Mar

19

New First Time Home Buyer Tax Credit

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If you are looking for a house buy, this is your time. The new first time first time home buyer credit is a significant boost to your wealth creation. But you have to take advantage of it this year.

The real economic question is, Why buy now?

According to the National Association of Realtors, housing prices have dropped between 7 to 22% from 2007 values, depending on where in the country you live. The coasts have experienced greater losses. On a median priced home of $200,000 that’s $30,000 on average of potential equity.

Believe me, with all the fiat money the Fed is pumping into the 2009 economy we WILL see inflation. As soon as the economy starts to pick up inflation will eat any of the real growth. The government is doing everything it can to create an ever bigger crises requiring even more legislative action to take control of private industry. Watch out for benevolence. It will cost you dearly.

Frankly the houses won’t be worth any more but the dollar will be worth between 3 and 7% less next year than it is worth now. Once again on a median priced home that’s about $10,000 right there. So if you don’t buy now you will get five percent less for your money in the near future (even next year). Put on top of that the lowest interest rates we have seen in thirty years and you have yourself a real buyers market.

The Government has one-upped W’s $7500 tax write down by replacing it with a one time real $8000 tax credit. I call it a real tax credit because this is the first time I remember the government actually paying you to buy a home.

Here are the details.

  • The first time home buyers tax credit applies to all buyers but it is only a real keeper (if the home is not sold within three years) if you are buying for the first time. All others have to pay it back gradually. So for those of you making less than $75k as a single or $150k as a couple you’re in. You will have to complete the purchase and move in this year to qualify.
  • Buyers who bought last year still qualify for the $7500 home owner credit of last year.
  • The $8000 first time home owner’s credit is a real tax credit. This is not only a subtraction from any taxes payable on April 15th of 2010 but if your tax payable total is somehow less than $8000 the government will actually send you a check for the difference.
  • As far as home values and the credit goes, you will get the lesser of these two: either 10% of the home value or $8000.

So let’s do a real example.
You’re buying a home for $170,000 and putting down $5000 so your mortgage payment at 5% interest is $886. The approximate income you need to be making without other debts is about $3000 per month. That’s $36, 000 per year. Your federal tax bracket is 28% so taxes owed is 10,080.

Let’s say you have two children and your wife is a full time homemaker. Your credits for the children are $1000. This does not include the standard deductions which are subtracted from your gross income. But just your credit puts you at 8,080 in taxes due. So if you buy that house you pay no taxes or get all you paid in 2009 back in 2010.

That would certainly buy some new drapes. In reality, you’ll find that after all of your deductions the government will actually be paying you to buy a house.

So if you are just considering your options I would say do all you can to make that purchase this year. You’ll get the lowest prices, beat inflation, get a great interest rate and get that new first time first time home buyer credit.

Go buy now!
If you are one of our members you also get a great deal on a house buy.

Mar

17

Downpayment Assistance For New Buyers

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When you finally find the home of your dreams you certainly don’t want to loose it to another offer because you don’t have your financing lined up.

Buyers going in for the first time often don’t recognize the distinction between being pre-qualified and pre-approved. Mortgage lenders are notorious for saying anything to keep you from looking elsewhere for a mortgage. In that case bring pre-qualified is worth little more than the paper upon which it is written. All the broker has collected is preliminary information – certainly not enough for an underwriter to review.

Being pre-approved is what is necessary to actually succeed at getting an offer accepted. A pre-approval should be a written commitment to finance up to a certain point. When you accompany an offer with such a document the seller can take your offer seriously, and frankly, should only consider a contingency with a pre-approval letter. Nevertheless many in this climate will receive for consideration just about any offer.

I have found that non-contingent offers based on a cash offer are always the ones that get the best price point. Seller financing and private money loans can allow this to happen if the selling price is low enough. I this market, with so many foreclosures this is not uncommon.

A distressed property can be available for 65 cents on the dollar and with private money an investor can acquire properties with built-in equity (after a little fix-up).

For many buyers it’s the down payment that is the problem so here are some ideas you might consider to get the greenbacks required.

VA LOANS

Veterans who qualify can also obtain VA loans that require no down payment. Veterans and active duty military servicemen and servicewomen can get these loans if they can qualify. These types of loans are available to qualifying veterans and active duty military servicemen and servicewomen. VA loans feature:

  • Fixed, below market interest rates
  • Low fixed payments
  • No down payments

VA VENDEE LOANS

Sometimes a buyer can obtain a down payment free VA loan without being a veteran. This can happen on a foreclosed home that has a VA loan on it. This could be a great option even for investors. . The benefits of VA Vendee loans include:

  • Low closing costs
  • No down payments

FHA PLUS LOANS

FHA plus loans require financing of the down payment in the form of another loan granted alongside the mortgage loan. FHA plus loans are ideal for buyers who are experiencing some financial hardship but have demonstrated the ability to make a mortgage payment. The good points about FHA plus loans are:

  • Assisted down payments
  • Easy qualification requirements
  • Closing costs are financed

All of these programs only work for first time home buyers. They were created to give buyers who might otherwise be unable to qualify for other traditional loan programs an opportunity to buy a home. Home ownership is important to the economy so our government has made it much easier for people to achieve the dream of home ownership by creating these down payment assistance programs.

You should also know that the government has tried to stimulate first time home buyers to purchase by providing a one-time tax break of $7,500. This is only available this year so get busy.