You keep hearing about the first time home buyer's tax credit and want to take advantage of it, but can you USE the $8000 to actually BUY the house. Well, NO. The problem is with 99.9% of the loan programs out there today, you need to have a down payment AND pay closing costs.
So, how much money do you need? Well FHA is the most popular loan for people who haven't saved up a lot of money and the down payment is 3.5% of the price you are paying for the house. So, if the house costs $100,000, you have to have $3500 as a down payment. If the house costs $80,000 you have to have $2800. If the house costs $145,000 (like the house at the right) the down payment would be $5075 - you get the point.
In addition to the down payment, you will need to pay your closing costs and prepaid items. What is that you say??? Well, closing costs are fees that are paid to the lender to make the loan (all those people who work on your loan have to be paid so there is a processing fee, an underwriting fee, a tax service fee, etc). Also, you will need things like a title policy to make sure the person who is selling the house actually owns it, and the termite report to make sure the house has no termites and the closing attorney who closes the house needs to be paid.
Prepaid items are things paid in advance like your homeowner's insurance. Just like you buy car insurance in case something happens to your car, you buy homeowners insurance in case something happens to your house. This fee is paid a year in advance, so you pay a One Year premium at closing.
So, that seems like a lot, but don't worry. Your realtor will make sure it ALL happens before you get to the closing - you just have to pay for it.
Many times the seller will pay some of the closing costs for you - if they like the price you are paying for the house. But you still have to come up with the down payment (3.5% of the purchase price).
It can be a challenge to save up money to buy a home but if you have some money in the bank, now would be a great time to talk to lender to see if you can qualify to buy a house. The first time home buyer tax credit is set to expire on November 30, 2009, so you have to find the home and close within 60 days. With a good lender and a good realtor, this is definitely possible - but don't wait.
You can search for homes for sale in Hoover Alabama and the Greater Birmingham area by going to the MLS Search section of my website. Click here for ALL the homes available in the area. See something you like, let me know and we'll go take a look!
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