Under the existing $8,000 first-time home buyer tax credit law, no, the fact that your name was on the deed to a home (even if it’s not on the mortgage) would exclude you from taking the first-time home buyer tax credit. There is, however, some good news for you.

Congress is voting today on whether to extend the first-time home buyer tax credit program (which is slated to end November 1). If passed, the extension also includes tax credits of up to $6,500 for buyers who have owned their existing homes at least five years. To take the credits, both groups of buyers would have to sign a purchase agreement before April 30, 2010 and close by June 30.

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David @MoneyUnder30

The decision to buy down your interest rate (also called buying points) depends on how long you plan to own your home. The longer you think you’ll own your home, the better it is to buy down your rate rather than pad your down payment.

Using a mortgage points calculator, I calculated that you could save roughly $28,000 on interest payments if you buy down the rate. So it definitely seems like a good deal.

The big question is whether that $3,000 is your only down payment. If so, you need to find out if your lender will approve your mortgage without a down payment.

Good Luck!

David @MoneyUnder30

Thanks for your question, Michele. This is a tough one. In today’s credit market, the best lenders usually want to see down payments of twenty percent. Some lenders will still approve you without much of a down payment, although you’ll likely pay a higher interest rate, plus you’ll have to pay private mortgage insurance (PMI). This adds to your monthly mortgage payment but doesn’t give you anything in return—that insurance is for the bank.

Although this is a good time to buy a home, I don’t think that there is any one time to buy a home. Certainly people who bought real estate at the top of the market a few years ago thought it was still a good time to buy a home. Yes, housing prices are low and yes, mortgage rates are low right now. But we don’t know if they’re going to go up tomorrow or in five years.

If you decide you really want to buy a home soon for personal reasons even if you don’t have twenty percent to put down, then go talk to a mortgage lender to find out exactly what kind of loan (and what rate) you can get. Ask them how that loan would change if you had a bigger down payment. Then ask yourself: Is it worth it, or should you wait?

Also, remember that once you become a home owner, there are going to be lots of new unexpected expenses down the road. If the water heater breaks, you can’t just call the landlord, you’ll have to fork out big bucks to repair it. That’s why I recommend first-time home buyers not only save up a down payment, but also a healthy emergency fund for all those home repairs that will inevitably pop up.

Sorry I don’t have a more “black and white” answer, but I hope it’s helpful anyway.

Good Luck!

David @MoneyUnder30