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PREA Signature Realty |
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A Full Service Real Estate Brokerage |
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Info Line: 314.621.5777 Brokerage: 314.397.3182 Display: 314.771.7171 MSilies@PREASignatureRealty.com
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1709 Park Avenue, St. Louis, Missouri 63104 |
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Prea Signature Realty—Your Real Estate Partner in St. Louis, Missouri |
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$8,000 FEDERAL FIRST-TIME HOME BUYER’S TAX CREDIT |
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FIRST-TIME HOME BUYERS GUIDE |
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When it comes to purchasing a new home, there is no such thing as a free lunch. As a buyer's agent, we can assist you and provide you with guidance regarding the home search and sales process. However, we strongly suggest that you take control of the process, set firm requirements and fully participate in the home search and sales process. Before you start your home search, you need to prepare for homeownership. Here are some simple tips:
(1) Review Your Credit Report and Score: Obtain a copy of your credit report from one of the major credit reporting agencies - www.equifax.com, www.transunion.com, or www.experian.com. Review the credit report to verify its accuracy. Close unused lines of credit or old credit accounts. If there are errors, write to the credit company challenging the accuracy of the credit report. If you have a credit score below 680, take steps to improve your credit score by making payments on time.
(2) Decide How Much Home You Can Afford: Prepare a budget and review your income and expenses. After you have reviewed your budget, determine what monthly payment you can reasonably afford. Do not delegate this important decision to your lender. Use a loan calculator such as the BankRate home affordability calculator found at: www.bankrate.com/brm/calc/newhouse/calculator.asp. As a rule of thumb, you can generally afford between two and three times your gross income.
(3) Start Saving: Start saving for both the downpayment and closing costs. The era of easy money is over. Although loans are available for qualified applicants, most loan products require some downpayment ranging from 3% to 20% based on a series of factors including the purchase price, your income and expenses, and your credit score. In addition, closing costs range between 2% and 7% of the purchase price.
(4) Assess Your Housing Needs: Start by making a detailed list of your housing needs, wants and desires. Establish a clear set of criteria for evaluating and selecting your new home.
(5) Select Where You Want to Live: Research where you want to live. Start looking at housing prices. Focus on finding the right neighborhood for your needs. Consider such items, where applicable, as schools, parks, recreational facilities, public transportation, etc.
(6) Determine Your Mortage Requirements: Obtain recommendations to select a qualified lender. Determine what type of loan products are suitable for your personal circumstances.
(7) Obtain Pre-Approval: Organize your financial records such as W-2 forms, tax returns, most recent pay stubs, 2-months of bank statements, etc. Make a formal application with your selected lender. Obtain a pre-approval letter.
(8) Consider Alternate Sources for Downpayment: Make inquiries to see if you qualify for any special mortgage or downpayment assistance program offered by federal, state or local government agencies. Determine whether your employer has a housing assistance program. If you are a first-time homebuyer, consider adjusting your federal income tax withholding to increase your net pay under the Federal First-Time Homebuyer Tax Credit Program.
(9) Calculate the Costs of Homeownership: Start by estimating your principal and interest payment using a standard loan amortization calculator such as found at www.bankrate.com/brm/mortgage-calculator.asp. Then factor in the estimated costs of real estate property taxes, insurance, maintenance, utilities, and subdivision or association fees. Compare the total costs to your original budget to determine whether you can regularly and consistently make these payments.
(10) Start Your Home Search: Contact a qualified and experienced real estate professional to assist you with your search.
By taking these steps, you will be prepared to purchase a new home. For some people, this planning will take days or weeks. For others, it may take several months. However, if you prepare to purchase a home, you eliminate uncertaintly, identify problems and make the sales process more efficient and surprise-free. |
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Summary of the Federal First-Time Home Buyer Tax Credit Program
The American Recovery and Reinvestment of 2009 provides a federal income tax credit to first-time home buyers of 10% of a home's purchase price up to $8,000. Here are the basic requirements:
• Eligibility - Individuals: The tax credit is for first-time home buyers only. The term "first-time home buyer" is defined by the Internal Revenue Service as an individual who has not owned a principal home during the three-year period prior to the purchase. • Income Restrictions: The tax credit is only available to single taxpayers with incomes up to $75,000 or married couples with incomes up to $150,000. • Maximum Tax Credit: The tax credit is equal to 10% of the homes purchase price up to a maximum of $8,000. • Deadline for Purchase of New Home: The credit is available only for homes purchased on or after January 1, 2009, and before December 1, 2009. • No Repayment: The tax credit is not subject to repayment. However, it is subject to a 3 year recapture period. If you sell the home, vacate the home or otherwise cease to use the home as your principal residence, then you are responsible for the repayment of the tax credit.
How to Claim and/or Use the $8,000 Tax Credit
A first-time home buyer can claim or otherwise use the $8,000 tax credit as follows:
• Claim on 2008 Tax Return: Under special IRS rules, the taxpayer may elect to treat the purchase as having occurred on December 31, 2008. The taxpayer may then file an amended federal income tax return claiming the $8,000 on the amended 2008 return. The taxpayer can then use the tax refund to reimburse themselves for their down payment or for closing costs. • Adjustment of Withholding Tax: The taxpayer may elect to adjust their federal income tax withholding thereby increasing the net pay in their paycheck. The taxpayer then can save the additional amount necessary for a down payment or closing costs associated with their home purchase. • Claim on 2009 Tax Return: The taxpayer can claim the tax credit on their 2009 tax return and receive a refund check. • State Loan Programs: The taxpayer may elect to use a state loan program that advance the tax credit. A list of such state loan programs can be found at: State Tax Credit Advance Loan Programs.
Recent Changes to Federal Tax Credit Program
HUD Secretary Shaun Donovan recently announced HUD's decision to allow consumers to use the $8,000 first-time home buyer tax credit for down payment and closing costs on FHA-insured mortgages. The measures announced by HUD would allow FHA-approved lenders; federal, state and local government agencies; and FHA-approved non-profit organizations to supply home buyers short-term or "bridge loans" up to the amount of the $8,000 first-time home buyer tax credit. Longer term loans secured by second liens can also be used by government agencies and FHA-approved non-profit organizations to facilitate home sales.
Other Resources
· NAHB TV - Video - Explanation of Tax Credit Program · NAHB - Website - Federal First Time Home Buyer Tax Credit · IRS - Website - First-Time Home Buyer Tax Credit Program · STATE HOUSING AGENCIES - Links to State Tax Credit Advance Loan Programs |
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EXCLUSIVE BUYER’S AGENT
Our exclusive buyer’s agents stand ready to assist you with your home purchase. We use a four step process to assist you with your home search before you even see the first home.
Step 1—Perform housing preference survey.
Step 2—Preliminary search and online review with customer.
Step 3—Preview homes prior to first showing with customer.
Step 4—Obtain preapproval from lender.
To schedule a FREE consultation with an exclusive buyer’s agent, contact:
Michelle Silies PREA Signature Realty 314.397.3182 |
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FIRST TIME HOME BUYER RESOURCE CENTER
$8,000 FEDERAL TAX CREDIT EXPIRES NOVEMBER 30, 2009
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