| Answer:
Dear BuyandHolder,
Without knowing what your financial commitments are – such as raising children, taking care of older parents, paying off education loans – and how solid your job is, I can only make an educated guess. And that guess is that this is a good time to buy… largely for two reasons.
Reason One: The First-Time Home Buyer’s Credit
Established by the government’s stimulus bill, this tax credit is worth $8,000. And, it’s scheduled to end on December 1st, although Congress is debating whether or not to extend the credit into 2010 and at the same time broaden it to include buyers who already own homes.
The credit does not have to be repaid (unlike a credit enacted in 2008) unless you move within three years after the date of purchase.
Even if you previously owned a home, you may still qualify. The law defines a first-time home buyer as someone who has not owned a house during the three years before this purchase. And, if you owned rental property during the past year but did not live in the property, you will also qualify.
Caution: If your spouse has owned a home in the past three years, you’re out of luck.
Details: www.irs.gov.
Reason Two: Home Prices Are Rising
For the third consecutive month, home prices in major cities rose. According to the Standard & Poor’s/Case-Shiller 20-City Index released this past Tuesday, prices rose in 17 of the 20 metro areas. And, of those 17 areas, 14 saw prices jump for the third month in a row.
In general, prices are up 3% since May yet are still below their peaks in 2006/2007. That bodes well for buyers.
TIP: If you want to take advantage of the $8,000 tax credit, get pre-approved for a mortgage right away. This will enable you to move rapidly should you find a house you like.
The VA Mortgage Program
If you are a veteran, you may qualify for the VA’s special loan guaranty program. The program is available to veterans who have served 180 days of active duty since September 16, 1940, or 90 days in any war. It’s also available to some surviving spouses, provided they have not remarried. These and a myriad of other rather complicated requirements are spelled out at: www.homeloans.va.gov.
The VA mortgage loan gives vets 100% financing without the need for private mortgage insurance (PVI). There is a VA funding fee of 0% to 3.3% of the loan. This is paid to the VA, although it can also be financed.
The “guaranty” part means the lender is protected against loss if you are unable to repay the loan. In other words, it replaces the protection a bank usually receives by requiring a down payment. Because money down is not required for VA loans, you would not need to tap into your BUYandHOLD account nor your savings.
The cap on VA loans changes periodically. It’s currently $417,000 ($625,500 for Hawaii, Alaska, Guam and U.S. Virgin Islands). That means qualified veterans could get a no down payment loan for up to those amounts. The loans are over 15, 20, 25 or 30 years.
Another plus -- VA loans are sometimes assumable. That means when you go to sell, the buyer of your home can pick up the payments where you left off, provided they have acceptable credit. The person assuming a VA loan need not be a veteran.
Good luck! |
