Mortgage Origination
First Time Home Buyer Information
Why do First Time Home Buyer Programs Exist?
After the collapse of the housing market from 2007-2008, the Government created First Time Home Buyer programs in attempt to stimulate residential demand, as well as create affordable access to home ownership for Americans. First time home buyer programs were a topic included in the American Recovery and Investment Act of 2009. Congress approved the tax credit for the act as a piece of the stimulus package. Since the federal home buyer tax credit was extended into November, experts continue to argue whether the programs have been market drivers or had little effect.
Unwinding the Cycle
At first glance, unwinding the economic cycle can be a challenging task. However, the explanation can easily be broken down into a few simple steps. As banks decrease the amount are funds they are willing to lend, loans for firms and individuals become more difficult to finance. This lack of funding leads to a decrease in demand in the housing market. As the economic law of demand states, as the demand for housing decreased, prices for homes decreased as well. Default rates began to increase as an after shock, followed by an increase in perceived risk by lenders. As investment becomes riskier, fewer consumers are willing to participate in the market. The risk rests on the consumer as well as the lender in this equation. If consumers borrow funds to invest in the housing market, there is a possibility that the house will rapidly lose market value in comparison to recent years. The risk for lenders is the possibility that borrowers will not be able to repay the loans and default.
FAQs
The top 5 FAQs for First Time Home Buyers:
1. What amount of credit is available?
A: $8000 for singles, $4000 for married couples filing separately.
2. Am I eligible?
A: Yes, if the individual has not had an interest in a principle residence for 3 years prior to the current purchase.
3. When will my credit reach termination?
A: Originally, the deadline was April 30, 2010, but an extension has pushed termination to November 2010.
4. What is the Binding Contract rule?
A: So long as a written, binding contract to purchase is in effect on April 30, 2010 the purchaser will have until June 30, 2010 to close.
5. What is the limit on income to remain eligible?
A: $125,000 for singles and $225,000 for married couples.
1. What amount of credit is available?
A: $8000 for singles, $4000 for married couples filing separately.
2. Am I eligible?
A: Yes, if the individual has not had an interest in a principle residence for 3 years prior to the current purchase.
3. When will my credit reach termination?
A: Originally, the deadline was April 30, 2010, but an extension has pushed termination to November 2010.
4. What is the Binding Contract rule?
A: So long as a written, binding contract to purchase is in effect on April 30, 2010 the purchaser will have until June 30, 2010 to close.
5. What is the limit on income to remain eligible?
A: $125,000 for singles and $225,000 for married couples.
Form 5405: Determining Your Credit Amount
Form 5405 is a quick and easy way to determine your credit by IRS guidelines.
Programs
Each state in the US has created individual programs. Refer to the following website to find information for your state: Local Home Buying Programs
The Beige Book
The Beige Book is the Federal Reserve's report of economic change in the districts of consumer spending, tourism, non-financial services, manufacturing, banking and finance, agriculture, natural resources, employment, wages, and lastly prices. The report is published 8 times each year. The report claims that most of the country is experiencing stronger home sales thanks to the tax credit, but are unsure of the future when the credit expires.
Tips For First Time Buyers
Check out the prices are surrounding homes in the preferred area and decide honest affordability. Predetermine the desired length of the mortgage as well as length of home hunting. Narrow home choices down to a handful to prevent being stuck in a "choice rut." When you find your home, buy it.
