Programs meant to help consumers into homes will only last so long, you need to think fast to take advantage of them.
Mortgage rates are on the periphery of my scope, but I do pay attention to them. More often I am watching my clients deal with lenders on other matters. This past year has been one to watch when it comes to loans. At one point loan rates were going quite low, causing a refinance boom. The rates started to rise as the year progressed, leaving many to wonder if buyers would return. In my inbox, I have been receiving many offers to obtain loans with a lower interest, and today brought a missive stating that interest rates are at their lowest so far this year. I think that the $8000 tax credit that we hear about on the news has driven more buyers into the market than what their mortgage may be like, but we are living in a year to be concerned about our finances.
About the tax credit, it will be ending on December 1, 2009. I have known many potential first time buyers who are sitting on the fence, and it has not occurred to them that this tax relief will not always be available. About the $8000, you may want to see if that is what you will get. The tax credit is 10% of the home’s value up to $80,000. So if you are buying a home for $75,000, you would receive $7500. Also they are some income concerns. An individual making up to $75000 will obtain the full credit, but then from $75,001 to $95,000 you will receive less credit. For couples, the numbers are up to $150,000, then $150,001 to $170,000. The credit is available to citizens and resident aliens who have not owned a primary residence in the last three years. Lastly, you will have to pay that money back if you sell the house within 36 months of purchase.
Tax credits are nice, but lenders still want you to qualify. One step in the qualification process is the down payment needed for the mortgage. I keep seeing people mentioning that there are zero down payment loans out there, but mortgage professionals that I know have indicated that is not the case. From what I have seen with my clients in the past year, they have been determined to meet the down payment needed to make a good loan happen. I think that for some potential buyers, the down payment is what is holding them back.
Many states have developed programs to fill in this gap to make home ownership possible. In my state, the Texas Department of Housing and Community Affairs has a Mortgage Assistance Program and a Down Payment Assistance Program. These are short term loan programs that allow consumers to use borrowed funds for closing costs or down payments, which will be repaid with the federal tax credit. Since these programs are working in conjunction with the federal tax credit, they are also coming to an end on the same date. One thing to be aware of is that there is a $250 administration fee with these programs. Both programs give you a limited amount of time to repay the loan in full where no interest will be charged, then they work out a repayment schedule. Also these programs require you to go through a first time home buyer course. I have known people to resist going to these courses, so they will not take advantage of these plans. Actually, the classes are quite informative, and I wished that more home buyers, whether applying for this program or not would take such classes. To find out more about these programs in Texas, go to MyFirstTexasHome.com. You will see all the details there.
The terms of your mortgage may help you obtain the home of your dreams, or it may hinder you, so be careful choosing one. The tax credit and assistance programs are a great way to help many buyers, so check out if it is right for you.