Obama’s First Time Home Buyers Tax Credit can be a great way to help make a new home affordable, while taking advantage of historically low home prices and interest rates.
The First Time Home Buyers Tax Credit is available for up to 10% of the homes purchase price or $8,000, whichever is greater. This tax credit is different from previous tax breaks for new home buyers in that it does not need to be repaid. Other tax credits for new home buyers, like the 2008 tax credit were simply no interest loans offered by the federal government. This tax credit, on the other hand, is provided to the homeowner and does not need to be repaid as long as the homeowner lives in the new home for at least three years.
This tax credit, which is part of the American Recovery and Reinvestment Act of 2009, is a powerful tool that can be used to fix up the home, pay down the mortgage, or help out with bills. Since it does not need to be repaid, it can be a great way to increase equity in a home.
It is also not necessary to owe anything in taxes to receive the tax credit. This is because this is a tax credit and not a tax deduction, the latter of which would only count towards the taxes.
This first time buyers tax credit is a great tool for those who wish to purchase a new home. It can be used on almost any type of home, including manufactured homes, mobile homes, condominiums, town homes, traditional single family homes, and even houseboats.
While the home buyers tax credit can be a great tool, there are several restrictions. In order to receive the tax credit, the homeowner must:
Receiving the home owners tax credit is also relatively simple and it can be claimed on either the 2008 taxes or 2009 taxes. People who have already filed their 2008 taxes can choose to file an amended tax return, which allows the homeowner to typically receive the tax credit within eight weeks of the IRS receiving the amended return. Otherwise, the homeowner can wait until April 2010 and claim it on their 2009 taxes.
It is important to note that this tax credit will go towards any outstanding tax debts first, and the remainder will be refunded to the tax payer. For those that do not owe anything in taxes, the entire $8,000 credit is offered.
To take advantage of Obama’s First Time Home Buyers Tax Credit, the homeowner will have to complete the IRS’s Form 5045. For those who wish to receive their tax credit early and decide to amend their 2008 tax return, it will be necessary to complete a 1040X Form, as well as the 5045.
Since the early twentieth century, the demographics of the home mortgage industry have greatly changed.
According to the National Association of Realtors, in 2006 1 in 5 home buyers were single women, with single women purchasing new homes in much greater numbers than single men.
This change in the demographics of homeowners might be attributed to a psychological urge of women to begin nesting at an earlier age than men and an increase in money earning potential. Today, women are also much more likely to have received a college education and in the workplace, women are slowly closing the gender pay gap.
While single women, and to a lesser extent single men, do make up a significant chunk of new home buyers, married couples still make up the majority of new home purchases. Currently the National Association of Realtors reports that about 60% of new home purchases are by married couples, but this percent has decreased slightly over the last 40 years. However, there has still been a significant increase of single females purchasing a home.
With the increase in women home buyers, there has also been an increase in less than reputable lending practices. In fact in a survey conducted by the Consumer Federation of America in 2006, it was found that women, who make up about a third of all borrowers, have received about 40% of all subprime mortgages. A subprime mortgage is a mortgage that is typically offered to those with poor credit who are deemed as a risk to the lender. The rate will typically be well above the typical market value and this is intended to help contract the risk presented by the borrower. This finding helps to highlight the importance of shopping around for your new mortgage and having a good understanding of the typical mortgage rates.
While women have been purchasing homes in much greater numbers, new home purchases by African Americans have actually significantly declined over the last twenty years.
For many people, owning a home can be a great investment that has many benefits. Most people do not have enough money to purchase the home up front, so they get a special type of loan called a mortgage.
A mortgage uses the actual home or the land as collateral for the value of the loan. Purchasing a home is a big decision and before jumping in and getting a mortgage, there are several things the borrower should do.
Before applying for a mortgage, one of the most important things to do is try to minimize your level of debt. This is because one of the things a lender looks at is how much debt you have and your payment history. If you already have a great deal of debt or have a poor payment history, they might not be willing to offer you a loan or you may not be able to receive the best rates.
If at all possible you should begin by paying down your credit card balances as much as possible. If you have any problems on your credit report, such as an unpaid bill, you should also pay these off before applying for a mortgage. This will increase your chance of qualifying for the loan and receiving the lowest interest rate possible.
