If you are actively shopping for your first home, it’s impossible to avoid looking at foreclosed homes.  They represent almost half of the homes on the market in Minnesota.  There are four things to remember when you consider purchasing a foreclosed home:

The owner of the home is a bank.  The bank representative has never lived in the home and will not tell you anything about it.  They don’t know how old the roof is, whether the furnace has had annual service, whether there has been a water leak in the home and if everything in the home works.  In other words, you will receive no information on the home except what you discover yourself.

The personal property remaining in the home is not owned by the bank and they cannot and will not sell it to you.  If there is still a refrigerator, a stove, a microwave, a washer and a dryer, technically they belong to the original home owner and not the bank.  If the home owner chooses, they can come and remove them before closing.  If they don’t come to remove them and they “abandon” them, then you can claim them at the time you move in.

The utilities in these homes may have been disconnected without properly preparing the home.  If the heat has been turned off in the wintertime and the plumbing in the home has not been winterized and treated with antifreeze, the pipes may freeze and burst.  When spring comes and the water melts, it may cause mold to grow in the home.  These homes can cost a lot of money to repair and restore. 

There are usually one or more problems with foreclosed homes that require remedy by the buyer.  These may be big problems (burst pipes, mold, ageing roof) or these may be small problems (missing appliances, doors, kitchen cabinets etc.).  Be prepared to spend some money after closing to restore the home.

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.

Buying a home is not like buying a car.  It’s a lot more complicated and with many more risks for you, the prospective home buyer.  We recommend attending one or more first time home buyer classes or meeting with a Realtor or Mortgage Consultant who specializes in working with first time home buyers. 

Your first step then is to locate a class.  Sometimes you will find classes offered through your local community education resource.  Other classes may be offered by government agencies.  Other sources of classes are Realtors and Mortgage Lenders who sponsor them.  Sometimes they will be listed in the housing or home section of your local newspaper or information website.

Wherever you go, whatever you do, become educated on how to buy a home.  If you know about the risks ahead of time, you can avoid the most common mistakes made by home buyers.

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.

Many Home Buyers are surprised to learn that in addition to a down payment, they may need to pay other fees at closing, commonly referred to as “closing costs”.  The amount of these fees will vary from mortgage company to mortgage company.  A good estimate is about 3-3.5% of the purchase price of the home.  

When you are buying your first home, it may be hard for you to come up with enough money for both a down payment and closing costs.  Many first time Home Buyers ask for closing cost assistance from the Seller.  Most mortgage programs will permit the Sellers to help the Buyer pay for their closing costs.  All you need is the Seller’s consent.  Your Realtor will ask the Seller for this assistance when they write up the contract on your new home.  Asking the seller for closing cost help is very commonly done, especially when buying your first home.

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.

Recently, I had two homebuyers come to our seminar for First-Time Home Buyers who plan to buy a home this year.  They want to take advantage of the record-breaking drop in home prices, the record-breaking low interest rates and the first time ever tax credit for first-time homebuyers.

They asked me if they could split the tax credit.  Well, at the time, I didn’t know the answer to that question but God Bless America.  The IRS website at IRS.gov had an answer for their question.  Of course, you know the IRS!! The answer WAS NOT short but basically it said this.

Of course you can split the one-time $8000 tax credit.  But you should be sensible about it.  For example, if you and a fiancé bought your first home together, and you each paid ½ of the down payment, you could split the tax credit 50/50 each taking ½ of the credit.  Or let’s say you paid cash for a home and you contributed $25,000 and your partner contributed $75,000 towards a $100,000 home.  You could split the credit taking 25% or $2000 for yourself and giving 75% or $6000 for your partner.

Or let’s say that your partner has been out of work for a year and thus doesn’t owe any taxes but you are self-employed and will owe $6000 at the end of the year.  In this case, it may make sense for you to take the whole tax credit to offset your taxes.  You would still get a check for the difference of $2000.  You can make the credit work for you…just have some sensible explanation to give the IRS.

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.

If you bought or are buying your first home between January 1, 2008 and June 30, 2010, you will qualify for a refundable credit from the IRS.  There are two types of tax credit.  The non-refundable credits reduce your tax but only can reduce your tax to zero.  Refundable credits mean that once your tax is at zero, the rest of the credit will be mailed to you as a check.

For example, let’s say your taxes are $5000 this year and you have already paid $4500 towards those taxes in withholding from your paychecks.  So you would owe $500 to the IRS.  However, you bought your first home this year (2009) so when you file your taxes in 2010 for 2009, you claim the first time homebuyer credit.  The IRS would send you a refund check for $7500.  They would take $500 from the credit to pay the balance of the taxes you owed to them.  The rest would be refunded to you.

Now there are some differences in the tax credits available for first-time homebuyers.   If you bought between January 1, 2008 and December 31, 2008, the credit is $7500 and must be repaid over 15 years starting the second year after receiving the credit at $500 per year.  If you bought between January 1, 2009 and June 30, 2010, the credit is $8000 and doesn’t have to be repaid if you live in that home you bought for 3 or more years.  If you bought between January 1, 2009 and November 6, 2009, the credit is $8000 and you can e-file to claim the credit.  If you bought your first home after November 7, 2009 but before June 30, 2010, you cannot e-file your return to claim the $8000 credit as the IRS now requires you to attach proof of home purchase to your return.

If you have filed taxes for 2008 but bought your first home after you filed, you can file an amended return this year to claim the credit.  You don’t have to wait to file your tax return for 2009.  This is a great benefit for first time buyers, defined by the IRS as folks who haven’t owned a home for the three years prior to closing on their new home.  Good luck in buying that first great home!!