Confused about whether or not you can apply the 2009 home buyer tax credit (up to $8000) to the down payment on your FHA loan? It seems many, including lenders, were unclear at first. The 2009 First Time Homebuyer's Tax Credit lets those buying their first primary residence to get a tax break up to $8000.
For FHA lenders and borrowers alike, May was a very confusing month, but the FHA seems to have sorted out the mess. The rules are clear now--bridge loans are permitted, but the FHA's required down payment must still come from the borrower's own funds. According to the Department of Housing and Urban Development's official site, FHA guidelines are designed to allow people interested in an FHA mortgage to cut their up front costs while requiring the borrower to have a personal investment in the property bought with an FHA home loan.
Click here to read more.
Labels: 8000, buyer, down payment, FHA, first time, Home, HUD, loan, tax credit
If you are struggling to save for a down payment, there are two government-run programs that are designed to help. The Federal Housing Administration (FHA) offers mortgage insurance that allows qualified buyers to purchase a home with a 3% down payment, and that down payment may be entirely a gift. Also, the U.S. Department of Veterans Affairs has a home-loan guarantee program that will help military veterans buy a home with no down payment. You may also be able to find a down payment program that offer grants and low-interest deferred-payment loans and are run by state or local housing authorities.
There are also down payment assistance programs offered by private organizations, such as Nehemiah Corp. and AmeriDream, two of the largest. These organizations convert money contributed by the seller into the buyer’s down payment and assist with seller concessions. They use the seller’s equity to fund a grant which allows the buyer to buy with no money down.
The FHA has tried, unsuccessfully so far, to ban using private down payment assistance programs in conjunction with FHA loans, since FHA-insured loans that used these programs had a higher rate of default and foreclosure than loans that didn’t use private assistance, according to an FHA study. “FHA loans made to borrowers relying on ‘seller-funded down payment assistance’ go to foreclosure at three times the rate of loans made to borrowers who make their own down payments,” stated FHA Commissioner Brian Montgomery in a May 2008 speech. Alternatively, the private down payment assistance industry believes strongly that the government shouldn’t restrict access to home ownership.
Talk to your bank or lender today to find out which programs or loans are right for you. You may be surprised at what you can do. There are some great homes at great prices on the market today, and we'd love to help you start looking for the right home today!
Labels: ameridream, assistance programs, down payment, FHA, nehemiah, VA
In recent years, no-down payment loans were extremely popular, especially with first-time buyers. However, with the recent lending crisis, lenders have tightened their standards and almost always expect buyers to come to the table with some money upfront. The advantage of having a down payment today is that you will be able to qualify for a loan, since there are very few “zero-down” loan programs still in existence. Down payments also have other benefits:
Benefits of a down payment include:
- Borrowing less money to buy the same-priced home
- Increased choice when shopping among lenders, loan originators and loan products
- Getting a better interest rate
- Paying less for mortgage insurance
- Avoiding mortgage insurance, if your down payment is at least 20% of the purchase price
- Lower Monthly payments
- Instant Equity
Many homebuyers struggle to come up with a down payment, as it can be a significant chunk of money. Consider that if you put 20% down on a $200,000 house, that is $20,000! Even a 10% down payment is $10,000. Here are a dozen ways to get a down payment if you are ready to buy a home:
- Set up an automatic saving plan.
- Sell a car, a boat, collectibles or other assets.
- Get a gift from a relative or friend.
- Liquidate stocks, savings bonds, mutual funds or other investments.
- Allocate your income tax refund to go toward your down payment.
- Take a loan from your 401(k) retirement plan, but pay yourself back with interest.
- Withdraw funds from your 401(k), but remember they are subject to taxes & penalties.
- Collect on a loan you made to someone else.
- Get a bonus or raise from your employer.
- Explore homebuyer programs for public servants, if you qualify.
- Apply for a state or local government homebuyer down payment assistance program.
- Use a private down payment assistance program.
You can also work on small ways to save money, such as cutting out your morning gourmet coffee stop, bringing your lunch and eating out less. Just make sure you contribute the money to your down payment fund; create a separate account if you have to.
Bottom line: The more you can put down on your home the better. But don't forget to keep a little in your cash reserves for home maintenance and other homeownership costs. Especially if you are a first time home buyer, you need to be prepared for that first year, and then adjust your budget accordingly as you see what your monthly expenses look like.
Watch our next post for information about Government backed & private down payment assistance programs.
Labels: down payment, down payment assistance programs
1. Decide what you can afford. Generally, you can afford a home equal in value to between two and three times your gross income.
2. Develop your home wish list. Then, prioritize the features on your list.
3. Select where you want to live. Compile a list of three or four neighborhoods you’d like to live in, taking into account items such as schools, recreational facilities, area expansion plans, and safety.
4. Start saving.Do you have enough money saved to qualify for a mortgage and cover your down payment? Ideally, you should have 20 percent of the purchase price saved as a down payment. Also, don’t forget to factor in closing costs. Closing costs — including taxes, attorney’s fee, and transfer fees — average between 2 and 7 percent of the home price.
5. Get your credit in order.Obtain a copy of your credit report to make sure it is accurate and to correct any errors immediately. A credit report provides a history of your credit, bad debts, and any late payments.
6. Determine your mortgage qualifications.How large of mortgage do you qualify for? Also, explore different loan options — such as 30-year or 15-year fixed mortgages or ARMs — and decide what’s best for you.
7. Get preapproved. Organize all the documentation a lender will need to preapprove you for a loan. You might need W-2 forms, copies of at least one pay stub, account numbers, and copies of two to four months of bank or credit union statements.
8. Weigh other sources of help with a down payment. Do you qualify for any special mortgage or down payment assistance programs? Check with your state and local government on down payment assistance programs for first-time buyers. Or, if you have an IRA account, you can use the money you’ve saved to buy your fist home without paying a penalty for early withdrawal.
9. Calculate the costs of homeownership. This should include property taxes, insurance, maintenance and utilities, and association fees, if applicable.
10. Contact a real estate agent. Find an experienced real estate agent who can help guide you through the process.
Labels: down payment, homeownership, mortgage
