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$7500 Tax Credit for First Time Homebuyers
First-time homebuyers (who have not owned a primary residence for 3 years prior) who purchase their home between April 9, 2008 - July 1, 2009 will be eligible for the tax credit.
Single taxpayers with modified gross incomes up to $75,000 and married taxpayers with a joint "modified" gross income of up to $150,000 are eligible for the full $7500.
This is a federal tax credit (not a tax deduction).
The credit is refundable (taxpayers owing $5000 in federal taxes would receive a $2500 refund).
The credit must be repaid to the government over 15 yrs or upon sale of the home.
For those taking the tax credit in 2008, the first $500 payment would need to be made when the buyer files their 2010 tax return.
The OC Market
The biggest challenge for the first time home buyers in Orange County (California) has been acquiring financing and a down payment while housing prices spiral upwards.
For the past five years many 1st time buyers were priced out of the market due to home appreciation out pacing the ability of renters to accrue enough money for a down payment.
Now with to a growing assortment of loan options, it's possible to find mortgages for as much as 97% of a home's value and sales price.
In the hopes of warding off a wave of foreclosures, FHA is currently advertising 3% down ..30 year fixed loans (up to $725,000) with rates traditionally reserved for borrowers who have a 20 percent (or more) down payment.
Advantages of FHA Lending
1) Low credit scores OK
2) 3% down (can be all "gift" money)
3) No "Pre payment penalty"
4) Seller can pay up to 6% in closng costs (directly to buyer)
5) FHA Adjustable loans have very low interest rate adjustments
6) "No Qualifying" to refinanc
7) Family members can co sign
8) FHA Adjustable loans are assumable
9) Monthly "PMI" payments are lower than conventional loans
Many borrowers mistakenly believe that paying off their credit cards AND closing the accounts will raise their credit scores. Wrong …that action will actually lower a borrowers score.
In reality (FICO) scoring is weighted to borrowers who maintain a heavy credit profile. A heavy profile has many open accounts with low or zero balances.
For the past decade lenders have been willing to make high risk loans because of the borrowers high credit scores.
Credit scoring was introduced in the early 1990s as a remedy to claims of redlining by minority and inner city borrowers.
The Department of Housing and Urban Development (HUD) studies confirmed that banks and savings & loans had engaged in a systematic discrimination against minority and inner city borrowers.
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HOW MUCH CAN YOU AFFORD?
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How much you CAN BORROW versus HOW MUCH CAN YOU AFFORD
versus HOW MUCH OF A home you WANT to afford are entirely THREE different issues.
Borrowers should calculate a household budget in advance of searching for a home.
Don't let any fast talking lenders and agents sell you into a home that is more than you need. You can always sell and move up when a job promotion is earned, a child is born or wealth is transferred thru inheritance.
Conversely if you are injured on the job, contract a life threatening illness or your job is outsourced to a foreign country ....you'll be glad you didn't over purchase.
Take in to account the sacrifices that you are willing to make. Do you really need to visit Cabo san Lucas every year?
Or is it a better use of resources to stay at your in - laws house home, visit elderly parents with the (grand) children.
As a general rule, your monthly house payment, property taxes, HOA and home owner's insurance shouldn't exceed 35% of your monthly income.
Furthermore your total debt service (child care/support, credit card payments, alimony) should not exceed 45% of your monthly mortgage.
These grants are worth up to 3% to 5% of the homes sale price. Buyers may put this money towards closing costs. However there are income limit restrictions.
There are no income limits to qualify for an FHA loans. However, these loans are designed for assisting first-time home buyers and low- to moderate-income families.
One drawback is a income versus loan limit to how much you can borrow. The amount fluctuates from region to region ($725,000 in Southern Cal).
To verify your regions maximum loan amount, visit the FHA mortgage limits page.
If you are currently serving in the armed forces or have been honorably discharged; VA (Veterans administration) loans are another source of government funding that has no income limits.
VA loans have different qualifying dates and criteria depending on enlistment dates and combat experience.
Loan limits range from $417,000 to $625,000 depending on the region.
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IN CLOSING
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Purchasing a home is the biggest single expense you will have in your life (with the exception of children). It's the time spent in preparation that determines whether you'll be happy or have headaches.
Orange County
37 Year Appreciation
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Year
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Average Selling Price
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Percent Change
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Average Percent Change
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Year
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Average Selling Price
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Percent Change
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Average Percent Change
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1970
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$27,000
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1991
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$246,900
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-4.04%
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1971
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$27,700
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2.59%
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1992
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$238,700
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-3.32%
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1972
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$28,400
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2.53%
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1993
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$221,500
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-7.21%
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1973
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$31,500
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10.92%
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1994
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$215,800
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-2.57%
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1974
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$38,400
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21.90%
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1995
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$213,300
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-1.16%
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1975
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$44,300
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15.36%
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1996
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$211,100
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-1.03%
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1976
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$55,000
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24.15%
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1997
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$217,300
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2.94%
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1977
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$70,100
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27.45%
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1998
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$251,200
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15.60%
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1978
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$81,100
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15.69%
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1999
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$273,500
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8.88%
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0.90%
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1979
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$93,400
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15.17%
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2000
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$300,400
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9.84%
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1980
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$107,100
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14.67%
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15.04%
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2001
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$334,800
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11.45%
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1981
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$118,100
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10.27%
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2002
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$391,600
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16.97%
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1982
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$120,100
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1.69%
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2003
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$458,600
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17.11%
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1983
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$132,700
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10.49%
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2004
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$535,000
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16.66%
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1984
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$133,900
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0.90%
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2005
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$623,275
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16.50%
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1985
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$138,200
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3.21%
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2006
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$660,000
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5.89%
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13.05%
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1986
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$146,200
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5.79%
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1987
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$165,700
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13.34%
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1988
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$210,600
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27.10%
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1989
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$248,200
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17.85%
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1990
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$257,300
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3.67%
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9.43%
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37 Year Average: 9.34%
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Buyer pre-qualified by loan officer |
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↓ |
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Offer accepted |
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↓ |
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Loan application taken |
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| OPENING DEPT Appraisal, credit verifs sent out |
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PROCESSING DEPT. Verified info from application reviewed. Second-guess any conditions and have them covered in loan package for submission |
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| IF PMI REQUIRED package sent to PMI for approval |
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LENDING UNDERWRITER Reviews package & cals out approva w/any conditions |
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PROCESSOR notifies escrow of approval & conditions. Loan officer notifies escrow when doc's will be in escrow |
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LOAN DOC's ORDERED. All conditions are collected by loan officer, processor & escrow. |
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LOAN DOC's signed in escrow & returned to funding department for final checking. |
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LOAN DOC's back to lender's underwriter/funder with all conditions met |
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↓ |
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LOAN FUNDS |
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↓ |
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RECORDING normally occurs day after funding |
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