What You Need To Know About The First Time Home Buyer Tax Credit
Posted by Tax Man - 19/06/10 at 11:06 amFirst Time Home Buyer Tax Credit. – If you are buying a home for the very first time be advised that there are different first time homebuyer programs that are available to you. These programs will help you get your very first home at the best deal possible.
First time home buyer tax credit.
Regardless of how our economy is at the moment, now is the best time to purchase a home especially if it is your first one. The Obama’s mortgage program includes an $8,000 tax credit or 10% of the home’s price, whichever is lower, for Americans who are buying a home for the first time.
However, not everyone is eligible for this tax credit. For single home buyers who have an annual income of more than $95K and a married couple who makes more than $15K, they will not be able to get the full amount of the refundable tax. And a single buyer who makes more than $95K a year and a married couple who makes more than $170K are not eligible for the tax credit at all. However, if your income does not belong to any of the brackets mentioned above, then you are indeed qualified for the full amount of the tax credit.
If you are eligible, the $8,000 tax credit (or 10 percent of the amount of the home) is fully refundable. This amount can be claimed on your next year’s income tax return. Even if the amount of your federal tax liability is less, the total amount of the tax credit should be refunded.
Aside from the first time home buyer tax credit you can also avail of a Federal Housing Administration Loan.
The Federal Housing Administration offers loans to homebuyers that require a down payment of about 3 and a half percent of the cost of the house. Usually, other lenders require you to pay a down payment of 20%. Getting a considerable reduction from the down payment would make it easier for first time buyers to acquire a home. This is just yet another mortgage program of the government to make it more affordable for everyone to own a home. But there are some limitations to this program. In order to be eligible for this loan, your monthly mortgage payments after you have purchased the home should not be more than 29% of your monthly gross income. Also, you need to have a good credit score to be approved for the loan.
If you are not eligible for the programs mentioned above, there also are some special loans available for first time home buyers.
Many lending institutes offer special packages for people who are buying a house for the first time. Included in the package is a considerably lower down payment. At least less than the conventional 20% down payment required by most lenders. Other creditors who will not give you a lower down payment offer a program where you can get a piggyback loan for you to be able to reach the required traditional 20% down payment.
You are required, however, to purchase a private mortgage insurance if you are applying for a special package loan to buy a home. This is used as security for the creditors just incase you default on the loan. Not to worry, though, the insurance usually just costs about 0.5% of the mortgage amount of the home per year. And usually by the time the borrower has paid 20% of the loan, creditors will allow the borrow to cancel the insurance.
When you are considering purchasing a home for the first time, it would be advisable for you to research on all your options. There are various programs offered by private lenders and the government alike that will make your first home more affordable. Be advised that there are also some states in the US and other federal programs that give out grants towards the cost of the home of first-time buyers.
