Some programs are for updating the house, either for new infrastructure or for cosmetic updates to make the exterior prettier. This can be important in more run-down neighborhoods.
There are grants and loans for garages and insulation; these are important, not only for safety in the case of the garage, but for energy efficiency, which is another thing for which tax credits may be available. I do plan to have my new house, whenever I get it, audited for energy efficiency. Additional insulation, new windows, new doors, new hot water heaters and crazy things like caulking gaps or adding weatherstripping can help a lot. I would do it for the savings on heat bills alone, and not worry about whether you exceed your tax breaks; because face it, at some point, what with income limits for these programs, some people whose income qualifies for tax credits, will end up getting all the credit they can and having no tax liability for a given year.
I'm not linking to programs as they vary with state, county, city and neighborhood. It's important to learn about programs in your area before searching for a home as these sorts of funds may make a difference to you.
Showing posts with label first time homebuyer programs. Show all posts
Showing posts with label first time homebuyer programs. Show all posts
Friday, August 7, 2009
Wednesday, July 29, 2009
Multiple Programs
It turns out there are a lot of different programs out there; the lender who came to talk to my last class reviewed three programs which may be used together. That includes money from the federal government and the county, but does not include money from the city in which you're looking, neighborhood-specific programs or money from foundations designated for certain areas. In some cases, $25-30K may be available. Per borrower.
Conventional loans require a credit score of 700 or above and/or a downpayment of 20%. Most of us with student loans don't have the 20%. There are VA loans for veterans and surprisingly, the Department of Agriculture has programs in some rural areas; at the break, our lender told someone who qualifies for both that she should check further as the VA loans have a fee that she doesn't think the Ag loans have.
Me? I'm looking at FHA financing, which is kind to those without great credit, doesn't require huge downpayments and may be available for people without great employment history. There are fees involved but the benefits of some available programs outweigh the fees greatly; while the downpayment required is 3.5%, half of that can be provided by programs but because the loan can't be for more than 100% of the sale price, the borrower must provide half. That's 1.75%, the amount of the fee; on a house costing $100,000.00, that's $1,750. Even I can manage to have that amount of money. This is money you must pony up yourself, though it may be given as a loan or gift from family, or may be withdrawn or borrowed from a 401K or IRA.
Excess money from programs for which you qualify goes to pay down your mortgage. The upshot? Because I live in an area with lower cost housing than many metropolitan areas, and housing prices have gone down, so long as I can find a lender, I should be able to qualify for programs and get a loan that is reduced to the degree that I can afford it.
Combined with the income tax reduction provided by a) the Federal Stimulus; b) mortgage interest, so long as that remains a deduction; and, c) one of the county programs, which 1) has a fee to get into but reduces personal income by 80% of mortgage interest paid, reduces tax obligation by the other 20% of mortgage income paid, and is valid so long as it's your homestead, buying a home now has huge tax implications. In a good way.
Conventional loans require a credit score of 700 or above and/or a downpayment of 20%. Most of us with student loans don't have the 20%. There are VA loans for veterans and surprisingly, the Department of Agriculture has programs in some rural areas; at the break, our lender told someone who qualifies for both that she should check further as the VA loans have a fee that she doesn't think the Ag loans have.
Me? I'm looking at FHA financing, which is kind to those without great credit, doesn't require huge downpayments and may be available for people without great employment history. There are fees involved but the benefits of some available programs outweigh the fees greatly; while the downpayment required is 3.5%, half of that can be provided by programs but because the loan can't be for more than 100% of the sale price, the borrower must provide half. That's 1.75%, the amount of the fee; on a house costing $100,000.00, that's $1,750. Even I can manage to have that amount of money. This is money you must pony up yourself, though it may be given as a loan or gift from family, or may be withdrawn or borrowed from a 401K or IRA.
Excess money from programs for which you qualify goes to pay down your mortgage. The upshot? Because I live in an area with lower cost housing than many metropolitan areas, and housing prices have gone down, so long as I can find a lender, I should be able to qualify for programs and get a loan that is reduced to the degree that I can afford it.
Combined with the income tax reduction provided by a) the Federal Stimulus; b) mortgage interest, so long as that remains a deduction; and, c) one of the county programs, which 1) has a fee to get into but reduces personal income by 80% of mortgage interest paid, reduces tax obligation by the other 20% of mortgage income paid, and is valid so long as it's your homestead, buying a home now has huge tax implications. In a good way.
Tuesday, July 28, 2009
Homebuyer Programs
I used to think that the first time home buyer programs provided only funds for closings and downpayments. Turns out I was wrong. While there is a significant amount of money available where I live, there are many programs available, some of which reduce interest.
My county has a program with an initial fee, which you can negotiate for the seller to pay, and provides you with an income reduction. Whatever the amount you pay in mortgage interest, 80% of the total goes to reduce your income; if you earn $50K on your W-2's, and had paid $10,000 in mortgage interest, your income is reduced by $8,000, so down to $42,000, not counting any other deductions you have that would reduce your income. One you calculate your tax liability, the other 20% of what you paid in mortgage interest goes to reduce that liability; if you end up owing money, that amount would be reduced by $2,000 in my example.
While this may not mean much with the stimulus credit of up to $8,000 for those who buy homes this year, it isn't limited to one year; this program lasts as long as you own your home.
My county has a program with an initial fee, which you can negotiate for the seller to pay, and provides you with an income reduction. Whatever the amount you pay in mortgage interest, 80% of the total goes to reduce your income; if you earn $50K on your W-2's, and had paid $10,000 in mortgage interest, your income is reduced by $8,000, so down to $42,000, not counting any other deductions you have that would reduce your income. One you calculate your tax liability, the other 20% of what you paid in mortgage interest goes to reduce that liability; if you end up owing money, that amount would be reduced by $2,000 in my example.
While this may not mean much with the stimulus credit of up to $8,000 for those who buy homes this year, it isn't limited to one year; this program lasts as long as you own your home.
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