California has initiated its own homebuyer tax credit. The credit is for 5 percent of the purchase price, with a maximum credit of $10,000. That’s a dollar-for-dollar reduction against income-tax payments.

Homebuyers must claim the tax credit in equal installments over three consecutive years, beginning with the year of purchase. Purchasers are required to live in the home as their primary residence for two years or forfeit the credit.

To be eligible, first-time homebuyers can purchase a new or existing home. Repeat or move-up homebuyers are eligible for the credit only if they buy a new home.

Buyers of existing homes must close escrow between May 1 and Dec. 31, 2010. The credit is available to buyers of new homes who sign purchase agreements between May 1 and Dec. 31, 2010, and close escrow by Aug. 1, 2011.

Separate from the California tax credit is the federal tax credit, which will expire soon.

Those who want to take advantage of the tax credit must act fast. The credit is available to buyers who sign purchase agreements on a new or existing primary residence home between Dec. 1, 2009, and April 30, 2010. Buyers have until June 30 to close the mortgage loan on their new home.

— Craig Greene is a senior loan officer at Prospect Mortgage, 3916 State St., Suite 100, Santa Barbara 93105. He can be reached at or 805.898.4211.