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Now is the Time for First Time Home Buyers

The federal government ended their generous tax credit of $8000 at the end of April of 2010 but in California at least, first time home buyers have another option. The State of California, under an initiative from legislators and Governor Arnold Schwarzenegger have extended and expanded the California first time home buyers' tax credit to $10,000 at least through 2011. This is great news for many Californians and actually covers more than first time home buyers but to all who purchase new or existing homes this coming year. This terrific incentive should help to revitalize a home buying market that has dropped precipitously in the last two to three years due to the bursting of the real estate market bubble.

For first time home buyers there has never been a better time to purchase, though they need to manage their expectations. Home values have dropped in California and interest rates are at all time lows. The main problem is still the availability of credit and the fact that lenders have made it very difficult for borrowers to qualify. This was a reaction to the too loose lending practices of the past decade which led to the wave of foreclosures that have endangered our economy. Lenders have money to lend, but they have placed super tight restrictions on giving loan approvals. Most lenders require very high credit scores and steady, rock-solid employment as well as seasoned assets.

There are a lot of first time home buyers down payment assistance programs available, especially in California that are well worth looking into. In the San Francisco Bay Area many of the counties and cities have collaborated on bringing these great programs to buyers. In the City of Alameda for instance, first time home buyers who have a combined household income of less than 80% of the median income for the county may qualify for a loan amount maximum of $80,000. The payments are deferred for fifteen years at which time there is a balloon payment due. No interest is charged for the first five years and after that the city takes a percentage of shared appreciation. This is a second position loan.

In the city of Antioch, where you can get a huge house for very little money, first time home buyers may qualify for down payment assistance of up to $30,000. Once again there is a shared appreciation clause that allows the buyer to sell the house at a future date and pay a portion of the accrued appreciation equity back to the city.

Besides the city programs, the State of California under the CalHFA department offers great assistance programs like CHDAP which will give up to $15,000 in assistance for first time home buyers. You can also stack all of these programs including MCCs or Mortgage Credit Certificates which are credits of 15% of the interest payments made on home loans. This helps many borrowers to qualify by effectively raising their take home pay.

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