BiggerPockets

Hello everyone, im kind of walking blind here, and hoping to get some good advice from you all!


I live in Yakima, Wa and pay around 675 for rent, where i live you can get a decent house for around 100,000 grand ( Starter home )

Im just finding out about this tax credit, and wondering if this could almost be my ticket to get a small house and own my house at the age of 22.

My Questions to you guys,

How much of a down payment am i looking at for a house around 100k?

Being a first time buyer, do i receive any other type of benefits? (besides the assistants with a down payment etc )

someone was telling me i could get around 12,000 if i buy a house before dec 1? But doing a little research on my own, its 10% of the house's value, up to 8,000.

i was thinking of taking the 8,000$ and setting up a bank account and pay my payments through that account while making another nest egg to pay rent while i attend a trade school, anyhow im getting off subject here..


Is there anything you guys could point me out on what to read, do i take a class for first time buyers program ? i have around 1,000 cash on me, would 5 grand be enough for starting out?

Please ask me any questions that could help you help me go in the right path!

Thanks guys, and sorry if this has been posted before, i did a search and didnt find anything! :mrgreen:

It is not always the realtors who know all about the tax credits, but the loan officers. Since it is them you are getting the loan from, they are your best bet. Some lenders in my state have 100% financing for rural areas. I would suggest you call around to atleast 3 different lenders and take the one who can satisfy all your real estate needs the best.

I think you may misunderstand a bit about how this tax credit works. Its a refundable tax credit you get when you file your 2009 taxes. Refundable means you can get it even if you don't owe taxes. Say your taxes for 2009 are $3,300. If you're like most people you over withhold, and your taxes paid end up being $3,800. You'd get a $500 refund. With the tax credit, your refund would be $8,500, even though you didn't pay that much.

You get this money when you pay your taxes, not when you buy the house.

The lowest down payment commonly available is FHA. That requires a 3.5% down payment. In addition, you'll have closing costs, loan origination fees (I assume this apply to FHA loans, too, but perhaps not), inspection fees, appraisal fees, and prepaid taxes and insurance. I'd estimate to buy a $100K house you would ned $3,500 for down payment and about $3,000 for all the other costs.

It is possible to get a short term loan based on the $8K tax credit to be used to cover these other costs and to add to the down payment. You can't use the short term loan to actually get any cash at closing. This HUD mortgagee letter, HUD Using First-Time Homebuyer Tax Credits, gives the details.

So, you could get a short term loan for about $3000 (plus the costs of this loan) to cover the closing costs. If I'm reading this correctly, you still must come up with the $3,500 down payment.

Once you file your 2009 taxes and get the $8000, you would pay off the $3000 loan and have $5000 in your pocket.

I estimate the PITI payments on a $100K house with an FHA loan to be around $650 and that you would need about $2,100 in monthly gross income to qualify. Don't really know taxes or insurance in your area, so this is just a guess. Speak with a lender to get a better guess and to find their actual qualifications. If you have other payments like car payments or credit cards, you may need more income to qualify.

I don't understand this:

i was thinking of taking the 8,000$ and setting up a bank account and pay my payments through that account while making another nest egg to pay rent while i attend a trade school, anyhow im getting off subject here..

You're not going to get this credit until you buy something and then file your taxes. Why would you be paying rent, too? This credit only applies to owner occupied property, so you have to live in the house you buy.

Lynn brings up some good points. Houses create lots of costs besides the PITI payment. That can be tough for first time home buyers who are moving from a rental to a house they own. With a rental, the landlord takes care of most things. With a house you own, you're on your own. If the heater breaks on Christmas eve, its your problem to pay a premium for someone to fix it or replace it. When you first buy a property, you'll have all sorts of little expenses. Shower curtains, window treatments, lawn mower, etc. This tax credit is intended, I believe, to ease that "I have to buy a what?" shock associated with making this leap. Don't make too many plans for that cash since you'll have numerous expenses you aren't aware at the moment.

How much of a down payment am i looking at for a house around 100k?

You would need to check around with lenders to determine what type of loan you may qualify for, because due to the economy, lenders have tightened up the purse strings so to speak. A lot of lenders who offered 100% financing last year are no longer offering this. Also, with closing costs.............you have to have money up front for this. You will not be able to get the 8,000 right at closing.

I was able to use my VA benefit, and VA does not require a down payment or PMI (mortgage insurance). Don't forgot to factor in PMI if you do not have %20 down. This may run you as much as an additional $90 a month for your mortgage. If your bank require escrow, you need to factor in property taxes and home owner's insurance with that also. *You also want to do your homework to see if the home you like is in a flood plain or earthquake zone. FEMA has maps on their website. These are additional, and can cost almost as much as your regular annual home owner's insurance.

I am a first time home-owner, and it has definitely been a learning experience. One house I put an offer on, the home inspection found a lot of hidden problems.......so there goes $355.00, for the termite/whole home inspection. Remember you do not get this money back!! On the house I will be closing on next week, I still had the additional cost of the inspection. Another 300.00..........the bank may require you to get an appraisal............425.00. One thousand dollars easily spent! Some sellers also want to see some amount of earnest money to know you are serious about the contract. And the title company does cash that check, so you can't float that until closing. So let's say you put a modest 500.00 in earnet, you have run over your 1,000. Closing costs, depending on taxes and other bank/lender fees, could cost you as much as $3,000.

I have lived in a town home for several years and have items, but I still need things like a lawn mower (300-average cost), had to buy a refrigerator (900). Your utility company may require additional deposits also if you have not been a customer with their company.

Houses are like children..........you may get a deductible, but you will spend that money on them!

Don't rush! Lender's are very particular now about who they offer mortgages. Be very cautious if someone offers you a mortgage if you do not have enough money on hand to pay closing costs. My lender wanted to see current bank statements, and several months worth of payroll statements, so they find out quickly how we spend our money and how much money on average we typically have on had on a monthly basis.

I hope this was not too long winded! I have been looking at homes since March, and I have looked at nearly 50 homes. You don't want to end up with a money pit and end up in foreclosure because you can't make your payments.

Good luck! :cool: