Courtesy of the NAHB:
Should I Wait Until Interest Rates Go Even Lower to Buy a Home?
Current mortage interest rates are extremely favorable for buyers. In fact, rates for 30-year, fixed-rate mortgages are hovering near 30-year lows.
No one can accurately predict whether rates will go up or down. Even those who follow the market for a living can’t figure out when interest rates will bottom out. If they could, they would all be multi-millionaires. Waiting to time the market is a dangerous – and losing – game.
Also, home prices don’t necessarily move in unison with interest rates. So, if you decided to roll the dice and wait to purchase a home, and the price were to actually drop $10,000 from where it is today, you could still end up losing money. How? If interest rates were to move up by a half-a-point during this period, the savings on the reduced home price would be more than offset by the higher monthly payment you would be making and the total amount you'd spend over the life of the loan.
In short, the smartest and safest time to buy is now. We know that interest rates are low today. We know that home prices are down. We know that there are plenty of homes on the market to choose from. We know that sellers are willing to bargain. And we know that builders are willing to offer attractive incentives to get your business.
Sunday, March 22, 2009
Homeownership Tax Advantages
Courtesy of the National Association of Home Builders:
Buying a home is one of the smartest purchases you can ever make. One reason is that homeownership has many positive tax implications. The three most important sources of tax savings for home owners are the:
deductions for mortgage interest
deductions for real estate taxes
capital gain exclusion for the sale of a principal residence
The deductions for mortgage interest and real estate taxes reduce the annual cost of homeownership by reducing the home owner’s tax liability each year. For example, a home owner with $10,000 in annual mortgage interest payments and real estate taxes and who falls in the 25 percent tax bracket could realize up to $2,500 in tax savings each year. Home owners who itemize their taxes can deduct from taxable income interest allocable to a first or second home for up to $1 million of mortgage debt and $100,000 of home equity loans. And most state and local taxes paid on homes are also deductible.
When the home is sold, the capital gain exclusion can again provide home owners a tax benefit. Under present law, sellers of a principal residence can exclude from taxation profits from the sale of a home, up to $500,000 for married taxpayers and $250,000 for single taxpayers. With capital gain tax rates expected to increase from 15 to 20 percent in coming years, these tax savings can be substantial.
Research by NAHB economists has estimated the tax savings for home owners for certain income and mortgage amounts. For a married couple with an income of $80,000 per year and an initial mortgage amount of $250,000, the tax savings from the mortgage interest and real estate tax deductions are estimated to save the couple more than $11,000 in the first five years of homeownership. Assuming the couple owns the home for twelve years, these savings grow to more than $25,000 over the time period. Combined with the capital gains exclusion, the total tax savings for the entire period of ownership exceeds $52,000.
For a couple with an income of $60,000 and an initial mortgage of $180,000, the five years tax savings total more than $6,000 and the total savings over a twelve year period are estimated to be more than $33,000.
Combined with the current $8,000 first-time home buyer tax credit (www.federalhousingtaxcredit.com), available for qualified purchases on or after Jan. 1, 2009, and before Dec. 1, 2009, the tax savings from homeownership make buying a home today a rewarding financial decision.
For more estimates of the tax savings of homeownership, check out NAHB’s “Opportunity Knocks” brochure.
Buying a home is one of the smartest purchases you can ever make. One reason is that homeownership has many positive tax implications. The three most important sources of tax savings for home owners are the:
deductions for mortgage interest
deductions for real estate taxes
capital gain exclusion for the sale of a principal residence
The deductions for mortgage interest and real estate taxes reduce the annual cost of homeownership by reducing the home owner’s tax liability each year. For example, a home owner with $10,000 in annual mortgage interest payments and real estate taxes and who falls in the 25 percent tax bracket could realize up to $2,500 in tax savings each year. Home owners who itemize their taxes can deduct from taxable income interest allocable to a first or second home for up to $1 million of mortgage debt and $100,000 of home equity loans. And most state and local taxes paid on homes are also deductible.
When the home is sold, the capital gain exclusion can again provide home owners a tax benefit. Under present law, sellers of a principal residence can exclude from taxation profits from the sale of a home, up to $500,000 for married taxpayers and $250,000 for single taxpayers. With capital gain tax rates expected to increase from 15 to 20 percent in coming years, these tax savings can be substantial.
Research by NAHB economists has estimated the tax savings for home owners for certain income and mortgage amounts. For a married couple with an income of $80,000 per year and an initial mortgage amount of $250,000, the tax savings from the mortgage interest and real estate tax deductions are estimated to save the couple more than $11,000 in the first five years of homeownership. Assuming the couple owns the home for twelve years, these savings grow to more than $25,000 over the time period. Combined with the capital gains exclusion, the total tax savings for the entire period of ownership exceeds $52,000.
For a couple with an income of $60,000 and an initial mortgage of $180,000, the five years tax savings total more than $6,000 and the total savings over a twelve year period are estimated to be more than $33,000.
Combined with the current $8,000 first-time home buyer tax credit (www.federalhousingtaxcredit.com), available for qualified purchases on or after Jan. 1, 2009, and before Dec. 1, 2009, the tax savings from homeownership make buying a home today a rewarding financial decision.
For more estimates of the tax savings of homeownership, check out NAHB’s “Opportunity Knocks” brochure.
Saturday, March 21, 2009
Tax Advantages for buying a new home in 2009
There is a great new tax credit that applies to first time buyers who purchase a home in 2009. The following information is from the National Association of Home Builders website. Visit this informative website for more information on this tax credit
$8,000 Home Buyer Tax Credit at a Glance
The tax credit is for first-time home buyers only. For the tax credit program, the IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase.
The tax credit does not have to be repaid.
The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
The credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009.
Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.
$8,000 Home Buyer Tax Credit at a Glance
The tax credit is for first-time home buyers only. For the tax credit program, the IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase.
The tax credit does not have to be repaid.
The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
The credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009.
Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.
What do I look for in a new home?
Many people looking for a new home in Houston have asked me what to look for in a new home. While most people concentrate on the model home, this does not really give the consumer a real idea of the capabilities of the builder. To get a real idea of what a builder has to offer, start with selecting a community or area of town you would like to live, then find builders in that area. Rather than drive around for hours, save yourself the time by going to one of the online portals such as Move.com to narrow down you search of builders, plans and price ranges. After you have done this, visit the communities first and talk to some of the neighbors about the community and the builders. It is important to get first hand testimonials and evaluate the community. When driving through the community, pay attention to the conditions of the homes under construction. A well run community will have clean job sites, homes that appear to be progressing through construction and have an orderly appearance. One you have narrowed down the builders and toured their models, make a spreadsheet of their standard features to evaluate what is included. This is a good way to compare the value proposition. For me information about selecting a builder, please visit our website http://www.ourfirstnest.com/
Builder's Financial Status
There has been a lot of interest in a website called implode/explode which is a blog about the financial status of builders and consumer's experience with them. While it can be trusted that the consumers posting their stories are accurate, they should be approached with caution. Some of the posts speculate on financial status of local builders based on their experience. Nobody can doubt their experience, but it does not necessarily validate the status of the company.
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