Aug
27

How Can A First Time Buyer In Manhattan Use the $8000 Federal Housing Tax Credit To Purchases a Co-op or a Condo?

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First Time Buyer $8000 Federal Housing Tax CreditIf you’re a first time homebuyer in New York City and you can close on an apartment by December 1st 2009,  you may be wondering how you can leverage the $8,000 tax credit to buy your first condo or co-op. The question then comes to mind, “How much can I afford or want to spend on my new home?”

The first thing you need to know is that a couple (or two individuals jointly) buying their first home who want to use the Federal Housing Tax Credit can only have an annual combined income of $150,000 or $12,500 per month.

When you apply for a mortgage, the first thing the mortgage broker or lender is will calculate is your debt-to-income ratio. This ratio takes into account your monthly debt including the monthly mortgage payment, maintenance (for co-ops) or common charges and taxes (for condos), student loans, car payments credit card payments etc. They like to see that your total monthly debt expenses do not exceed 40% of your monthly income. If your gross monthly income is $12,500, then your total monthly debt cannot exceed $5,000 (12,500 x 40%).

The calculation above may be adequate to receive financing for a condo purchase, but many coops only will allow your maximum monthly housing expenses (principal and interest payment on the mortgage and maintenance), to be typically 28%  of your monthly income (could be 25% or lower for some co-ops, which is the limit set by the co-op board, not the lender).

Using a limit of 28% for housing expenses, a buyer with an income of $12,500 per month would have approximately $3,500 per month to spend on housing expenses.

So depending on the amount you have for a down payment (assume at least 20%), the mortgage rate and other debt, you may be able to spend between $3500 and $5000 per month to for your Manhattan co-op or condo.

You can use this link to StreetEasy.com to adjust the variables and see what’s available for you based on your personal circumstances.

See a video here and read the FAQ here

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