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Time Winding Down for Service Members To Use $8,000 Tax Credit

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WOMEN IN COMBAT

The $8,000 tax credit program for first-time home buyers helped prop up the sagging real estate market in 2010.

While the landmark initiative finally expired last fall, there's still one group of Americans who can still capitalize on the opportunity: Active duty military members who were serving our nation abroad on extended duty.

But the clock is ticking.

Qualified service members have until April 30 to sign a sales contract and until June 30 to close on their home purchase in order to take advantage of the $8,000 tax credit for first-time buyers and the $6,500 credit for current homeowners.

To qualify, service members must have spent at least 90 days abroad between Jan. 1, 2009, and April 30, 2010. Otherwise, prospective borrowers must adhere to the same guidelines that governed the tax credit program for civilians.

Those requirements include:

-- First-time home buyers (or their spouses) cannot have owned a home in the last three years. Any prior history of homeownership outside that three-year window is fine.

-- Individual borrowers must have an annual income no greater than $125,000. Married couples who file their taxes jointly cannot have an annual income above $225,000.

-- A home purchase above $800,000 is not eligible for the tax credit.

The requirements for the $6,500 tax credit for current homeowners are essentially the same. Borrowers must have lived in their current home for five of the last eight years.

Service members can claim the tax credit no matter their loan financing option, including VA loans, which come with no down payment or private mortgage insurance.

With interest rates still hovering near record lows, this is a significant financial opportunity for scores of service members returning from Iraq and Afghanistan. The key is making sure you have the credit and income profile necessary to secure financing.

Service members without a credit score of at least 620 may struggle to land a loan.

This post originally appeared at VA Benefit Blog.