If you have recently decided to move from renter to homeowner, you are not alone. First-time homebuyers accounted for 41 percent of the market, according the National Association of REALTORS® Profile of Home Buyers and Sellers. Price declines in many markets around the country have created unique opportunities for those considering home ownership for the first time.
As a homeowner, you have security and stability, the freedom to decorate and remodel, and the capability to build equity and recoup tax benefits. While interest rates are still at historically low levels – 5.22% for the typical, 30-year fixed-rate mortgage (as of August 2009), combined with ample inventory, now is a great time to buy. On top off that, there are several incentives and programs available specifically for first-time homebuyers.
First-Time Homebuyer Credit
It is a great time to take advantage of the highly publicized First-time Homebuyer Credit, which was part of the Housing and Economic Recovery Act of 2008. This federal initiative allows first-time homebuyers to take up to an $8,000 tax credit, which does not have to be repaid, as long as it is used in conjunction with a new or resale property purchased prior to Dec. 1, 2009. For new construction, the purchase date is considered to be the date you first occupy the home.
Under this program, a first-time homebuyer is considered to be anyone who has not owned a principal home within the last three years. If you are married, both spouses must meet this criteria. However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer. In addition, ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer. You are eligible to claim first-time buyer status if you owned a principal residence outside of the United States within the last three years.
Be aware though, the actual tax credit may vary depending on the purchase price and your income. The credit is generally equal to 10 percent of the home’s purchase price, not to exceed $8,000. In addition, the income limit to receive full credit is $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return.
For complete details, visit www.irs.gov and www.federalhousingtaxcredit.com. As always, consult with your tax advisor on how this tax credit may affect you.
Mortgage Loans
As a first-time homebuyer, you do not have the advantage of using the equity from a previous property to help bridge costs associated with a down payment, closing and other fees. Many financial institutions have mortgage products with you in mind. In addition, the Federal Housing Administration (FHA) offers mortgage programs in which your down payment can be as low as 3.5% of the purchase price, and allows most of your closing costs and fees to be included in the loan. Although the FHA does not directly loan to consumers, you can work with a FHA-approved lender. For more information, visit www.hud.gov.
Workshops
Besides financial assistance, there are workshops specifically geared toward first-time homebuyers. They provide a wealth of information about the home-buying process, such as how to search for a home, setting up a budget, choosing a real estate professional, loan products, and so on.
The transition from renter to homebuyer is a large step and is arguably one of the largest investments you’ll make, so make sure you take advantage of all the assistance available to make the road to homeownership easier.
Many may not perceived it but it is actually the best time to purchase a new home because of the advantages it offers such as lower price, lower interest rates, tax savings, more choices etc. So instead of wasting money in renting a place, buying something that can be an equity is far more better option.
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