FICO scores and home loans
By Marcie Geffner – LendingTree.com

Are you concerned that your FICO score might stop you from getting a home loan? If so, you may have more options than you believe you have.

While it’s true that a higher FICO score will likely help you get a lower interest rate, you don’t necessarily need a perfect FICO score to qualify for a home loan today. On the contrary, many lenders make mortgage loans (often so-called “FHA loans”) to borrowers who have a FICO score between 620 and 679, and such loans are often a good option for borrowers with FICO scores in this range.

An FHA loan is a mortgage guaranteed by the federal government through mortgage insurance, which protects the lender and is paid for by the borrower. Because of this insurance, lenders are often more comfortable making FHA loans to borrowers who don’t have sky-high FICO scores.

An FHA loan might be a good fit for you if:

● You don’t have a high FICO score.
● You’re a first-time home buyer.
● You don’t have a lot of money for a downpayment.
● You want to minimize your monthly payments.
● You’re concerned that you might not be able to qualify for a conventional loan.

FHA loans tend to have competitive interest rates and be easier to qualify for than other loans. The minimum down payment will be just 3.5 percent of the home’s purchase price and can be a gift from a family member, friend or other source. Of course, you should always shop around to find a loan that’s right for your situation.

The only way to determine whether you’ll qualify for a home loan is to discuss your personal situation with a lender. If you have an acceptable, but not perfect FICO score, a steady paycheck and at least a small downpayment, you may be well on your way to homeownership.

© 1998 – 2008 LendingTree, LLC. All rights reserved. No part of this article may be used or reproduced without prior written permission of LendingTree, LLC.

First-Time Home Buyer Tax Credit
By Marcie Geffner – LendingTree.com

The federal government has enacted a tax credit of up to $7,500 to encourage first-time home buyers to jump into the housing market. If you meet the relatively easy qualifications, you could find an extra $7,500 in your pocket as a bonus for buying your first home.

The requirements for the first-time home buyer tax credit are:

• You (and your spouse, if you’re married) haven’t owned a home in the last three years.
• The home you purchase must be your principal residence where you live most of the time.
• You need to buy your home after April 9, 2008, but before July 1, 2009.
• Your income is less than $75,000 if you’re single or a married head of household or $150,000 if you’re married and filing a joint tax return. If you earn up to $95,000 (single) or $170,000 (married couple), you may get a partial tax credit.

The First-Time Home Buyer Tax Credit is a true tax credit, not a tax deduction. That means the federal income tax you owe will be reduced dollar-for-dollar up to the amount of the credit.

For example, if you owed income tax of $10,000 and claimed the maximum first-time home buyer tax credit, your tax bill would be cut to just $2,500. If you owed $3,500 and took the maximum tax credit, you’d get a check for $4,000 from the government.

The caveat is that the first-time home buyer tax credit must be repaid. The repayment period is 15 years. That means if you took the maximum tax credit, you’d owe an extra $500 on your taxes each year. If you sell your home at a profit, you’ll have to pay back whatever you still owe. However, if you sell your home at loss, you won’t have to pay back another dime.

Like anything else that involves taxes, the rules for the first-time home buyer tax credit are complicated, so you should ask a tax professional for advice about your personal situation.

© 1998 – 2008 LendingTree, LLC. All rights reserved. No part of this article may be used or reproduced without prior written permission of LendingTree, LLC.