or "How Home Buyers Can Help Save the Economy"
First time home buyers have been given a once in a life-time opportunity to buy a home and in the process get thousands of dollars back to spend on home improvements. Provisions in the American Recovery and Reinvestment Act signed into law on February 17, 2009 offer unprecedented incentives for qualified buyers to purchase a home in the year 2009. Using existing home loan programs, it is possible to buy a new home with little to no money down plus receive a tax credit of up to $8,000 on which no payback is required.
Yes, it is possible to buy a new home with no money down, and in the process put up to $8,000 of tax-free money into your pocket. Because there is no longer a payback required for this home buyer tax credit, the new homeowners can experience the joy of “found money” as disposable income to spend or save at their discretion.
In addition to the initial savings, forward looking home owners can elect to improve the energy efficiency of their recent purchase with new windows, doors, air conditioning and/or furnace to receive up to $1,500 as an additional credit on their 2009 tax return. To emphasis the benefits of alternative energy, the environmentally conscious have been offered huge tax savings (30%) by purchasing solar or wind turbine products with new and existing tax credits to save an additional $2,000 for each system chosen.
Knowing that this $8,000 yax credit/rebate is coming to them, this lucky homeowner may choose to hurry to buy a plug-in hybrid car this fall. Imagine the possibilities for spending the additional $7,500 tax credit due to them in 2010 from this purchase? Keeping these savings flowing back into the economy in the form of discretionary spending will surely boost our ailing economy. How extremely fortunate for those who qualify!
How to Make this Work for You!
This program is available to first time home buyers as well as to anyone that has not owned a primary residence for the past three years. The buyer must earn less than $75,000 as an individual or up to $150,000 as a couple. A buyer fitting within these parameters and qualified by a lending institution may consider investing in a home purchase prior to December 1, 2009 to reap these benefits. Qualifying home purchases closed after January 1, 2009 are eligible retroactively.
Learning to build wealth from the ground-springs welling up at your feet is as easy to understand as it is to accomplish. If as a buyer you fit within these parameters, and are creditworthy (probably at least a 580 median credit score without evidence of a trail of NSF checks), you should consider the following as a simple guide to becoming a homeowner before December 1, 2009:
1) Choose a financial institution with which to work on qualifying for a home loan. You will need to know how much home you can afford to buy with your current income, debt load, and credit history. Your banker or mortgage broker will give you a letter stating the maximum amount of home for which you can qualify. This step is critical in its importance, as nothing can be done without knowing and proving your ability to borrow.
Ask your lender to base your qualifications on FHA guidelines with the seller paying your closings costs, and your 3.5% down payment coming from your savings and/or as a gift from a friend, family member or a down payment assistance program. If you live in a qualifying rural area and your earnings are less than the income limitations set to receive Rural Housing Act funds (as of March 2009 may be only slightly lower than the Act’s maximum $75,000), the seller can pay the down payment as well as the closing costs for you.
2) Develop a relationship with a knowledgeable real estate agent. Share with your agent your housing needs as well as the amount you want to spend. Some buyers may qualify for more home than they prefer to spend on their monthly payment. Buying as much home as you can afford within normal debt to income ratios has been traditionally the best way to maximize your home as an investment. Your agent can help you navigate the waters of purchasing a distressed home (short sale or foreclosure) as well as to negotiate the best price for your investment into your home.
3) Shop to find the best home value with regard to size and location available for your market. Currently, property values have fallen to prices similar to those in 2003 – the year the housing market started to grow in leaps and bounds. There are many bargain foreclosure properties for sale at this time but do not feel compelled to buy a foreclosed home. There are many good values among homes for sale by sellers that MUST sell and are willing to negotiate with you.
After you have chosen a great home by making a good offer and you have entered into a contract, you should have ALL normal home inspections performed as well as a survey. Ask your agent to review your title commitment to make sure that there are no exceptions listed on your title policy. In the rush to get properties sold, some title agents are not pointing out the clouds (problems) on some of the title commitments. Agree to close on your home only if you can obtain a marketable title free of liens and other issues.
4) Collect your keys and move in -- it may be just that easy in the year 2009 to begin building your wealth through home ownership!
Maximize the Tax Credits
Additional savings are available by structuring well-timed purchases with the new tax credits . If a home purchase can be closed before filing your 2008 tax forms, the $8,000 tax credit may be taken on your 2008 tax return. That means the $8,000 tax refund will be available to spend some time in 2009!
If you bought an older fixer-upper and choose to spend the $8000 on home improvements, you can maximize the savings by choosing energy efficient updates such as windows, doors, furnace or air conditioning systems. If $5,000 worth of qualifying fixtures or equipment (labor not included) are purchased, a $1,500 rebate will be seen as a tax credit on your 2010 tax refund as well. The new administration is encouraging consumers to purchase money-saving, energy efficient long term improvements.
The government is promoting savings for other "green" purchases as well. Additional tax credit savings of up to $2,000 each are available for the installation of qualified solar energy systems, geothermal heat pumps, small wind turbines and fuel cell systems. There is also a 30% tax credit (up to $500) for the cost of fuel cells or micro turbine systems in the home.
There is an additional way to be energy conscious if home improvements are not the spending priority. IF you plan to close on a new home before April 15, 2009, you can be one of the first 200,000 people (from each manufacturer) to buy a new plug-in hybrid car with some or all of your 2008 tax refund check with its home buyers tax credit of up to $8,000. The savings continue when you receive a $7500 tax refund in 2010 for the purchase of a plug-in hybrid car.
The purchase of big tickets items like a home, hybrid car, and energy efficient home improvements are now possible with improved and substantial discounts thanks to the American Recovery and Reinvestment Act of 2009. Owning the roof over your head has never been easier or more profitable for knowledgeable first time home buyers or those re-entering after three years without owning a home. Your purchases will serve to bring much needed spending into the retail, auto and home improvement industries – all areas of the economy hardest hit by job losses and the housing crisis.
When the housing market stabilizes, the economy will begin to show signs of recovery as well. Even in the most economically challenged areas, the purchase of a home creates a ground swell of new spending. Eventually this tiny bubbling up from a previously clogged spring will trickle out to form a stream of much needed capital flowing to individuals and businesses. In turn, these people will reinvest their new revenues producing a flow of income to hep turn the tides of a troubled economy.
Receiving government money in the form of tax credits will reintroduce the availability of disposable income into the pockets of some middle class Americans. In turn, discretionary spending in restaurants, hair and nail salons as well as for travel, entertainment and other choices will infuse much needed income to many more mainstream Americans.
Savvy first time home buyers have a genuine opportunity to impact not only their own lives and futures but those of others as well. Best of all, they can help save the economy by buying back into the American Dream of homeownership. Americans need encourage those eligible to take advantage of this unique opportunity offered to them. Preserving our way of life has been placed back into our hands. We need to do our part to help the economy recover. Please spread the word about this fantastic opportunity!
Part 2: A Real Life Example Maximizing the Credits.