first time home buyer – owner loan

Bryan Hendersen asked:


y believe that over-extended first time home buyers played a large role in creating the current economic crisis, the Federal Government nonetheless is trying to woo even more new home buyers with their current stimulus package. Afraid you can’t afford to buy a house? Worried you won’t qualify for a loan? Never fear ? the government will come to your rescue with its ‘First Time Home Buyer Stimulus Package,’ which is being targeted to both first time buyers and those who have not owned a home for at least three years.

Owning your own home remains the American dream. That’s the philosophy behind this program, which includes both pre-owned and newly constructed homes. If successful, it could reduce the current inventory of unsold homes, replenish construction industry coffers and put some unemployed builders back to work. There are three components of the program:

1. Tax credits

2. Down payments funding

3. Lower interest rates

The first stimulus programs were instituted in 2008 at the beginning of the economic downturn. As these programs were found to be insufficient, the government unveiled additional incentives to spur home ownership. The goal was to reinvigorate the real-estate market at a time when people must overcome their fear of spending and of home foreclosure.

A 10% tax credit is available to those who purchase a home between January 1, 2009 and December 31, 2009. Depending on purchase price, this credit may be up to $8000. The credit must be claimed within two years of buying the home. The tax credit might be used to offset the property taxes and to recover some of the downpayment, which is often a barrier to home ownership.

Speaking of down payments, the second incentive introduces the possibility of having to raise a smaller sum. A typical down payment amount is 10% of the sales price — $20,000 on a $200,000 house. If you don’t need to put down so much, the government hopes you’ll spend that savings on home improvements or other investments. They might also offer you a loan with lower points, resulting in lower closing costs or a lower monthly mortgage. This program is restricted to individuals earning up to $75,000, or couples earning up to $150,000.

A final alternative being offered is a tax rebate on the loan’s interest. This is different from a tax credit. Investment property owners are also eligible to take advantage of the tax rebate for expenses that are considered part of the property’s maintenance and therefore an income tax deduction.

The government foresees many positive benefits from the First Time Home Buyer Stimulus programs. Beyond helping people to become homeowners, it is viewed as a way to revitalize the economy, and keep our head up in the eyes of the world.

Jessica