Why Today is Quite Possibly the Best Time Ever for First Time Homebuyers
With all of the media attention that real estate and mortgages have demanded in recent years, it’s important to not forget the fundamentals. Nothing real has changed. I know the mortgage meltdown problem is real, but real estate is still valuable and not as scary to jump into as the media leads often states. There are a few key reasons why now might possibly be the best time in history to be a first-time homebuyer.
Photo by seanosh via Flickr
Home Prices are Bottoming
I don’t claim to be an economist but you don’t have to be Alan Greenspan to know that a home is a bargain when it’s selling at the same prices as 10 years ago. Argue if you want, maybe it’s not a bargain, but there’s no way we are in a bubble and realistic buyers cannot expect the floor to drop much lowers. Even if current prices are not as low as they might be it is still a great time if you are a prudent consumer.
First-Time Homebuyer Tax Credit
Wouldn’t it be great if the government offered you a reward for investing instead of just a gnarly tax bill? Well, for the rest of 2009 the federal government doing just that! Originally the First-Time Homebuyer Credit was a $7,500 tax credit that was to be repaid interest free over 15 years, essentially a loan at 0%. However, this bill was modified to declare the credit a grant that does not require repayment at all. The limit is $8,000 or 10% of the home value, whichever is lower. In order to fully qualify, you must make under $75,000 individually or $150,000 with a spouse. Learn more about the Expanded Tax Break Available for 2009 First-Time Homebuyers on the IRS.gov site.
Possible Zero Down Financing
The tax credit is sweet, but the FHA is potentially making it even sweeter. Rumors are swirling, and should be confirmed next week, that the FHA is to allow $8,000 tax credit to be used for down payment on FHA home loans. This is huge because it basically means buyers could make any home $215,000, or below, essentially zero down. Say what you might about zero down financing, there are folks who can afford a monthly payment but have trouble accumulating much of a down payment.
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FHA Loan, mortgage meltdown, first time homebuyers, alan greenspan, irs gov, home, First-Time Homebuyer CreditRecommended articles
All posts by Brandon Charles
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Yeah, I’m kind of bummed that we bought our home in September 2007. But we are thinking of refinancing. It’s a good time to do that, too.
How are home prices at 10-year ago (1999) levels? Maybe it’s close in extremely distressed areas like Detroit or the inland part of California but it’s no where close to 1999 prices anywhere that people actually want to live in.
You’re right, the ten year low allusion is probably an exaggeration in most places. I’m just trying to point out that prices have slid way off so if you’re buying for the long term (i.e. not speculating in hopes of appreciation) it isn’t critical that you wait for the absolute bottom (because you’ll miss it!).
It looks like the FHA bridge loan program cannot be used until certain changes are made, such as:
1. Agencies and lenders must be approved who have funds for the down payment.
2. A Change to the HUD guidelines on the time frame that is allowable for a bridge loan.
3. A change to the IRS guidelines allowing the refund to be assigned to an agency or lender.
We bought last July. Yes, our home’s in a rust best city, but we got a brick home with 1,900 square feet (another 1,000 in the basement), full two-car garage, brick out building and 1.2 acres for under $140,000—all immaculately kept. Oh, within walking distance of two grocery stores, fast food, videos, great school…
Life is good!
I am looking to take advantage of this opportunity by buying a duplex. I want to live in one and rent out the other. I think this will be a great move on my path to building wealth.
@Chiko — Buying a duplex with an FHA loan is a really smart way to start building wealth. Your renters will pay a sizable chunk of your mortgage and you’ll realize the equity gain from the appreciation of the entire duplex. It only takes 3.5% down to boot.
This is absolutely a great time to get in as a first time homebuyer. We got in about 5 years ago and thought that was a good time. We sold our first house in a couple of years and made quite a bit on that so we could buy our next. Got a fixed rate and now we’ve turned it into a rental property. We need about $1000 to cover mortgage, taxes and insurance. I think nowadays your mortgage will be much less. All this doom and gloom can lead to some really low home prices.
Now if only one of those people would just buy *my* house, I’d be a happy camper. Back to wishin’ and hopin’ for me.
Has there been any further discussion within the government since the announcement on the tax credit possibly being used for a down payment? I haven’t seen any further updates since it was hinted on previously by the Housing Dept.
Anyone have any kind of idea how long it would take to implement this if it goes through?
Why does the home need to under $215,000 to use the $8,000 for down payment? Is that because of the FHA restriction in your area? In California you can use a FHA for a home far greater than $215,000.
The home doesn’t have to be under $215,000, that just makes it theoretically no down payment based on 3.5% down.
Great article! I really think times of late just proves that even in the midst of a recession, there is and always will be a few good things that will occur. I just hope people aren’t too depressed to see these opportunities.