First Time Home Buyer Tax Credit

So the deadline to get the First Time Home Buyer Tax Credit is rapidly approaching. In order to be eligible for the credit, you must close on your house by Dec. 1, 2009. But just to be on the safe side, try to close before that date.

Although I already closed on my house in July, my best friend is in the process of buying her house located about 8 miles from mine. So I'm doing my best to tell her all the things I didn't know or understand when I got into the home buying process. I'm no mortgage or real estate expert so these things should serve as talking points for you and your realtor, seller, and mortgage lender.
  • If you already filed your taxes for 2008 and buy a house in 2009, you can amend your 2008 tax return to get the $8000 tax credit sooner! I think we're using ours to build a new deck!
  • If you have a debt to income ratio of greater than 41%, then you'll most likely need to get an FHA mortgage loan.
  • MIP (Mortgage Insurance Premium) is required to be paid on FHA loans. This amount is equivalent to 1.5% of your loan amount that gets tacked on the the total (no, it makes no sense). Then you have to pay 0.5% (of loan amount over 12 months) in monthly mortgage insurance payments usually til you've paid for over 20% of your home.
  • PMI (Private Mortgage Insurance) refers to mortgage insurance for conventional loans. You'll have to pay this if you put down less than 20% and it's usually less than MIP on FHA loans.