It can also be a good idea to save some money aside from the money you are saving for a down payment, this can be used in the event that there is some sort of emergency. Usually most financial advisors recommend that you have enough money to live for 4 to 6 months, paying your utilities, groceries, and mortgage, without working.
Once you have taken care to lower your risk factors, such as outstanding payments or credit card debt, it is a good idea to get an idea of how much you can afford for a monthly payment, because this will help you determine what type of home you will be able to afford.
It is not uncommon for both lenders and real estate agents to try to push as much debt as possible onto the borrower, because this is in their best interest, but it is not typically in the best interest of the borrower. So, ensure that you have an idea of what you can afford before you begin shopping for a mortgage.
Commonly, it is recommended that your monthly mortgage payment does not exceed 28% of your gross income, including that of your spouse. There are a number of other costs associated with owning a home, such as repair and maintenance, and the 28% figure typically allows for these expenses, as well as those of daily living.
Since the more you borrow, the more the lender makes, they might try to convince you that you can afford more than this. Leading up to the current financial meltdown, many lenders were telling people that 30% or even 40% was acceptable, arguing that the home would always increase in value, so this was no problem.
Now, however with the current slump in homes values, this is no longer the case, so remember to have an idea of what you can afford and look at any effort on the part of the lender or real estate agent to increase this with skepticism.
Once you have your current credit load as minimized as possible and have an idea of what you can afford in terms of a monthly payment, you can begin shopping around for loans and try to find the best possible deal.
Even though the Federal Government is not directly in the business of financing home mortgages, they do offer a number of programs designed to help make it easier for Americans purchase a home. The main government agency responsible for administering these programs is the Federal Housing Administration (FHA.)
The FHA was created in 1934 and is primarily targeted at those who are unable to get a traditional mortgage due to a poor credit rating or low income. It was created to provide mortgage insurance on home loans made by government approved lenders in the United States. The FHA not only insured mortgages on single family homes, but also multi-family homes, hospitals, and manufactured homes.
The Federal Housing Administration is not the only government agency that provides mortgage assistance. About 10 years after the creation of the Federal Housing Administration, the Veterans Administration (VA) began offering a mortgage assistance program for enlisted personal and veterans of the Armed Services. The Rural Housing Service(RHS) also provides assistance for mortgages on homes in rural areas.
Together, the FHA, VA, and RHS work together to help people who might not otherwise be able to get a home loan by offering a guarantee to the lender. These agencies guarantee that if the borrower defaults, they will pay the remainder of the mortgage.
The Federal Housing Administration is currently the largest mortgage insurance company in the World. It was created while the Great Depression was still fresh in lawmakers minds and many citizens were unable to receive a loan.
The FHA, and programs like it, help reduce the risk of a default, specifically for borrowers who have less than 20% available for a down payment. Typically, the FHA requires only a 3% down payment, which can be a gift of contribution.
While the FHA will cover a number of different types of homes, they do not offer insurance on multi-million dollar dwellings.
Instead, they will insure mortgages for about $360,000 in areas deemed as high cost and about $200,000 for lower cost areas. In Alaska, Hawaii, the Virgin Islands, and Guam, the FHA will insure homes up to almost $550,000.
While an FHA Loan can be a great choice for someone with poor credit or who has previously filed bankruptcy, they do charge a premium for the insurance. The FHA requires 1.5% of the value of the loan at the time of closing and 0.5% annual charge over the course of the loan.
The Veterans Administration offers mortgage insurance for veterans and insure mortgages for up to $417,000.
As is the case with an FHA loan, a VA loan can be used by veterans who have limited credit or even those who have previously filed for bankruptcy, as long as it has been at least 2 years.
Rural Housing Service Loans (RHS) became available in 1994, with the passage of the Department of Agriculture Reorganization Act.
RHS Loans are intended to help stimulate rural areas that have been in a recession over the last twenty years. These types of loans are also called Section 502 Guaranteed Rural Housing Loans and do not require a down payment.
RHS loans can be used to help rebuild a rural home or prepare a site for a home, including installing water and septic facilities.
While an RHS loan can be an excellent way to purchase a rural home, the interest rate is based off of the income of the borrower and can go up if the individuals income increases. There are also may be a charge for selling the home early.
Preparing to buy a new home can be a very daunting process, especially for a first time home buyer. Due to the current financial situation, in many cases lenders have become much more strict with who they will lend to and are much more likely to throughly analyze the finances of a prospective home buyer, more so than they would have only a few years ago.
