Be aware of the January 1st change!

As we head into the home stretch for 2008, there is a great opportunity for first time home buyers that shouldn't be overlooked!

First, the government is offering a $7500 tax credit to first time home buyers. This is an automatic and immediate credit of $7500 on your next tax return*. Whatever your refund would have been, will automatically increase by $7500.

Second, as of January 1st, 2009, the FHA minimum down payment requirement is going from 3% to 3.5%.

Let's look at how these two fit together:

For first time home buyers who would like to buy but are coming up short on the 3% down payment, the number is going up in January which will only delay the process further. BUT, if you think of the $7500 tax credit as your down payment then $7500 is 3% of $250,000. Why not consider taking a temporary loan from your 401K** or a relative*** and buy before the end of the year? If you file your tax return in mid February, you would be able to repay your 401K or relative by March 1st!

If you wait until after January 1st, now the required down payment is 3.5% so the $7500 is 3.5% of $214,000. Your purchase price just went down by $36,000 AND you have to wait another year before you get the tax credit.

So why not take action now? We are at or close to the bottom of the market, a great time to buy. AND rates are still very low!

If this applies to you, don't miss out on this opportunity. Take action now!

OK, OK - I am the same way, don't put an asterisk up there and not explain it!

* The $7500 tax credit is basically an interest free loan from the government. You do need to pay it back at a rate of $500 per year over 15 years.

** The payment on a loan against your 401K would have to be included in the qualification. However, you can take out up to $10,000 penalty free from your 401K for the specific purpose of buying your first home.

*** The relative would need to consider the money they give you as a gift and would have to document it as such. But you are allowed to use the tax credit any way you want, including paying your relative back.

By Ronny Loew - Ronny is the Next Home Specialist with MN Home Loan Partners. Whether you are moving up, downsizing, relocating or keeping your home as an investment and buying a new primary residence, Ronny has specific strategies to make it easy and a financial win. He can be reached at 952-808-2815 or rloew@houseloan.com