I found this website yesterday, and have been looking through it to find out more about this credit, and it really has a lot of information available.
One of the most interesting things that I found was located at question #21 of the FAQs:
Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2008 tax return?
and the answer is:
Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the future home buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the down payment. Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.
Basically, all I have to do is adjust my W-4 to an insane exemption number, and I’ll get a portion of the money without having to wait on filing my taxes next year. This will give me a good jump-start (roughly $2,000-3,000) to apply to closing costs, down payment, moving, etc.
My current plan is to adjust my W-4, and take the excess out of my account, and store it in a savings account. This extra money won’t go against debt, but it won’t be spent, either.
What do you think? Would you take the exemptions and start building up a down payment? Or would you pay down debt? Or would you leave things as is, and just take the entire credit at tax time?