If You’re A First Time Home Buyer, You Might Qualify For Help
If you’ve never owned a house, home buying seems particularly daunting. In places like California, where it’s tough to find anything below half a million dollars, it can mean having a downpayment of at least $100,000, and a credit score that doesn’t reflect your student loans and credit card debt. It makes you wonder how anyone buys a home for the first time. The good news is, there’s help.
What is a First Time Home Buyer
You might think “first time home buyer” would be a logical, self-defining term. It’s a lot more confusing than you might think, though. Many people who have owned a home qualify. Here is how the Department of Housing and Urban Development defines first time home ownership:
- An individual who has had no ownership in a principal residence during the 3-year period ending on the date of purchase of the property. This includes a spouse (if either meets the above test, they are considered first-time homebuyers).
- A single parent who has only owned with a former spouse while married.
- An individual who is a displaced homemaker and has only owned with a spouse.
- An individual who has only owned a principal residence not permanently affixed to a permanent foundation in accordance with applicable regulations.
- An individual who has only owned a property that was not in compliance with state, local or model building codes and which cannot be brought into compliance for less than the cost of constructing a permanent structure.
While the First Time Home Buyer Credit from 2008 has expired, there are five tax credits you may be able to take advantage of.
In California, there are several programs designed to help qualified first time home buyers. Make sure your credit score is at least 640, and your debt to income ratio is no higher than 45%. In other words, if you have a $50,000 annual salary, you must have no more than $22,500 in debt. That includes your car.
Property Tax Deductions
Property taxes in California are high, but there is some help. You can deduct up to $10,000 in annual property taxes on both your state and federal taxes.
If you add solar, wind turbines, geothermal heat or fuel cells to your home, you may qualify for a massive 30 percent tax credit.
Mortgage Interest Credits
You probably already know that mortgage interest is tax deductible, but if you qualify, you may be able to receive an additional tax credit of up to $2,000 per year. There are income requirements.