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Tag: first time buyer

  • First Time Home Buyer? Ten Facts Nobody Tells You

    Buying your first home can feel like both the best of times and the worst of times. Here are 10 facts nobody tells you when you’re buying your first home.

    1. Something will go wrong

    No move is ever perfect. Something will get broken or there will be something you’ve forgotten to bring or do. With any luck, the setback will be minor, and you can chalk it up to the old adage, “things happen.”

    2. Some of your conditions might not be met

    One of the least enforceable clauses in offers to purchase is one for cleaning requests. You can stipulate that carpets, refrigerators and ovens be cleaned. However, if they haven’t been, there is often very little that you can do about it.

    If a major repair hasn’t been completed as promised, one of two things will happen: you either won’t take possession of the property on the day you planned or your funds will have to be placed in escrow pending resolution of the issue.

    3. If you don’t have the closing fees, you don’t get your new home

    Legal fees are due on closing, and your funds won’t be released to the seller unless your lawyer is paid. Closing costs usually range from two to five percent of the purchase price, but be sure to verify this information before arriving on closing day. This money is in addition to your down payment.

    4. Good schools increase a home’s value

    You’ll pay more for a house in a good school district. Of course, the good news is you’ll get more for it when you decide to sell. If the home you’re planning to buy is your “forever” home and you don’t have, or plan to have children, this may not matter. Still, it’s something to think about.

    5. Your neighborhood may be about to change drastically

    The municipality may be planning a park, a school, or a playground for your area. Depending on your lifestyle, that can mean profound changes in a short period of time. Check with local administration and the area’s local representative. The first can tell you what the plan is. The latter will have a far better grasp of whether outlined timelines are accurate or not. You can base your decision on the information they provide.

    6. You need to read all the documents yourself

    It’s tempting when you’re paying a lawyer to review HOA or condo documents to simply delegate this task. However, a close reading of the minutes of meetings will teach you a lot about your neighbors-to-be and help you avoid nasty surprises, like planned increases in fees or devolving renovations that used to be the condo board, or HOA’s responsibility to individual owners.

    7. Don’t apply for other credit while mortgage shopping

    Applying for a loan or another credit card may seem like a good idea when you’re about to take the home ownership plunge and know you’re going to need to buy things like garden tools, a gazebo, and a grill. Don’t do it unless absolutely necessary. It can negatively affect not only the amount of your pre-approved mortgage, but it can also mean you don’t get pre-approval. Wait until after you’ve bought your home to apply for more credit.

    8. You’re going to need “earnest” money

    Also known as a deposit, you’ll likely need about $1000 per $100,000 worth of house available when you make an offer. This money is required as a show of good faith and will be held in escrow. You’ll get it back if your offer isn’t accepted, or it may be applied to your down payment. You may forfeit this money, though, if you’re the one who withdraws from the deal.

    9. Your neighbors-to-be may be your best source of information

    Walk around the area you where you want to live. If you see people out gardening or mowing their lawns, talk to them. Strike up a conversation and explain that you’re thinking of buying. Ask receptive individuals what the neighborhood is like, how long they’ve lived there, and how long they’re planning to stay. If you learn that your new home is located next door to some party animals who blast music every single summer evening, you may not enjoy your own backyard, so you may want to reconsider.

    10. Check for rebates you may be entitled to

    You may qualify for first-time homeowner rebates. There may be other municipal, state, or utility-provider rebates available, too. Start investigating early. It may make more sense to invest in attic insulation than an air conditioner if you’re going to get a rebate that covers some or all the cost of the insulation. Some areas offer rebates on newer, more energy-efficient appliances. You won’t know that unless you do your homework.

    A good real estate agent can talk you through the buying process. Now you’re already ahead of the game with these ten facts nobody tells you, and you’ll be able to focus on offer strategy rather than the fundamentals.

  • First-time home buyer incentives: Tax Benefits

    Many first-time homebuyers are mostly concerned with getting the best price for a home and the lowest interest rate on their mortgage. However, there’s an array of other factors that are involved in a home purchase. For one, you may be able to receive tax benefits for your new home purchase when it comes time to pay your income taxes. Here are some important first time home buyer information regarding your tax advantages:

    Tax advantages that homebuyers may receive:

    What is a first time home buyer credit and who can qualify? If you’re a first time homebuyer, it is important to know what tax advantages are out there because certain benefits are only available for your first home purchase. You want to keep an eye out for first time home buyer incentives offered by your local, state, and federal government. For one, you may be able to qualify for what is called a “first time homebuyer credit” when you file your tax returns. For a limited time, homebuyers who are eligible for this incentive can claim an interest-free credit of up to $7,500 by attaching a completed Form 5405 to the Form 1040 of their tax return.

    What are itemized deductions? All homeowners have the ability to deduct certain expenses that come along with owning a home.  There are a number of costs associated with buying and owning a home that qualify as itemized deductions in Schedule A of your Form 1040. As a homeowner, you will be able to deduct expenses like the interest you paid every month on your mortgage. Other expenses that can be itemized may include mortgage points purchased at the time of closing, real property taxes, as well as Private Mortgage Insurance (PMI) premiums for those who put less than 20% down on their home.

    What are home energy tax credits? As a homeowner, you can make as many improvements to your home as you want, and some of those remodels are tax deductible. Improvements made to reduce the amount of energy consumed within your home can be deducted from your federal taxes. If you are interested in making energy saving updates to your home, you want to save all of your receipts because you can receive credit for 30 percent of all the costs of qualifying improvements and products. By using a Form 5695 to claim the Residential Energy Property credit and the Residential Energy-Efficient Property credit, you can receive interest-free credit for home improvements like adding insulation, installing energy efficient exterior windows, and more.

    Other tax considerations for first-time homebuyers

    Keep in mind that you will not receive your tax benefits on the day of your home purchase. If you are buying a home in 2014, you will not be able to take advantage of your tax benefits until you file your tax return in 2015. With that said, the potential savings that you can gain will accumulate over the year before you file.