For many lenders, having a high credit score with limited or manageable debt is a key factor in offering an individual a home loan, with some lenders now requiring minimum credit scores of 700. A persons credit score is a number that is based off of information on your credit report. Whenever you make a purchase on credit, are delinquent on a bill, or make a payment on your line of credit, this information is added to your credit report. In the case of a delinquent or unpaid bill, your credit score would likely be lowered, while a record of on time payments will raise your credit score.
A credit score of 850 is considered to be perfect, while a credit score of 300 is considered to be fairly low. With many lenders tightening their restrictions on financing mortgages and requiring a credit score of over 700, they have successfully limited the number of individuals who will now qualify for a home loan.
These restrictions help to highlight the importance of thinking about the big picture when using a credit card or deciding not to pay a bill. While missing a payment or making a late payment might not be a big deal at the time, if this prohibits you from getting a mortgage a year later, it has effectively cost you much more than a little bit of extra interest.
When preparing to apply for a mortgage, it is important to first take steps to repair your credit report and take care of any delinquent or unpaid bills. This will not only help raise your credit score, but will also show a strong sense of commitment to the bank or mortgage broker, who will see that an effort has been made to be fiscally responsible.
Not only will a lender take your credit score and borrowing practices into account when you apply for a home loan, but they will also consider your net worth. Your net worth is basically the difference between your total assets and how much money you owe. So, even if you were to make six figures a year, if your liabilities were also six figures, then you would not be considered to have a very high net worth.
Both your net worth and credit rating are two very important factors a mortgage broker or other lender will consider when deciding whether to offer you a mortgage and how much of a mortgage to offer. So, not only should you try to clean up your credit report well before applying for a mortgage, it is also a good idea to try to reduce your overall liabilities whenever possible.
The process of buying a new home can be very exciting, but it can also present a very daunting task for the prospective home owner, especially if it is their first time buying a home. For many, one of the most difficult parts of purchasing a new home is all of the paperwork that is required and it is true that by the time you finish closing on the home, you will very likely have a sore wrist from signing your name.
However, before a person can purchase a home most will have to apply for and be approved for a mortgage, which is a type of loan that uses the home and land as a form of collateral. This is because most new home buyers do not have enough money to purchase the home upfront and instead must turn to a bank or other lender to borrow the money. When you first speak with a mortgage broker, bank, or other lending institution, you will likely either be preapproved for a mortgage or prequalified for the mortgage. While in some financial institutions these terms are used interchangeably, there is a technical difference that should be noted.
Prequalification for a home mortgage is probably the quickest and easiest way to see if you are eligible for a mortgage. During the prequalification, the lender will ask a series of questions regarding your salary, current level of debt, and your assets. Sometimes, the lender may require the prospective borrower to fill out a form with this information, but some will prequalify people over the phone or Internet.
Once the borrower has supplied their current financial information, the lender will use this data to determine what type of mortgage they could offer. The lender does not actually check to see if this information is correct, nor do they run the borrowers credit. Instead, they provide a letter that states how much they would offer assuming all of the information about the borrower is correct.
With a prequalification, it is possible to supply the lender with false information and receive an estimate that is much larger than it should be. However, before the lender offers the loan, they will verify that all the information you provided is correct. So, falsifying this information is not in the best interest of the lender or the borrower. This is also the reason that most sellers and real estate agents look at prequalification letters with a very high level of suspicion. Often, they will require a much stronger letter from the lender before approving the purchase agreement.
During a Preapproval the lender will not only request information about the borrowers finances, but they will also take measures to verify this information. This means that they will run the individuals credit and may even require copies of work and tax statements. Once they have verified this information, the lender will be able to offer the borrower a mortgage.
However, even though someone is preapproved, this does not guarantee that they will receive the loan, nor does it legally bind the bank to give the individual the mortgage. Typically, the bank will require a completed application before officially approving the mortgage, but a preapproval is much stronger than a prequalification.
Typically, a real estate broker or real estate agent will look at a preapproval letter much more favorably than simply a prequalification letter, because a preapproval letter shows that lender has actually verified that the information the borrower provided is correct. However, since the bank has not officially approved the loan yet, a number of brokers will not take a preapproval letter at face value, instead looking at it with a little suspicion.