As published in Scotsman Guide's Residential Edition, February 2009.
For many consumers, the thought of buying their first home can be overwhelming. They’re constantly hearing about how terrible the housing market is and how getting a mortgage is becoming tougher than passing the bar exam.
First-time homebuyers could have an advantage in today’s housing market, however. First, there are low home prices and a large housing inventory nationwide. In addition, this past July, Congress passed the Housing and Economic Recovery Act of 2008, part of which is sure to boost the first-time-homebuyer market.
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Included in the housing bill is a $7,500 tax credit for first-time homebuyers. In addition, there is still a variety of available lending options from which first-time homebuyers can benefit, including Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) loans. And finally, interest rates are still low.
Here’s what brokers should know about the various factors that can help them assist their first-time-homebuyer clients.
The tax credit
July’s housing bill implements a $7,500 tax credit for qualified first-time homebuyers. For the credit’s purposes, first-time homebuyers are defined as people who have not owned a principal residence for three years before the subject purchase.
The credit is available for homes purchased between this past April 9 and this coming July 1. Single taxpayers with incomes of as much as $75,000, and married couples who file jointly and have incomes to as much as $150,000, qualify for the full tax credit.
The tax credit will help first-time homebuyers by absorbing some of the expenses that accompany homeownership and providing a financial cushion. First-time homebuyers simply claim the credit when filing the tax return for that year.
It is important to remember and to remind your clients that this is not a grant and that the money must be repaid -- interest-free -- over a 15-year period.
The housing bill also allocates $150 million to states and communities around the country to fund housing counseling for first-time homebuyers and families facing foreclosure.
Clearly, when trying to navigate through a real estate transaction, education is imperative. These classes and counseling can help anyone who would like their questions and concerns addressed by an unbiased third party. Purchasing a home and acquiring financing is not something the average person learns in school, and even highly educated people are novices when it comes to this topic.
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