A great way for young adults to get started buying their first home is by using the FHA "Kiddie Condo" Loan Program.
There are three big advantages to using this type of loan.
1.
A low down payment (as little as 3% of the purchase price).
2.
A lower, owner-occupied interest rate on the mortgage Vs the higher investment property interest rate.
3.
Helps the new borrower establish a solid credit rating.
This type of mortgage allows a person to co-borrow with a blood relative (eg. parent, grandparent, sibling, etc.) who helps qualify for the loan using their income or assets. Both borrowers take title to the property and sign for the loan.
First-time homebuyers may be able to take advantage of a tax credit for homes purchased in 2008 or 2009. The credit:
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Applies to purchases that close after April 8, 2008, and before Dec. 1, 2009.
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Applies only to homes used as a taxpayer's principal residence.
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Reduces a taxpayer's tax bill or increases his or her refund, dollar for dollar.
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Is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.
For 2008 Home Purchases:
The Housing and Economic Recovery Act of 2008 established a tax credit for first-time homebuyers that can be worth up to $7,500. For homes purchased in 2008, the credit is similar to a no-interest loan and must be repaid in 15 equal, annual installments beginning with the 2010 income tax year.
For 2009 Home Purchases:
The American Recovery and Reinvestment Act of 2009 expanded the first-time homebuyer credit by increasing the credit amount to $8,000 for purchases made in 2009 before Dec. 1.
The credit does not have to be paid back unless the home ceases to be the taxpayer's main residence within a three-year period following the purchase.
