Christina Dunham's Random Real Estate Musings

What Would You Do with $8,000?

What if the government decided today that, instead of bailing out Wall Street, it was going to give every American $8,000? What would you do with the money?

For most Americans, paying off credit card debt would be a great way to use the free money. According to a Nielson Report released in April 2009, the average credit card debt per household in the US was $8,329 at the end of 2008. That money from the government would almost wipe out your debt completely. Imagine being completely debt free.

Healthcare is a big topic these days. According to the most current Census Bureau statistics, some 45.7 million Americans do not have health insurance. So, many Americans might choose to use their $8,000 to enroll their family in a healthcare program through their employer. The federal government tracks the average spending on health insurance for people with job-based coverage, and the most recent figures (from 2005!) indicate that the average individual's premiums were $3,991, while families spent an average of $10,728. Your $8,000 would go a long way in insuring your family.

Some Americans might choose to start a small business. Experts estimate that start-up costs for many new business ventures are between $10,000 to $15,000. With $8,000, a large portion of your initial investment would be covered.

If you really think about it, there are so many things you could do with $8,000. You could open a 529 college savings plan. You could take your family on an amazing once-in-a-lifetime vacation. You could open an IRA and save for retirement...

But what's the point in dreaming. The government's not giving away $8,000, right?

Wrong.

Right now, through November 30th of this year only, the government is giving qualifying first-time home buyers up to $8,000 for purchasing a home (or up to 10% of the purchase price). This is free money that you do not have to pay back. And here's the best part: if you qualify, you can get your money from the IRS this year, even if you've already filed your 2008 taxes.

There are certain income restrictions and rules for repayment. The new law does not affect people who purchased a home after April 8, 2008, and on or before December 31, 2008. For taxpayers who are claiming the credit on their 2008 tax returns, the maximum credit remains at 10 percent of the purchase price, up to $7,500, or $3,750 for married individuals filing separately. In addition, the credit for these 2008 purchases must be repaid in 15 equal installments over 15 years, beginning with the 2010 tax year.

With today's combination of lower home prices and lower interest rates, this temporary incentive from the government is really a great option for many Americans who act now to finally fulfill their dreams of owning a home.

Christina Dunham is a Mortgage Banker at Bay Equity, a commercial, residential and FHA Direct Lender. She may be reached at contact@christinadunham.com.