As a first time home buyer you may think that you don’t have enough credit history to get approved for a loan. However, mainly due to government regulations, private lenders can obtain tax benefits when they lend to first time home buyers. There are also government grants and loans for first time home buyers that will provide you with the finance you need.
Approval for first time home buyers has become increasingly simple but there are still obstacles to be overcome when you want to get a home loan for purchasing your new home. In order to understand what you need for getting approved you need to know how credit risk affects approval and how you can avoid this problem.
First Time Home Buyers Difficulties
First time home buyers seldom have a credit history long enough to create a pattern a lender could use to analyze their credit behavior. Having no credit can sometimes be worst than having bad credit. However, as regards to home loans this is not the problem as we will analyze when examining secured loans.
The real problem with first time home buyers is the lack of experience. Purchasing a home is not a simple process and unless you know which steps to take, it may take a lot more time than you expected. Proper preparation can solve this problem, so you need to gather all the information you can and learn about the legal an economic components of a home purchase.
Secured Loans: No Credit Is Overlooked
Secured loans are guaranteed with an asset which means that the risk involved for the lender is considerably reduced. The lender can always recover the money lent by taking legal action of repossession against the property to claim the amount owed. Thus, as opposed to unsecured loans, credit score and history is not so important.
Secured loans overlook the lack of credit of applicants as long as they can show proof of having enough income to cover for the monthly payments and closing costs of the loan. Nevertheless, since no credit implies a higher risk, those who lack a credit history will have to pay more interests than those who can show a good to perfect credit.
Co-Signer Further Reduces Risk
By providing a co-signer, the already lower risk implied in a secured loan transaction is reduced even more. A co-signer is at the same time responsible for the loan payments. When applying for a home loan with the aid of a co-signer, the interest rate charged for the loan is also reduced and the loan term extended to suit the applicants’ needs.
A co-signer makes a home loan approval even easier. The income requirement is easily achieved by an applicant if the co-signer income is also computed to see if the incomes reach the minimum required by law. Also, the credit requirements are more flexible as there are two people obliged by the loan. If either of them qualifies, both do.
Melissa Kellett is an expert loan consultant who has worked for twenty years in the financial industry and helps people to repair their credit and get approved for home loans, unsecured personal loans, student loans, consolidation loans, car loans and many other types of loans and financial products. If you want to learn more about Poor Credit Personal Loans and Guaranteed Approval Mortgage Loans you can visit her site http://www.speedybadcreditloans.com/
The other day I was listening to a local agent complaining about how quiet the office was – nobody was coming in. “It’s to be expected”, he said, “Everyone is going through the same thing;.”
It frustrates me that people are content to sit and wait for business to come to them. This complacent attitude only translates into missed opportunities.
One of the prime opportunities in our current market is the first time home buyer. This is a cross-section of the real estate market that is ripe for the picking. While seasoned buyers were cashing in during the boom, first timers could barely make the down payment. Now with low interest rates, cheap house prices, plenty of inventory, and government incentives, first time investors are back in the game again.
The trouble is, they’ve been scared off into sitting on the sidelines by the barrage of economic horror stories in the media. The smart realtor will take this opportunity to educate the public. You’ve got time on your hand, use it to your advantage. Spread the word and hold free lectures about buying a home. Outline the steps involved in a home purchase and explain the legal terminology.
Do some number crunching that demonstrates to renters how much house they could get for the same payment. Post current mortgage rates by all major banks. Open their eyes to the different ways they could subsidize their mortgage by renting out rooms in their own home.
Outline the process for obtaining financing and what new buyers can do to maximize their success with lending institutions. Describe how they can obtain credit checks and what information they should have before applying for a mortgage, so they go in confident and prepared.
Explain the different FHA and government-sponsored programs that are available for first time homebuyers. A prime example is the $7,500 interest free loan they can receive from the federal government.
Eligibility requirements include:
- Home must be the first for both spouses (rental properties and vacation homes don’t count).
- The home purchase must be between April 9, 2008 and July 1, 2009.
- Income should not be greater than $75,000 (single) or $150,000 (married)
Once they qualify, the new buyers get a refundable tax credit that basically wipes out $7,500 of the taxes they pay for that year. The catch is that the money has to be paid back at a rate of $500 per year at tax time – with no interest.
Up until now, you’ve been dealing with a cross-section of the market that has heard nothing but negative information about the housing market; it’s your job to turn that around. You may be pleasantly surprised with the results.
Edkirkland.com is the place to satisfy all your Destin real estate needs. Our free, easy-to-use website features powerful home search technology, information on market trends, and a guide to finding the best deals in the Destin condo market.
Have you ever heard of the Housing and Recovery Act of 2008? Well today we are going to focus on one of the benefits, the $7500 First Time Home Buyer IRS Tax Credit.
Even with interest rates at historical lows and with a wide selection of discounted homes on the market, people still weren’t buying, so the government came up with this tax credit to stimulate and provide financial assistance for First Time Home Buyers to buy now rather than wait.
The $7,500 First-Time Home Buyer IRS Tax Credit only applies to first-time home buyer purchases of a primary residence between April 9, 2008 and July 1, 2009. It is important to understand that this is a TAX CREDIT and not a TAX DEDUCTION. Now a tax credit is a reduction in income taxes owed! In other words, when a buyer files their income taxes for the year the home was purchased (April 2008 – July 2009), they may be able to subtract $7,500 from the amount of federal income tax liability, which will either put more money in your pocket as you will get an increased tax refund or reduce the amount of tax still owed.
However, this tax credit is not FREE. Yes, this is not a hand out from Uncle Sam; it is a loan that has to be paid back. Repayment will begin 2 years after the credit is claimed, and must be repaid within 15 years. So that’s a $500 payment per year. It’s an interest-free loan for 15 years.
Now before you get turned off by this “LOAN,” lets take a look on the benefits this $7500 tax credit may provide. Majority of first time home buyers have walked away from the closing table with an empty savings and or checking account once the purchase of their home is complete. Now they have a home to decorate, furnish and in some cases repair and paint. Majority of these first time home buyers will now turn to their credit cards to pay for these expenses, which will come with pretty high interest rates. So when compared to have a credit card payment which comes with interest charges, versus and an interest free $7500 loan…..it now seems a little more attractive.
Now for those of you first time home buyers that are a little more well off financially, this can still benefit you….here’s how.
Let’s assume a $200,000 mortgage was needed in the home purchase at 6.0% interest rate fixed for 30 years. What if the $7,500 tax credit was a refund which you used to pre-pay the mortgage? Using simple math that would be an annual interest savings of $437.50; which is actually less than the $500 payment per year on the $7500 Tax Credit Loan.
The main benefit here is not just the payment savings but the outstanding mortgage balance will be reduced by $7,500 and each future mortgage payment results in savings in mortgage interest and increased reduction in principal mortgage. As each monthly mortgage payment go to reducing the mortgage balance and less is applied to interest. Together these savings will exceed the $500 cost of repayment of the tax credit. The benefit over the long term in interest savings and principal reduction will be quite amazing. Talk about good old Uncle Sam helping you payoff your mortgage early!
Marlon Baugh is a nationally-known mortgage expert. Since 2003, he has specialized in FHA Mortgage Loans for people with Bankruptcies, Foreclosure or with other credit issues, as well as Commercial Mortgages. If you would like a Free Copy or to get instant access to the remainder of this Insider Mortgage Report, please visit http://www.specializedfinancialsolutions.com/own-a-home.htm or Call 954-678-5796
