First Time Home Buyer Stimulus

If you are a first time home buyer, stimulus programs passed by Congress in 2008 and 2009 might give you the extra help you need to purchase your home.

First time homebuyers are taking advantage of a variety of different home loans.

Buying Your First Home

A home purchase will probably be the largest purchase you will ever make. Not only does it require a big cash down payment at the beginning, it will require you to pay a sizable loan payment every month.

As with all large purchases, buying a home requires a lot of preplanning. The more planning you do before the purchase, the greater your chances of finding the right home at the right price. Your key planning activities should include:

• Determine your price range – Figure out how much you can afford to spend each month on your mortgage and taxes as well as how much down payment you will have available when you purchase your home. Once you know these amounts, use a mortgage calculator to determine the maximum amount of mortgage that you can afford. Knowing your budget will quickly let you know what size home you can buy, and in what neighborhood.
• Clean up your credit history – Review your credit reports at all three major credit bureaus, correcting any errors. Request a copy of your credit score. Knowing your credit score will help you understand your chances at receiving a mortgage loan at a reasonable interest rate.
• Assemble your down payment – Once you know your price range, you will be able to calculate how much cash you will need in order to put down a down payment of 10 percent or more.
• Talk to local lenders – Your lender can tell you the types of loans they have available as well as provide you with information about special loan programs which might be available to first time homebuyers. They will also be able to give you the details on special federal, state and local programs available to help first time home buyers.

First Time Home Buyer Stimulus Programs

Generally, a first time home buyer is defined as a person who hasn't owned a home in the past three years. They can be singles or couples or groups of individuals who are buying a home together.

Governmental groups often provide special mortgage programs to encourage new homebuyers to get into the market. Federal, state and local programs are available to assist new homebuyers with some of the financial aspects of their purchase such as:

• Down payment assistance
• Reduced mortgage interest rates
• Tax credits

In 2008 and 2009, federal programs were passed by Congress to stimulate the housing market and the economy by providing assistance to first time home buyers. Both programs were designed to provide tax credits to new home buyers. These tax credits could be used to reduce the homeowner's tax bill or increase their tax refund.

American Recovery and Reinvestment Act of 2009

Congress approved a tax credit program for first time homebuyers as part of the American Recovery and Reinvestment Act, commonly called the "Stimulus Package." The credit is designed to motivate new buyers to get into the mortgage market during 2009. The specifics of the 2009 credit program include:

• Amount – A first time home buyer can receive a credit equal to 10 percent of the purchase price of their new home, up to a maximum of $8,000.
• Timing – The home must be purchased on or after January 1, 2009 and before December 1, 2009.
• Eligibility – The maximum modified adjusted gross income (MAGI) for single taxpayers is $75,000 and $150,000 for married couples. The MAGI is a taxpayer's adjusted gross income plus the amount of any tax deductions such as IRA contributions, student-loans and college costs. Partial tax credits are available for tax payers with higher income levels.
• Qualification – The new home must be the homeowner's principal residence. It does not have to be a single-family home. In fact, a wide variety of housing types will qualify including condos, townhomes and manufactured housing.

To claim this first time home buyer stimulus credit, the homebuyer uses IRS form 5405 to calculate their tax credit and then enters the amount of the credit on their 2009 Form 1040 of their federal income tax return.

Housing and Economic Recovery Act of 2008

A tax credit was also included as part of the Housing and Economic Recovery Act of 2008. This tax credit was designed to provide an amount of money to the first time homebuyers as an interest-free, 15-year loan. The details of this program include:

• Amount – First time homebuyers can receive up to 10 percent of the home's purchase price. Single and married taxpayers who file joint returns can receive up to a maximum of $7,500. The maximum is only $3,750 for married couples who file their taxes jointly. Higher income taxpayers may be eligible for a partial tax credit.
• Timing – The home must be purchased after April 8, 2008 and before July 1, 2009.
• Eligibility – The maximum MAGI for a single taxpayer is $75,000 and $150,000 for married couples who file a joint tax return.

This tax credit is claimed on the taxpayer's federal income tax return. The federal tax return is also used to repay one-fifteenth of the credit every year starting with their 2010 tax return.

Stimulus Information Updates

The most current details of the federal stimulus programs and other federal mortgage assistance programs are available on the federal Internet websites at:

• Tax credit details
• Recovery and stimulus package details and updates
• FHA home buying programs
• Veterans Affairs loans and programs
• FannieMae programs

• List of Popular Mortgage Companies
• FHA Loan Guidelines
• Amortization Table

• FHA Mortgages and Home Inspection Requirements
• Help for Single Moms to Buy a House
• Escrow
• FHA Debt to Income Guidelines
• Free Home Inspection Forms

• Stimulus Mortgage Refinancing Facts
• Stimulus Package Mortgage Assistance
• Home Mortgage Stimulus Credit
• Down Payment for Mortgage for First Time Home Buyer
• First Time Home Buyer Tax Credit