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Homebuying and selling resources on FrontDoor:

• FrontDoor Unlocked Vlog
• Foreclosure Buying Guide
• Home Seller’s Guide
• Pricing Guide
• Home Finance Guide

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How it used to work: A first-time buyer would complete the homebuying process, file their tax return with the IRS in January and the credit would be applied to the taxes owed. If you don’t owe anything, you get the full credit.

How it works now: A new federal program will let you use the tax credit immediately — during closing. This is an even sweeter carrot, because the down payment and closing costs are typically the biggest obstacles to overcome when buying a home.

In today’s uncertain economy, people would rather hold on to their cash. With lenders charging higher fees, this program lightens the burden of closing costs. Average fees for a $200,000 mortgage in 2008 with a 20 percent down payment were $3,118, according to Bankrate.

The catch or two…: How much your credit will be depends on your income, tax-filing status and home price. You have to get a Federal Housing Administration (FHA) mortgage and put down at least 3.5 percent of the purchase price. Of course it doesn’t hurt to use the credit to boost your down payment, which could help lower your interest rate.

Also it’s important to note that like conventional loans that require private mortgage insurance (PMI) when the down payment is less than 20 percent, FHA loans require what’s called a mortgage insurance premium (MIP). With the FHA loan, you pay an up-front premium (1.75 percent of the loan) which is financed into the mortgage and a monthly premium for at least the first five years (0.50 percent to 0.55 percent).

The bottom line: Any time you can get money upfront as opposed to waiting for it, it’s a good thing. Too bad I still own a condo in Knoxville, or else I’d be all over this.

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