First Time Home Buyer

The headlines are full of disappointing news regarding the housing industry; however, the current flat economy is creating opportunities for many. As in many areas around the United States, people who have wanted to buy in high end areas such as Boston but could not are reaching for their dreams of finding a first home in a coveted location. It seems that the buzz word in real estate right now is opportunity. According to many real estate companies, there are a lot of great deals to be found in today’s housing market. This does not come as a big surprise to the many folks looking to buy their first home, particularly in Boston. Massachusetts home prices have fallen around 10 percent since 2005 which is allowing many first time home buyers to enter a market they previously could not afford.

One of the big draws for the first time home buyer today is the perks they are finding. With the efforts of the government, housing development centers and other incentives available first time home ownership is a dream come true for an increasing number of people all over the United States and all over Massachusetts.

Many programs in Massachusetts offer a number of resources for the first time home buyer including classes, information, guidance and even a lottery system for the individuals that qualify to purchase condominiums and homes at below-market prices. There are plenty of enticing programs available for the first time buyer as well in the Massachusetts housing. If a person works for the town or city as a teacher, firefighter, police officer or other public service position they can be eligible for lower interest rate loans. Similar programs are available for people using public transportation or who are trying to rehabilitate a home that is in rough condition.

Naturally there are conditions to be eligible for most programs in Massachusetts and other places around the U.S. Income guidelines and limits as well as other stipulations may apply; however, it is always a good idea to see if you are eligible for any incentive programs. Doing so just may save you significantly on your first home and may allow you more home than you dreamed possible.

When it comes down to it, if you are considering buying a first home, the best time is now. It is a buyers market and there are a lot of great deals and incentives available to the first time home buyer! Expect to possibly be required to take a home buying 101 class or other classes that are offered through incentive programs. Additionally the governmental incentives and tax credits are available to most all first time home buyers to try to stimulate the stagnant housing market. If you are ready the market is primed just for you, run your credit, smooth out the wrinkles and start shopping for that dream home. Make your dreams your reality while the market is yours!

An ambitious housing bill has been passed by legislation and has just been signed into law by President Bush. Included in the bill are provisions for those facing foreclosure, the first time home buyer, and help for the low income. This bill brings with it hope of relief from the tough economic times many are facing throughout the country.The economy today has found many current homeowners facing foreclosure on their homes. Now that this bill is passed into law, homeowners unable to make mortgage payments will be able to refinance their homes more affordably with fixed rate loans that are insured by the federal government. Up to $300 billion of loans will be able to be guaranteed by the FHA. According to the U.S. News and World Report this will be enough funds to modify approximately 400,000 mortgages. The downside to this is that lenders will take a financial loss on the original loan.

Drawing much attention are the provisions for the first time home buyer in this bill. The first time homebuyer, under the new law, will be eligible for up to $7,500 in tax credits. This is not to be confused with a grant, more like an interest free loan that must be paid back over 15 years. When purchasing a first home this can be very helpful none-the-less. If the tax credit is not fully paid when the property is sold, selling for more than the original price, the outstanding balance is due at the time of the sell.

The eligibility requirements for the bill include home ownership status for first time buyers, citizenship, and income limitations. According to the law, a first time home buyer is any buyer who has not owned a home during the last three years. Additionally all U.S citizens are eligible to be a part of the program providing they file taxes.

The tax credit limitations for the first time homebuyer include the filing status of single or head of household being able to claim the full $7,500 if the adjusted gross income is under $75, 000. These persons who earn between $75,000 and $95,000 can claim a partial first time home buyer tax credit. For the status of married filing jointly the income limit is $150,000 to receive the full credit and between $150,000 and $170,000 can claim the partial first time home buyer credit. Tax filers with adjusted incomes greater than the limits shown are not eligible for the tax credit at all.

Homes purchased and closed on between the dates of April 9, 2008 and July 1, 2009 by first time home buyers will receive the tax credit if they are eligible. In addition, if the first time home buyer who qualifies for this credit pays less than $7,500 in income taxes the government will refund the difference. Tax payers who receive tax refunds will have the homebuyer tax credit added to their refund. This tax credit can be claimed on the 2008 or 2009 returns depending on the year the home closes.

The law offers provisions for low income housing and seniors as well; each with their own requirements and regulations. The bill is an effort to help the housing crisis and the economy on the whole.

In the recent past it was not uncommon to find no-down payment loans from lenders for first time homebuyers. Unfortunately lenders are tightening standards and requiring a down payment of some degree. This is making it a little more difficult for the first time homebuyer to get into home ownership. Today it is difficult to find a zero-down loan program and lenders are making it advantageous for the buyer to have a down payment. The obvious advantage is in the amount being financed; the more money down, the less financed and the smaller the monthly payments will be. A down payment becomes instant equity once closing and this equity can then be borrowed against with home equity loans and lines of credit. It is recommended to first time homeowners, by most lenders, to reserve money for closing costs, unexpected expenditures and maintenance of the home and not allocate all savings to a down payment.

With today’s economy many people, particularly the first time homebuyer, to come up with a down payment. Below is a list of practical ways that a down payment can be obtained:

• Automatic Savings Plan. Set up a savings plan with your employer and your direct deposit banking to divert a particular percentage of your paycheck to go into a savings account. In most cases you do not even miss the money and it will quickly grow into a substantial savings for a down payment.

• Gift Money. Parents, grandparents and relatives can give a monetary gift for a down payment; however, often a lender still wants to see a decent amount of money in savings such as 1 to 5 percent of the cost of the home.

• Sale of Assets. Selling a car, boat or motorcycle will often give you enough money for a down payment on a home. These items can always be replaced in the future.

• Liquidation. Liquidating stocks, mutual funds, savings bonds and other investments is a quick way to obtain a down payment.

• 401(k) Loan or Dispersal. This is usually allowed in a company’s plan; however if in the form of a loan, you must remember this will be coming from your paycheck each week until it is paid off. Remember this when budgeting. If you can get a dispersal figure in the taxes and penalties.

• First Time Homebuyer Programs. Explore your options from several lenders for the first time homebuyer or other programs for teachers, police officers, military or other public servants.

In general a lender will want to know how you obtained the money you are using for a down payment to see that you have been able to properly manage your money. Most of the time only a certain percentage of the down payment can come from a lump sum gift or dispersal; lenders want to be assured you will manage your budget wisely. There are government programs that can assist homebuyers who are unable to save much for down payments such as an FHA loan or a Veterans loan. Grants and government assisted programs often have to be qualified for and many people actually make too much money to qualify for the assistance.