First time home buyers are a strong addition to any housing market. First off, they tend to purchase properties in neighborhoods that need stabilization. These homebuyers also are building wealth for their families in the coming generations by building equity. Finally, first time homebuyers tend to turn around and put disposable income into their homes as well as making their mortgage payments.
What Defines a First Time Home Buyer?
If you’ve never owned a home before, you’re obviously a first time home buyer. If you’ve been renting for at least 3 years, you can qualify as a first timer when you apply for a mortgage.
Additionally, if you marry someone who’s never owned a home (also considered a first time home buyer), you can fall into this category. If you’re recently single and owned a home with your spouse but are now buying on your own, you qualify for the designation. You may have been on a mortgage for years prior to the end of your marriage, but until you’re the only borrower on the mortgage, you’re a first time buyer. Finally, if you formerly owned a mobile home, you qualify.
Benefits Available to You
One you get qualified for your mortgage, there are several benefits you can use to put together your down payment. To start, make sure you apply for a down payment grant or a forgivable loan that you can use to get into your home. This is important for first time home buyers to understand.
Before making these applications, take a good look at your five year intentions, or your five year plan if you have that certainty. Funding for down payment help can be clawed back from you by the lender or grantor if you don’t fulfill the term of the debt or meet other requirements. Many forgivable down payment loans require you to stay in the home for a specific term. Down payment help isn’t much help if you need to move in 18 months and have to pay the loan back out of the proceeds of the sale of your home.
Tax Credits and Deductions for First Time Home Buyers
The 2008 federal first time home buyer tax credit was allowed to end in 2010. However, you may still qualify for state credits depending on where you live.
Instead of a lump sum, many of these credits relate to the interest you’ve paid your mortgage. Because most mortgage interest is currently deductible, you may be able to double up on that deduction if you’re already taking it on your federal return. Florida offers a state credit that’s related to a percentage of the value of your home.
If you’ve always done your own taxes, it’s a good idea to have a professional look them over to avoid missing out on one of these valuable deductions or credits. A sizable credit or deduction can provide you with a refund that you can use to improve the value of your home or to pay down your loan principal.
Let Your Realtor Know
Discuss your situation with your realtor and confirm that you are considered a first time buyer. This status opens up many avenues for you.
It’s important to note that first time home buyers conventional mortgage lenders tend to look more closely at the borrower than the property. If you’re a first time buyer, your lender will also take a hard look at the property. Lenders want to be certain that borrowers don’t get in over their heads, both in regard to their debt to income ratio and the livability of the home.
Unless you have time before you need to move, avoid buying a house that needs a lot of repairs. You may be interested in doing your own work, but unless you have the tools and the skills, you may find yourself overwhelmed with work or trying to function in an unlivable house. Your best choice, for the first year at least, is to buy a house that needs cosmetic touches but no major repairs. Wait to decide on renovations until you know what works and what doesn’t.
Let Your Lender or Broker Know
It’s a very good idea to get prequalified before you start looking. Not only will you know your price range, but your lender or mortgage broker can let you know of any problems on your credit report that you need to address. They can also let you know if you need to step away from the house search and focus on your debt.
However, if your credit rating and debt to income ratio are good and you can qualify for a first time home buyers mortgagee program, make sure you find out what loans and grants are available. Apply for everything. Carefully review what you qualify for, and choose the option that works best for you if you qualify for multiple forms of assistance.
Sellers in the time of COVID 19 are looking to reduce uncertainty, just as buyers are. If you can find a house to put a contract on, do so. Once you have a contract, lenders, grantors and your entire team of real estate professionals will profit from your purchase. If you don’t get a house, they won’t. Most real estate contracts run 30 days, so once you sign, you have a limited amount of time to get the money in order.
This urgency can also apply to you. For example, if you’re renting, you will need to let your landlord know, and you may have to find a way to get out of your lease. If you don’t do this, you may lose your deposit, so be sure to notify your landlord as soon as you start looking for a house that you are planning a move. Once you set a closing and possession date, notify the landlord of your moving date.
First time buyers are critical to the housing market as a whole, so programs put in place to make it easier to qualify are quite common. Discuss your status with your realtor, your lender or the broker helping you to find the most appropriate lender. Find the assistance that serves you best.
Find Out About The Programs Specific To Each State Below: