First time homebuyer tax credit

[frisco]

I've been following these developements pretty closely. A few weeks back, HUD announced that it would allow the lenders to front the $8,000 tax credit to the homebuyer as they were well aware, the greatest problem facing 1st time homebuyers is the down payment. Great idea!!!

As of Friday, HUD announced, the $8,000 can't be used as part of the down payment. I don't understand. What's the point??? It seemed as though the government was saying "Here - In an effort to help the housing market get back on track, we're going to give you $8,000 if you buy your first home this year." When they announced you could get it fronted to you at closing, all the better. Now, they're enforcing rules on how you can use that money.

Doesn't make sense to me.

 

[Piecey]

I'm glad it can't be used as a down payment.

DH and I took it on the house we closed on 12-22-08. We have to pay ours back. I was pretty sore when they decided that if we'd closed a week later, we wouldn't have had to pay it back, but whatever. We used it to install central air in our house.

I think letting people have it to use as a down payment is going to put us right back where we were to begin with-- people who can't afford their mortgages and never should have been given one in the first place. It takes responsibility to save up for a down payment and handing people their down payment isn't going to help.

DH and I saved up our down payment but didn't end up needing it (VA, employee loan) so it's our *nest egg* of sorts.

 

[frisco]

I'm glad it can't be used as a down payment.

DH and I took it on the house we closed on 12-22-08. We have to pay ours back. I was pretty sore when they decided that if we'd closed a week later, we wouldn't have had to pay it back, but whatever. We used it to install central air in our house.

I think letting people have it to use as a down payment is going to put us right back where we were to begin with-- people who can't afford their mortgages and never should have been given one in the first place. It takes responsibility to save up for a down payment and handing people their down payment isn't going to help.

DH and I saved up our down payment but didn't end up needing it (VA, employee loan) so it's our *nest egg* of sorts.

Then why bother giving the $8,000 at all?

 

[ZachnElli]

I work in an insurance agent's office, I've been doing several first time buyer homeowner's policies because of the tax credit. It's definitely working here. And several of these people are young, the youngest was a 19 year old male buying his first house.

 

[golfgal]

The problem is that you can legally only get down payment money from your savings, a relative or an employer and since your lending company is none of the above the money would be given out illegally. They didn't think through that very well when they offered the money for down payments.

 

[Where'sPiglet?]

Say you have 20K in savings and don't want to wipe ALL of it out on the down payment, but you need all 20K. If you had 8K up front, you could put all 20K of your savings for the down payment, and replenish your savings with the 8K immediately.

Am I reading that policy correctly?

 

[LadyZolt]

If you don't have at least 10% (and hopefully more like 20%) to put down on a house, then you cannot afford that house. Like Piecey said, we're in this mess because people were taking out mortgages for like 110% and not putting down any of their own money. People who never should have qualified for loans were getting them, some using really questionable mortgage lending tactics that are now biting them in the butt and they're losing their homes.

Where'sPiglet asked, <<Say you have 20K in savings and don't want to wipe ALL of it out on the down payment, but you need all 20K.>>

If you need all 20K and that's all your savings, you're buying too expensive a house. You will need to have some savings left in case the roof goes, or you need a new hot water heater, or you have a plumbing issue, etc. Buy a house you can afford and you will not regret it.

-Dorothy (LadyZolt)

 

[frisco]

If you don't have at least 10% (and hopefully more like 20%) to put down on a house, then you cannot afford that house.

I don't agree with that 100%.

A lot of single people have been living in apartments since the day they graduated from college. With a $1,000 per month rent payment, it's not possible for many of them to save up $40,000 for a down payment. Should those people not be given the chance to buy a home of their own? The majority of people in this country live paycheck to paycheck. I don't think the right to own a home should only belong to the independently wealthy. There are plenty of people who have mortgages where they only put 3.5% down or in some cases, nothing down, and they're still making their mortgage payments. Clearly, some people that can't save 20% for a down payment can afford a home.

Don't get me wrong. I agree, many people were given mortgages that should not have received one, but to lump everyone who is unable to save $40,000 up in a category of being unable to afford a home, isn't fair.

 

[Where'sPiglet?]

Where'sPiglet asked, <<Say you have 20K in savings and don't want to wipe ALL of it out on the down payment, but you need all 20K.>>

If you need all 20K and that's all your savings, you're buying too expensive a house. You will need to have some savings left in case the roof goes, or you need a new hot water heater, or you have a plumbing issue, etc. Buy a house you can afford and you will not regret it.

-Dorothy (LadyZolt)

But if you have the 8K from the govt, you would still have 8K in savings...that 8K just would not have gone towards your down payment.

And if you were to put 20K down on a 100k house, then that is 205 down payment and you are only financing 80K...which would likely give you lower payments than what many people are paying in rent.

I'm just tossing out numbers. I'd love to buy a house this year to get the tax break, but we are just not ready yet - mainly because of the down payment. As a PP mentioned, we COULD afford the monthly payments though - we are paying over $1000/month in rent, but we can't really get a house yet because we don't have thousands and thousands of dollars in savings.

We DID have a lot more in savings, but we spend a lot of it to pay for my masters degree out of pocket, thus saving in interest payments on student loans. So now we have to build that up again before we can get a house. My friends have mortgage payments that are about half of what I pay in rent...it's just that pesky down payment!

 

[LadyZolt]

Don't get me wrong. I agree, many people were given mortgages that should not have received one, but to lump everyone who is unable to save $40,000 up in a category of being unable to afford a home, isn't fair.

$40,000 for a downpayment? How many single young people are trying to buy homes that cost $200,000 to $400,000? Maybe in some big urban areas this is the average price, but if that's the case then salaries are equally inflated. I just looked up the average price for a home in America and in March the median price was $175,200, which means 10% down would be $17,500. Of course, that number is the median, so half of homes cost less and half cost more.

Again, if you cannot afford to put down at least 10% in cash that you have saved up, then you cannot afford *that* house. I didn't say you couldn't afford "any" house. You also have to qualify for a mortgage for the other 80-90%, so again, if more people focused on buying houses they can afford with their current incomes and not try to buy that "perfect dream house" for half a million dollars that, if all goes well and they get all those promotions they think they're going to, they will be in homes that they can afford and maintain and they won't end up in foreclosure.


-Dorothy (LadyZolt)

 

[frisco]

I just looked up the average price for a home in America and in March the median price was $175,200, which means 10% down would be $17,500.

Again, if you cannot afford to put down at least 10% in cash that you have saved up, then you cannot afford *that* house.

$175,000 where I live will buy you a pretty small fixer-upper.

I don't have $25,000 in my savings, but I can afford the monthly payment on a $250,000 home.

 

[LaurenLC]

$40,000 for a downpayment? How many single young people are trying to buy homes that cost $200,000 to $400,000? Maybe in some big urban areas this is the average price, but if that's the case then salaries are equally inflated. I just looked up the average price for a home in America and in March the median price was $175,200, which means 10% down would be $17,500. Of course, that number is the median, so half of homes cost less and half cost more.

Again, if you cannot afford to put down at least 10% in cash that you have saved up, then you cannot afford *that* house. I didn't say you couldn't afford "any" house. You also have to qualify for a mortgage for the other 80-90%, so again, if more people focused on buying houses they can afford with their current incomes and not try to buy that "perfect dream house" for half a million dollars that, if all goes well and they get all those promotions they think they're going to, they will be in homes that they can afford and maintain and they won't end up in foreclosure.


-Dorothy (LadyZolt)

I'm not single, but I am somewhat young.. My husband and I live in Chicago and if we wanted to buy something in the city (2 bedroom 2 bath condo) it would be at least $250,000.00 minimum... If we wanted to buy something outside the city (single family home) it would be at least $350,000.00......
And I don't find either of our salaries to be inflated... It's just the way it is.

 

[Piecey]

If you don't have at least 10% (and hopefully more like 20%) to put down on a house, then you cannot afford that house. Like Piecey said, we're in this mess because people were taking out mortgages for like 110% and not putting down any of their own money. People who never should have qualified for loans were getting them, some using really questionable mortgage lending tactics that are now biting them in the butt and they're losing their homes.

Where'sPiglet asked, <<Say you have 20K in savings and don't want to wipe ALL of it out on the down payment, but you need all 20K.>>

If you need all 20K and that's all your savings, you're buying too expensive a house. You will need to have some savings left in case the roof goes, or you need a new hot water heater, or you have a plumbing issue, etc. Buy a house you can afford and you will not regret it.

-Dorothy (LadyZolt)

I pretty much agree with everything you've said.
I was 21 when we closed, DH was 26.
I worked for the bank, so closing fees were almost all waived.
DH is a disabled Veteran (no funding fee, PMI or down payment required).
Our situation was unique. We are not the norm. We bought a house tens of thousands of dollars less than we could "afford"... because WE decided what we could afford, we didn't listen to the bank.

However- we had, in savings, 35% of the house that we were looking to buy when we applied. We chose NOT to put it down, as we do have student loans outstanding. It's a nice cushion and knowing I was pregnant... we like having the money in savings "just in case"...

Even with 100% financing our mortgage payment is $397.07. $468.02 with escrow (hazard insurance and taxes)....

We were smart but working at the bank I see tons of people who weren't.

So again... I'm glad they won't let people use it as a down payment. I have no problem with people taking it and applying it directly to their principle, though I doubt that many will do that..

 

[LaurenLC]

I pretty much agree with everything you've said.
I was 21 when we closed, DH was 26.
I worked for the bank, so closing fees were almost all waived.
DH is a disabled Veteran (no funding fee, PMI or down payment required).
Our situation was unique. We are not the norm. We bought a house tens of thousands of dollars less than we could "afford"... because WE decided what we could afford, we didn't listen to the bank.

However- we had, in savings, 35% of the house that we were looking to buy when we applied. We chose NOT to put it down, as we do have student loans outstanding. It's a nice cushion and knowing I was pregnant... we like having the money in savings "just in case"...

Even with 100% financing our mortgage payment is $397.07. $468.02 with escrow (hazard insurance and taxes)....

We were smart but working at the bank I see tons of people who weren't.

So again... I'm glad they won't let people use it as a down payment. I have no problem with people taking it and applying it directly to their principle, though I doubt that many will do that..

Why give people something if you are then in turn going to dictate how they use it? And do you think you might be seeing things differently if you weren't in your very "unique situation"?

 

[LadyZolt]

$175,000 where I live will buy you a pretty small fixer-upper.

I don't have $25,000 in my savings, but I can afford the monthly payment on a $250,000 home.

Housing markets differ, as I said -- usually the average income of an area correlates to the home costs. So if you're in an area where you need more than $200K to buy a decent home, the average income also is high enough to afford that.

Now, if you can afford the monthly payment on a $250K mortgage loan, that is one thing -- but when you own a home, you have to maintain it. My sister bought a house for $125K and one month later had to spend $30K on an unseen plumbing problem. If you don't have a healthy savings, you will end up losing the house or putting these unexpected expenses on a credit card and paying high interest on them, or taking out home equity loans that end up being more than the value of the house. Again -- it is simply the wise thing to do to save up money for your future house. Too many people today live paycheck to paycheck and they are only one major financial crisis away from losing their homes.

-Dorothy (LadyZolt)

 

[rockydek]

Piecey....


I noticed your P and I was very low.....The 8000.00 would wipe most of the balance out.
In Boston we could not buy a parking space for that.


I think its time to move to West Virginia.......

Thats Awesome!

 

[marypoppinswannabe]

But if you have the 8K from the govt, you would still have 8K in savings...that 8K just would not have gone towards your down payment.

And if you were to put 20K down on a 100k house, then that is 205 down payment and you are only financing 80K...which would likely give you lower payments than what many people are paying in rent.

I'm just tossing out numbers. I'd love to buy a house this year to get the tax break, but we are just not ready yet - mainly because of the down payment. As a PP mentioned, we COULD afford the monthly payments though - we are paying over $1000/month in rent, but we can't really get a house yet because we don't have thousands and thousands of dollars in savings.

We DID have a lot more in savings, but we spend a lot of it to pay for my masters degree out of pocket, thus saving in interest payments on student loans. So now we have to build that up again before we can get a house. My friends have mortgage payments that are about half of what I pay in rent...it's just that pesky down payment!

I am in a similar boat...It is quite frustrating!!!

 

[Piecey]

Why give people something if you are then in turn going to dictate how they use it? And do you think you might be seeing things differently if you weren't in your very "unique situation"?

IF we'd not been in our situation, we still would have done exactly what we did.. we just wouldn't have a *nest egg* anymore.

We were in a position to buy in conventional terms as well... we HAD a down payment, we saved it and delayed our trip to Europe as to add it to as much as possible (then I got pregnant, still no Europe! )

So no, I don't think I'd be seeing things differently. I had actually been laid off from the bank when we started home hunting. I applied for the mortgage with a "conditional offer of employment" to get the employee perks, getting those fees waived was NOT something we planned on but it was a nice perk when it all worked out.

I think anyone who gives something away is well within their rights to dictate how it is to be used... if you want free reign on what to do with something (like this money).. save your OWN money or earn it yourself. Don't take a handout.

Piecey....


I noticed your P and I was very low.....The 8000.00 would wipe most of the balance out.
In Boston we could not buy a parking space for that.


I think its time to move to West Virginia.......

Thats Awesome!

Yeah, we are pretty lucky that houses are cheap here!!
One benefit of living here... neither DH or I really like it here but it's a great place to build up some equity!

 

[DMickey28]

If you don't have at least 10% (and hopefully more like 20%) to put down on a house, then you cannot afford that house. Like Piecey said, we're in this mess because people were taking out mortgages for like 110% and not putting down any of their own money. People who never should have qualified for loans were getting them, some using really questionable mortgage lending tactics that are now biting them in the butt and they're losing their homes.

I do not agree with this at all. We have a $1600 rent payment right now and are looking to buy our first house in the next year. We have savings but it's under $10K. We are moving into my parents house for a few months to bulk up that savings so that we have a down payment. We are looking to spend no more than $275K. The mortage payments with the property taxes rolled in are well within our budget to afford. However it would take us YEARS to save up $50K to put down, that's just not logical.

I'd love if we could get that $8K up front but I'll just be happy to close before December 1 and get it at all.

 

[LaurenLC]

I think anyone who gives something away is well within their rights to dictate how it is to be used... if you want free reign on what to do with something (like this money).. save your OWN money or earn it yourself. Don't take a handout.
QUOTE]

Just like insurance companies deciding what kind of treatments are covered and what isn't? It's really their call as to what kind of service they allow you to receive because hey, they're really paying for it....