House Calls by Edith Lank

Dear Edith: We are planning on buying our first home this summer. My husband applied at a lending Web site and we are pre-qualified for a Rural Housing Loan at 100 percent financing. We also qualify for an FHA loan with 3 percent down.

We are waiting because we just paid off our cars and are paying off old credit cards so we will go into the process debt free. Hopefully we will be able to accumulate about $5,000 to $7,000 cash by summer.

If we use a no-down-payment loan, and manage to find a seller to pay closing costs, will we have to write a personal check as a "good faith deposit" or does that come from the lender too? — Via e-mail

Answer: The good-faith (or earnest-money) deposit with your purchase offer comes from your own funds. It shows the seller that you are indeed in earnest, and have something to lose if you later walk away. Given the mortgage you plan on, perhaps a small deposit might be enough to convince some seller you mean business.

It sounds as if you may qualify for the 2009 first-time homebuyer tax credit. You can receive 10 percent of purchase price up to a limit of $8,000. The money will come off your 2009 federal income tax (or even as a refund check if you owe the IRS less than $8,000). The credit does begin to phase out for taxpayers with income of more than $75,000 ($150,000 for a married couple).

If you do qualify, you may want to have your employer(s) change your withholding schedule now. That should give you somewhat more take-home pay and help boost your savings.

Taking A Loss

Dear Edith: This weekend my in-laws offered to help my wife and I buy a new home to make room for a baby on the way. They would gift us the down payment. We owe $219,500 on our current mortgage, but because of the decline in the market, cannot sell for enough to pay it off. I am guessing we will be between $25,000 and $15,000 short. Our in-laws are willing to cover that and still give us a bit for a down payment. Is it worth taking a loss on this house right now assuming the next house we buy will be our home for 10-15 years? I hate taking a loss to get out of this place, but I fear we will be stuck for a long time, and the offer from my in-laws won't always be on the table.

— Via e-mail

Answer: It's emotionally difficult to take a loss, I know. But you can take some comfort from the fact that you may be getting a markdown on the new house you buy. What you lose on one end, you usually make up on the other.

If you're buying and selling in the same market, it doesn't really make much difference whether prices are rising or falling. If you stay where you are, waiting for equity to pay off your mortgage, you'll only end up paying that much more on your next home, because the market will be better then.

New Homebuyer Tax Credit

Dear Ms. Lank: I bought a one-bedroom condo four years ago when I graduated from college. I have since married and we are expecting our first baby in September. We are going to be in need of a bigger home.

My wife has never owned a home. Would we be eligible to take advantage of the first time homebuyer stimulus benefits with her on the title and mortgage and without leaving me off the same? — B.J.

Answer: The rules for the 2009 first-time homebuyer's tax credit say that neither spouse can have owned a home in the past three years. Even if your wife buys in her name alone, your purchase won't qualify.

Removing Her Ex

Dear Edith: How do I remove an ex-husband's name from my mortgage without re-financing? — J.

Answer: You know, it poses no threat to you if your ex remains liable on the mortgage. Taking his name off would help him, of course. The loan would no longer show up on his credit record as his personal debt.

I assume, therefore, that you want to do him a favor. Or perhaps you promised to relieve him of liability as part of your divorce agreement. Consider: Mortgage rates are so low right now that it may actually be worth the cost and trouble of refinancing, if you can qualify to do so.

Otherwise, your mortgage lender may agree to relieve your ex of responsibility if you can prove that you've carried the payments on your own, perhaps for 12 month past. Or they may not agree. To find out, ask.

Edith Lank will respond personally to any questions sent to her at 240 Hemingway Drive, Rochester, NY 14620 (please include a stamped return envelope), or readers may e-mail her at ehlank@aol.com.

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