SMRE NEWSLETTER MAY 2009
Embarking on the American dream of owning a home can be a difficult journey, but so very rewarding when you attain that goal. Even with a faltering economy and the loss of jobs, no one knows what the future may bring. But one thing is for sure; there is only so much land on this planet, and no more mountains, rivers or valleys are going to be created. If you have the financial means to purchase real estate, you have the hardest part already completed. It is no secret that selling a home right now can be a challenge, but this is a great time to make that purchase you may have been putting off. There is lots of inventory (also known as a Buyer’s Market), interest rates are down, and for first time homebuyers, there is an $8,000 tax credit incentive. (Details to follow).
The first decision to be made is on what part of the planet you want to own your piece of dirt. If the decision is made that north Idaho is the place, Selkirk Mountain Real Estate is here to help you obtain your piece of the planet.
Next, you need to figure out how much house you can afford. If you need to finance the purchase of a home, it is a very good idea to get prequalified.
This serves several purposes:
- 1. We look at homes or land that you have the ability to purchase. If we don’t do this and we find the perfect house, and it turns out that you cannot qualify for the loan, you will be very disappointed. It also saves everyone a lot of time by not looking at real estate that you are not going to be able to purchase.
- 2. When we write up a Purchase and Sale Agreement, a seller is much more likely to consider your offer and terms if you have a contingency of financing, and your offer is accompanied by your pre-approval letter. This is especially true if a seller receives more than one offer on his property.
- 3. By working on your preapproval ahead of time, you can shop for the best interest rates on loans. Even a small difference in a rate can save you thousands of dollars over the life of a loan. Good credit, documenting your income and a substantial down payment will make you a better candidate for the better mortgage rates.
There are definite advantages to owning a home:
- 1. Uncle Sam helps out by letting taxpayers deduct part of the mortgage interest and real estate taxes each year. Borrowers get the benefit only if they pay enough in one year to exceed the standard deduction. But that usually happens, especially during the first few years of a mortgage, when most of each payment goes toward interest rather than principle. According to the Federal Reserve Survey of Consumer Finances, the average homeowner today has 36 times the net worth of the average renter. By taking advantage of the federal income tax deductions on property taxes and mortgage interest, you can save thousands annually.
- 2. Owners enjoy other benefits, too. They build equity over time as home values rise and their mortgage balances shrink. The National Association of
- REALTORS (NAR) estimates that on average, the value of a home nearly doubles every ten years. As a homeowner you earn appreciation on your purchase price, something a renter cannot do. This value, especially paired with a low interest rate and plentiful inventory, makes now the perfect time for a home purchase.
- 3. They also don't have to worry about their housing costs shooting through the roof, because lenders can't boost borrowers' rates and payments unless those borrowers have adjustable-rate mortgages.
- 4. Pride and comfort in owning your own home.
- 5. Control over your own property and the freedom to decorate and landscape how you like.
- 6. Fixed mortgage payments.
- 7. Housing security.
While poor market conditions have created troubling circumstances for some homeowners, the downturn has made the affordability of homes better than ever. The NAR housing affordability index concluded that homes in December of 2008 were more affordable than at any other point since 1970 (the start of the index). And with numerous foreclosures on the market and prices still dropping, now is a good time to buy. In addition, because the market time to sell a home has increased, this creates a larger inventory of homes; everything including new, existing as well as foreclosures. As a buyer you can peruse the market and have the freedom to select the home you really want. If you’re interested in a new home, many developers are getting more competitive with their pricing because they have also taken a hit by the ailing economy.
There is a Home Buyer’s Tax Credit that first time home buyers should be aware of. The following information was obtained from CNNMoney.com:
First-time buyers can claim a credit worth $8,000 - or 10% of the home's value, whichever is less - on their 2008 or 2009 taxes. A big plus is that the credit is refundable, meaning tax filers see a refund of the full $8,000 even if their total tax bill - the amount of withholding they paid during the year plus anything extra they had to pony up when they filed their returns - was less than that amount.
Scenario 1: Your final tax liability is normally $6,000. You've had taxes withheld from every paycheck and at the end of the year you've paid Uncle Sam $6,000. Since you've already paid him all you owe, you get the entire $8,000 tax credit as a refund check.
Scenario 2: Your final tax liability is $6,000, but you've overpaid by $1,000 through your payroll withholding. Normally you would get a $1,000 refund check. In this scenario, you get $9,000, the $8,000 credit plus the $1,000 you overpaid.
Scenario 3: Your final tax liability is $6,000, but you've underpaid through your payroll withholding by $1,000. Normally, you would have to write the IRS a $1,000 check. This
time, the first $1,000 of the tax credit pays your bill, and you get the remaining $7,000 as a refund.
To qualify for the credit, the purchase must be made between Jan. 1, 2009 and Nov. 30, 2009. Buyers may not have owned a home for the past three years to qualify as "first time" buyer. They must also live in the house for at least three years, or they will be obligated to pay back the credit.
Additionally, there are income restrictions: To qualify, buyers must make less than $75,000 for singles or $150,000 for couples. (Higher-income buyers may receive a partial credit.) Applying for the credit will be easy - or at least as easy as doing your income taxes. Just claim it on your return. No other forms or papers have to be filed. Taxpayers who have already completed their returns can file amended returns for 2008 to claim the credit.
Emotions, family and personal reasons all come into play in any home buying decision. Buying a home can create a higher quality of life, giving you pride of homeownership, and something to enjoy improving and developing over the years. |
