FHA Home Buyers Tax Credit: Clock’s Ticking for First-Time Home Buyers

Remember the Good Old Days? These are the Good Old Days!! tick tock… tick tock…

Time is running out. Hurry before April 30th to take advantage of Federal Governments first-time home buyer tax credit. If you are considering parlaying the home buyer tax credit with an FHA approved mortgage, then you will want to also turn it up a notch and make sure you apply for your mortgage prior to April 5, 2010, when The Department of Housing and Urban Development (HUD), through it’s FHA program, will be raising the amount of the required upfront mortgage insurance by a half-percent, from the current amount of 1.75 percent to the new amount of 2.25 percent. View Today’s FHA Rates.

• FHA will still allow a borrower to qualify for a FHA mortgage with as little as 3.50 percent down payment.
• FHA may allow up to a 55 percent debt to income ratio (DTI) to qualify for this 3.50 percent down payment mortgage.
• FHA will allow a borrower to purchase an owner occupied property and qualify up to a 55 percent DTI while including a non occupant co borrower.
• FHA will allow maximum financing of 96.5 percent LTV (3.50 down payment) for borrowers related by blood, marriage or law (spouses, parent-child, siblings, stepchildren, aunts-uncles/nieces-nephews, etc.), or for unrelated individuals that can document evidence of a family-type, longstanding, and substantial relationship not arising out of the loan transaction.
• Conforming loans (Fannie Mae and Freddie Mac) will not allow a loan with a Loan to Value Ratio of greater than 80 percent to qualify fro a mortgage if the debt to income ratio is greater than 45 percent at best. FHA will still allow a seller to contribute up to 6 percent of the Purchase price toward the buyers closing costs.
• FHA will allow this 6 percent Seller contribution to be used toward the upfront mortgage insurance and/or to buy down the interest rate.
• FHA will not allow the 6 percent seller concession to be used toward the 3.50 percent down payment FHA will allow the 3.50 down payment to be in the form of a gift from a related to the borrower or with an established “family type relationship”
• FHA will also allow the buyer to borrower the money from a relative, then when they get this infamous Homebuyer Tax Credit back from the US Federal Government they can pay them back if it was not initially gifted to them.

President Obama signed into law H.R 3548 The extension and expansion of the home buyer tax credit on Friday November 6, 2009.

In case you haven’t heard the home buyers tax credit has been extended and expanded to include:

1. Extension of the current $8,000.00 tax credit for first-time home buyers with a signed purchase contract by April 30, 2010, and closed by June 30, 2010
2. Raising the income limits for singles to $125,000, and for married couples filing jointly to $225,000
3. Offering a $6,500 credit for current home owners who have owned their current home as a principle residence far any consecutive five-year period out of the last eight years.
4. Limiting the purchase price of the home at $800,000
5. Members of the military, military intelligence, and foreign service who are on qualified extended official duty are not subject to the recapture fee, and individuals who have been deployed overseas for 90 days or more in 2008 or 2009 can claim the credit through April 30, 2011.

The expansion of this credit for current home owners and/or people making more than $75,000 for single taxpayer, and $150,000 for married couples filing jointly, is effective and shall apply to residences purchased after the date of the enactment of this act.

I am sure you have either heard someone else remark or possibly say it yourself, “Remember the Good Old Days.”  Well in spite of some of the serious economic challenges we are facing at this time as a nation, in some aspects with regards to home buying and/or refinancing your current mortgage, these ARE the Good Old Days we are currently living in, and we will be referring too these days as the Good Old Days in the future.

For all home buyer’s tax credits these are the critical times. The clock is ticking for both first-time buyers & FHA home buyers.