One of my favorite things about being a real estate professional is helping buyers find their first home. These days, due to national economic stimulus activity, the term "first-time buyer" doesn't necessarily mean someone who has never owned a home. Currently, qualified homebuyers who had not owned a principal residence for the three years prior to making a purchase may be considered first-time buyers by the Internal Revenue Service.
A tax incentive to encourage home purchases was included in the Housing and Economic Recovery Act passed last year. This legislation allows an income-tax credit of up to $7,500 — essentially a non-interest loan, repayable over 15 years — for qualified buyers. It applies to homes purchased from April 9, 2008 through Jan. 1, 2009.
This legislation was enhanced this year with passage of the American Recovery and Reinvestment Act, which increased the potential tax benefit to a maximum of $8,000 and eliminated repayment responsibility. Now it is truly a tax credit, not a loan with a deferred repayment plan.
There are nuances for married taxpayers and for unmarried joint purchasers, so an introductory read of Frequently Asked Questions at federalhousingtaxcredit.com is a good idea.
Another boost for first-time homebuyers is the resurgence of Federal Housing Administration (FHA) loans for single-family and owner-occupied multi-family residences. Variables such as the maximum-allowed purchase price based on the community where the property is located, whether the property is single-family or owner-occupied multi-family, and income, influence eligibility. FHA loans afford buyers the opportunity to purchase with a 3.5 percent down payment.
Declining property values and motivated sellers make properties affordable for traditional first-time buyers who have never owned real estate. A snapshot of single-family homes (2-3 bedrooms, 1-2 baths) sold in Beverly, Salem, Danvers and Gloucester from Feb. 28 to March 28, 2009, according to the MLS Property Information Network, shows a total of 27 sold, for an average sale price of $228,759, with an average list price of $238,859, and an average original asking price of $259,944 (meaning there was an average 12 percent price reduction between the initial asking price for the property and the actual purchase price).
One of the first things a potential homebuyer can do to facilitate a successful buying experience is to determine creditworthiness. A conversation with a mortgage consultant clarifies purchasing power and loan programs, including "soft seconds."
The Massachusetts Housing Authority, is one source for supplemental second mortgages. Certain communities offer first-time homebuyer assistance through Housing and Urban Development grants.
A new initiative by the North Shore Association of Realtors' Community Advocacy Committee is identifying affordable housing resources, including subsidy programs for first-time buyers. It plans to launch an online database to post its findings for members and consumers at the conclusion of the research phase.
Despite national media reports to the contrary, mortgage money is available for qualified buyers. Lenders have adopted proper due diligence to ascertain creditworthiness. (The days of NINA — No Income No Assets — loans are over!)
As the rudiments and reasons for home-buying are restored, there's opportunity for qualified people to attain the American dream of home ownership.
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Janet Breiter of Rockport is a marketing consultant and licensed real estate professional who serves on the North Shore Association of Realtors' Community Advocacy Committee. Contact her at connect now2homes.com.
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