FHA Financing Assists Borrowers in Gaining Homebuyer Tax Credit
November 9th, 2009
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The extension of the federal home buyer tax credit comes as good news to more people, as eligibility now includes some existing homeowners. Here are the highlights of the new tax credit program:
Tax Credit Eligibility Requirements Expanded
- Buyers who have owned a home for five of the past eight years are eligible.
- Single buyers may have gross annual income up to $125,000, while married couples may have gross annual income of up to $225,000.
- First time buyers (defined as anyone who has not owned a home within the preceding three years) are eligible for the full tax credit of $8000 while former or existing homeowners qualify for a credit of $6500.
New Tax Credit Qualification Deadlines
Under the new tax deadline, you must sign a purchase contract no later than April 30, 2010, and close no later than June 30, 2010.
No or Low Down Payment? FHA Qualification Requirements May Help
- If you don’t have enough cash to come up with 10% or 20% down, an FHA loan may help. FHA assists in facilitating home ownership by providing loans with low down payment requirements, and allows of as little as 3.5%.
- Source of down payment may include family, friends, employer, charitable organization, or government agency
- FHA Financing offers more lenient credit qualifying requirements than conventional mortgages.
- Closing costs:, FHA loans offer choices for paying closing costs. You can roll many closing costs into your mortgage amount, or have the lender absorb your closing costs in exchange for a higher interest rate. Of course, you may also pay closing costs up front.
FHA Mortgage Insurance
FHA insures mortgage lenders against losses caused by defaults. Borrowers are required to pay for FHA mortgage insurance in two segments: You pay an up-front mortgage insurance premium (UFMIP) at closing. In most cases, borrowers choose to roll the UFMIP into their mortgage amount. You also have to pay annual mortgage insurance premiums that are typically pro-rated on a monthly basis and added to your monthly mortgage payments along with amounts for paying property taxes and hazard insurance. Your FHA-approved lender can explain these costs when going over the “Good Faith Estimate” of loan charges, fees, and costs. If you’re buying your first home, it’s important to budget for the additional costs of owning a home.
Contact an FHA-approved lender to learn more about how combining the benefits of the tax credit with FHA financing can help make owning a home an affordable reality.
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