Home Buying in 15205>Question Details

Joe Homebuyer, Home Buyer in 15205

I want to take advantage of the $8,000 credit.. but my income is small and I have a lot of debt.

Asked by Joe Homebuyer, 15205 Mon Aug 10, 2009

I am hoping to buy something by November 30th to take advantage of the $8,000 tax credit.

My income is currently $32,000/yr. I am expecting a raise in the next month or so, but it will probably be a few thousand dollars at most. I believe that my job is very stable, as my sector seems to be one of few not impacted by the recession.

I believe that my credit is good. My FICO score is in the 730s to 740s depending on agency, with no negative entries on my credit report.

I am currently approximately $16,000 in debt with a monthly payment of $570.

I am hoping to buy something west of Pittsburgh and am thinking in the $70,000 - $80,000 range.

Is this feasible? I don't want to miss out on the tax credit, but I would be in a better position (less debt) to buy something next year. However, if I spend the next 6 months paying off $8,000 of debt, it seems like a waste to throw away the $8,000 tax credit.

Any guesses regarding an extension of the tax credit beyond November 30?

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Answers

6
Erin Rowley Stoner’s answer
Hey Joe Buyer...

You know I think the easiestt way to address your concerns is to give a mortgage lender a call. They can go through all of your unique variables and get you pre approved. Don't stop there! It may be a good idea to get more than one lender to quote you.

Before you can go purchase a property, or even look at homes, you will need to have your financing lined up. Get started, who knows if they will extend the credit or not. Remember, you have to close by November 30!
That is less than 90 days out!

Good luck!
Erin
0 votes Thank Flag Link Fri Aug 21, 2009
Hi Joe,

Thanks for your honestly. You are actually servicing a lot of debt. You might be better off paying down some of your debt and then buying a home. I know this is not popular however for long term homeownership it makes sense.
A rule that I use when I teach home buyers seminars is that borrowers have an 8 month reserve in case of a job loss, etc. With your situation you might consider paying off your debts, recapitalize and have a certain amount of cash to get into a home at a price you can afford with a payment that makes sense.
I do not believe that anyone is speaking about the $8k tax credit extended into next year because the government does not want fencesitters. They want the first time homebuyer to eat up this inventory.

I do think the tax credit will be extended into next year. However, I think that is secondary with regard to the $16k of debt that you might want to consider paying off before getting into a home.

Maybe I am old fashioned but I do know a new roof will cost $8k.
Good luck!
0 votes Thank Flag Link Fri Aug 21, 2009
Joe, you might qualify for a PHFA loan. Pennsylvania's first time home buyer program. The state also has a program to advance the tax credit at closing. Please visit my web site for a variety of mortgage and closing cost calculators and links to PHFA. Email me on the contact page if you have any questions.
Good Luck!
0 votes Thank Flag Link Fri Aug 21, 2009
FHA loan programs requires 3.5% down payment. Front end debt ratio of 31% (mortgage payment to gross monthly income) and back end debt ratio of 43% (all debt, including credit cards to gross monthly income). FHA has upfront mortgage insurance (financiable) and monthly premium.

Fannie Mae requires 5% down payment. NO mortgage insurance required, subject to meeting certain guidelines.

You can use the $8,000 tax credit as the down payment: http://www.federalhousingtaxcredit.com/2009/glance.php

Let's assume your purchase price is $80K:
A. 5% down payment, 5% interest, 30-yr fully amortized mortgage
B. the estimated monthly mortgage payment is $408 (+prop. tax and +homeowner insurance).
C. Estimated monthly debt: $408 + $150 (estimated tax&ins) + $570 ($16K debt) = $1,128 (EXCLUDEs utilities, food, gas, etc.)

So, how comfortable are you with the estimated $1,128+ monthly payment? What are you paying for rent now?

I suggest you find a local lender who can do Conventional, Fannie Mae, FHA, or VA loans so he/she can find the best loan progam to fit your affordability.

Be a homeowner...income tax deductible, an excellent equity builder.
Don't be a renter...ZERO income tax deductible, does NOT help you to build wealth.

Good luck to you and l hope the infomation helps. Please verify all my calculations with your local lender.

Email: Contact@ActusPropertySolutions.com
Phone: (888) 525-0125
0 votes Thank Flag Link Mon Aug 10, 2009
Your best bet would be to contact a mortgage representative who can tell you what you could be qualified for. There are some programs that you can use the $8,000 tax credit towards your closing costs if you qualify. I have several mortgage reps that work 7 days a week that can get your pre-approved in approximately 40 minutes. You can also apply online. You can get their information and online applications at http://www.kaedimanly.com under mortgage info.

Let me know if I can be of any more assistance. I am a local Pittsburgh real estate agent.

Kaedi Manly, Realtor
WJ Kellar Real Estate
725 McKees Rocks, PA 15136
office: 412-331-1162 x 109
mobile: 412-855-0077
email:buypghrealestate@gmail.com
Web Reference: http://www.kaedimanly.com
0 votes Thank Flag Link Mon Aug 10, 2009
It anyones guess about an extension.....it's our recommendation that people look to take advantage of the program as it exists today and worry about an extension when the time comes.
0 votes Thank Flag Link Mon Aug 10, 2009
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