Can you afford to buy a house?
You have heard it countless time that buying a house is the largest purchase you make in your life. For many, that is absolutely true and for that investment it makes perfect sense to get as much information as possible about the how to buy a house.
Even with prior knowledge and preparation, many first-time home buyers, make a mistake or two along the way. Buying more house than you could afford, or taking on a more decrepit house than you could realistically make habitable, are examples of those mistakes. Despite their best intentions, agents can only do so much with their advice.
The first-time buyers who are happiest are those who had done their research, and planned their purchases, communicated with their partners and agents and did not step too far outside of their comfort zones. A home is often a big part of your lifestyle, so when you find the right house that meets your criteria, be prepared to pull the trigger and follow through. Waiting to get absolute best possible deal may not be the best strategy. Creeping interest rates and lost opportunities could eat up any saving in the deal.
Financing is one of the major obstacle in most home buyers decision making process. Even though affordable housing is out of reach for lots of people, there are still programs to help people in their home ownership dreams. If you live in Travis Country, I would like to introduce two such programs.
My First Texas Home Program
This program allows qualified Texans access to low interest rate home loans, and help with down payment and closing cost assistance. The benefit is simple, you get more house for the same down payment or qualify for house easier. You can begin a lifetime of homeownership through My First Texas Home.
Homebuyers who meet the following minimum requirements are eligible to apply for a loan under the program:
- You must be a Texas resident who has not owned a home for the past three years
- Your combined income (s) may not exceed program’s income limit:
- For Travis and Williamson counties median family income (2 people): $77,800
- Purchase price of home may not exceed program’s purchase price: limit:
- For Travis and Williamson counties maximum purchase price: $332,470
- Credit Score, minimum 620
- Maximum Debt-to-income (DTI) ratio: 45%
To verify eligibility and apply for these loans, take your personal financial information to your lender. At the time of loan application, you will need the following:
- Recent bank statements for all of your accounts
- Pay stubs for the past 3 months
- Tax returns for the past 3 years
- W-2 forms for the past 2 years(your employer can provide you this)
- Information about your long-term debts, including the names of the creditors, account numbers, payment amounts, etc.
- Proof of any other current income
- The executed sales contract (if available)
Texas Mortgage Credit Certificate (MCC) Program
This program hat increases a family’s disposable income by reducing its federal income tax obligation. This tax savings provide a family with more available income to qualify for a loan and meet mortgage payment requirements. It is available to teachers, fire fighters, peace officers, veterans, and low and moderate-income homebuyers. This program is available through a network of lenders across the state and provides the following benefits:
- A dollar for dollar savings %40 of interest paid, up to $2,000 every year as a special tax credit
- Saves the homebuyer thousands of dollars over the life of the loan
- Exclusively for first-time homebuyers or individuals who have not owned a home in the last three years
- Can be used with TSAHC’s Down Payment Assistance
The example below assumes a family purchases a home for $200,000 at a 4.75% interest rate. Interest paid the first year is approximately $9,500. The 40% of the interest paid would equal $3,800 (40% x $9,500 = $3,800).
In this example, the homebuyer would be entitled to a tax credit of the maximum $2,000.00. It is important to note that the homebuyer will still be able to take a mortgage interest deduction
- Tax Credit = A $2,000 tax credit reduces your taxes owed dollar-for-dollar by $2,000
- Tax Deduction = A reduction of your taxable income by $7,500 ($9,500 – $2,000 = $7,500), results in lesser tax liability
So the question if affordability should be, have your explored all available options to make the home buying easier on your pocket? Let’s get started!