Get the Most Out of Your Homebuyer Credit

California also enacted its own one-time home buying credit for newly built homes purchased between Feb. 28 and March 1, 2010. The nonrefundable credit, which is for all buyers, not just first timers, is equal to 5 percent of the purchase price up to $10,000. It can be claimed over a three-year period. The property must be a single-family residence, the principal residence and eligible for the property tax homeowners exception.

A California resident can take both the federal and state tax, according to Kathleen Thies, a state tax analyst at CCH Inc. However, only $100 million has been put aside for the state credit and that money is expected to run out this month or next. And there are no plans to add more funding to the program.

"It's on a first-come, first-serve basis," Thies says.

ADVANCE CREDIT: Last month, the FHA said its borrowers can receive advances on the $8,000 first-time homebuyer tax credit from lenders, so they don't have to wait to get the money next year from the Internal Revenue Service.

Borrowers will still have to come up with the FHA's required 3.5 percent down payment, but the advance from the tax credit can be applied toward closing costs, fees or to increase the down payment.

John W. Roth, a senior tax analyst at CCH, believes some lenders won't participate. The process involves more work for lenders, but lenders can only charge an additional 2.5 percent fee for that.

"How many qualified FHA lenders will offer this option to their borrowers will be interesting to see," he said.

Roth advises homebuyers to wait and receive the money in next year's 2009 tax return.

Said Roth: "There's always those initial expenses when you move in that are more than you expect."