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Buying a House in Tennessee
Can I buy a new house in TN? With FHA, are the concessions paid by the owner tax deductible?
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If you meet the eligibility criteria, you can purchase a new house in Tennessee using an FHA loan. FHA loans enable low-income families and first-time buyers to obtain affordable financing.
FHA Loan Basics
Down Payment: Normally, FHA loans require a minimum down payment of 3.5% and a credit score of at least 580.
Credit Score: The credit score requirements on FHA loans are more lenient, but lenders may have specific requirements.
Debt-to-Income Ratio: You must also qualify for specific DTI ratios that lenders will analyze.
Owner-Paid Concessions
Selling a home against concessions always raises a question:
Concessions Defined: A seller concession is an amount the seller pays to assist the buyer with pre-closing costs or other functions regarding purchasing that home. This amount includes prepaid taxes and insurance or any other fees.
Tax Deductibility: In most cases, the seller concession paid is not tax deductible. From the sellers’ perspective, the payment of these concessions is treated as a lower part of the price of the home, which is not a taxable event for the buyer. In this case, it may be the closing time when a client would see some advantages, as the cash paid to the seller has quite reduced.
Important Considerations
Loan Limits: Please ensure that the purchase price of the new house does not exceed the FHA loan limits for Tennessee.
Inspection and Appraisal: The FHA loan requires the appraisal and inspection of a property to ensure it meets its minimum safety and livability requirements.
Yes, getting an FHA loan and purchasing a house in Tennessee is possible. Yes, some sellers submit closing costs to the buyers. Unfortunately, they are not usually tax deductible for the buyer. Always consult with a tax adviser to understand how regulations apply to you. If you have additional questions or need help, don’t hesitate to get in touch!