benefit. The current excessive inventory of houses will be eased by the fact new buyers are coming on to the market. Also, current home owners who would like to move to a larger home, or simply have to move because of relocation, now have more buyers that are interested in purchasing their home. Also, many of the foreclosures that are contributing to the excessive inventory in most markets are well suited for first time home buyers who will be receiving the tax credit.

Furthermore, the $8,000 tax credit is available to home owners once they buy a home. Recipients are not allowed to use the $8,000 towards their minimum contribution of 3.5% on a FHA loan. Therefore, a couple of weeks after closing consumers now have the much needed funds to go out and buy furniture, lawn mowers, carpet, and other accessories for their new home. This is absolutely a good thing for local businesses, home improvement centers, and people who offer repair and renovation services.

While the $8,000 is great for improving a newly purchased home, I am advising most of my clients to save a good portion of the money for cash reserves and to pay off high interest credit card debt. This approach will create more healthy financial households which lead in turn to a long term healthier group of consumers.

We have a long way to go before our economy fully recovers from the current down turn. However, the $8,000 tax credit is one thing the government is doing right to help the American economic situation.