California first-time home-buyer credit running low; New construction buyers have time

The CA Franchise Tax Board, who is responsible for administering the tax credits for first-time home-buyers and new construction buyers, estimates they have received approximately 17,860 applications as of yesterday, 6/22/2010. Those 17,860 applications account for 91% of the available credit for first-time home-buyers. The tax board is currently receiving around 2,500 applications per week for the first-time home-buyer credit and if that trend holds the credit is estimated to be completely allocated around the end of the month.

However, don’t lose hope and don’t panic! The tax board also admits that the estimated number is over-stated:

“The numbers are overstated as there will be duplicate, revised, and invalid applications included as we have not verified any of the applications. In addition, some purchases may be included twice if we have received both a reservation request and an application for the purchase.”

In reality, the credit will likely still be available for first-time home-buyers who close and apply in the first week or two of July, and maybe a little bit longer. The tax board is going to accept 28,000 applications for the credit, and at the current submission rate the tax board will stop accepting applications around the end of July. However there is no guarantee all applicants will receive they credit. The tax board will review the applications and allocate the credit to qualified applicants on a first come, first served basis. So if you’re a first-time buyer and you’re still looking for the right place you may not have enough time to find a home, close your transaction, and still benefit from the tax credit (unless you end up buying new construction – see below). It’s definitely down to the wire, but you should still apply because you never know (the application form is only 2 pages).

If you’re already in escrow on a property, don’t panic. Proceed to your closing date in an orderly, single-file line. Here are a few tips:

  • Fill out the application ahead of time, and fax it in to the number on the page linked above as soon as you close your escrow, but not before. Submissions prior to closing will not be processed.
  • Make sure you are using the 2010 form. You can find the application on the Tax Board’s website under “Forms and Publications.”
  • The tax board will use the time stamp from the faxed application to determine priority order and it literally may come down to missing it by minutes, so be prompt once you’ve closed. At 2,500 applications / week, the tax board is receiving an application every minute if you assume most everything comes in during business hours.

One other thing to note, if you’re trying to get the federal tax credit as well the closing deadline is still June 30th, so make sure you, your lender, and your agent are in constant communication to carry the ball over the goal line.

If you’re hunting for new construction, whether you’re a first-timer or not, the new construction credit is only 41% allocated and will likely last until the end of September at the current application rate. Watch the tax board website for updates. They will post allocation updates every Friday morning so you can see how things are progressing and will post another update when they are no longer taking applications for the two credits.

Happy hunting.