What's the penalty for getting a first time home buyer loan, and selling your house 2 months later?
Answer:
There are two penalties that are of concern to you. The first is the pre-payment penalty on the loan. This varies from lender to lender. You may find yourself paying 6-12 months of principal payment if you pay the loan off early. The good news is that there are many loans out there that do not have a pre-payment penalty and you would be wise to seek one of those out.
It sounds to me that you want to try and 'flip' properties. That is, you found (or want to find) a property that is a good deal and then re-sell it at a profit. Keep in mind, that you should figure in the closing costs of buying the property to make certain that you can sell it at a profit. A $10,000 profit may not be enough if you have three or four thousand dollars in closing costs plus capital gains taxes.
The next penalty to think about is the IRS capital gains tax. If you sell the property in under a year you will be subject to a capital gains tax of 25% or moreof the profit. The profit is treated as regular income. If you hold the property for longer than a year it is considered an investment and the capital gains are taxed at a rate of 15%. If you buy the property and keep it as your primary residence for at least 2 of 5 years (does not have to be consecutive time) you have a $250,000 capital gains exemption ($500,000 if you are married and file jointly).
I hope this answers some of your questions. I would advise you to consult a tax advisor and an accountant for more information.
If you have any other questions, please feel free to e-mail me through my website at www.flwaterhomes.com
Jim Reske, Realtor
ERA Advantage Realty
Port Charlotte, FL
We do not know the terms of the contract in your possession.
If it's difficult for you to understand, take it to a lawyer.
Good luck.
Other than the fact that you won't be able to sell it for much more than what it originally appraised for. Especially if a good real estate agent is involved. You'll also experience professionals fees on the way in and out that will leave you worse off than when you started capital-wise.
If you are thinking you've made a mistake yes it should turn out to be a whopper financially by deciding not to hold the property till equity & appreciation can cover your potential losses. However, if you bought low and your flipping and you can cover the expenses etc. It may have been a wise move.
The way to check for any other losses based on the financing is to take a look at the Title companies closing documents. there are documents with names like Note or Mortgage Note, Riders and Addendums. Pay special attention to any clauses in these documents that mention a penalty for early cancellation, payoff, pre-payment penalties, change dates-there's all kinds of stipulations but you'll have to read those doc's to really understand them. In fact, unless you had a great loan officer that went over your documents at the closing, most people don't know or care until they need to know. I'm located in the Chicagoland area of Illinois- the mortgage terms are written state by state so you need to dig your lenders mortgage notes up to see what the loan officer sold you-and should have disclosed to you at least once when they described the program they wanted to put you on.
Each state has a first times plan, and each has its own rules governing penalties for such as you are considering.
Be warned, you are going to loose money selling before 2 yrs. Hopefully you did not do 100% financing. Plus if your area is primarily a first time area, you have to compete with other brand new never lived in homes at the same price. So if you were looking for a home in your neighborhood, what would you buy, new or nearly new at the same price?
What ever the reason you have for selling so soon, try to work thru it. It will eventually pass and you'll be the better for having worked thru it.
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