First Time Home Buyer Tips

If you are looking to become a first time home buyer you may be overwhelmed with the idea of buying your first home. This is not at all uncommon. Buying your first home can be nothing short of a daunting task. You need to come up with a substantial down payment, many areas in the country are still way overvalued, and you have to qualify for a loan. There are a few first time home buyer tips that may just help you achieve the American dream.

First you need to think procuring enough capital for a decent down payment. It’s important to remember that if you put 20 percent or more down you achieve the all important 80/20 loan to value (LTV) ratio. Why is this important you may ask? We’ll if you have an LTV ratio of 80/20 or better you won’t be required to pay private mortgage insurance (PMI). Saving on PMI will allow you to afford more house or simply lower your monthly payments. PMI is mortgage protection insurance that protects your lender and not necessarily you. So, avoiding it only helps.

The government has allowed for a few benefits that can help you with the down payment, First, you can utilize retirement funds from your IRA, 401k, or other qualified accounts if you qualify as a first time home buyer. You are, however, limited to $10,000 towards your first time home purchase. Every bit helps though, and this may be a source for funds that you didn’t consider.

Another government program allows you a $7,500 tax credit if you’re a first time home buyer. This program has been introduced to encourage home buying during the current hosing mess. Before you get too excited about free money, it does have some restrictions. First, you must purchase between April 9, 2008 and June 30, 2009 to get the credit, so it’s short lived. Secondly, it’s not really a tax credit in the traditional since. The first time home buyer tax credit must be repaid over a period of 15 years. It is also capped at certain income requirements.

It’s important to do your home work as a first time home buyer. There are certain grants and aid available based on your state of residence. The FHA, Fannie May and Freddie Mac all offer first time home buyer programs that allow you to purchase a first home with rather minimal down payemnt requirements. Take a look at their web sites to see their latest offers.


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