First Time Homebuyer
Benefits of Owning A Home
Owning a home is not only an investment that lets you build value or equity, but other benefits include an income tax deduction, stable housing cost, and freedom to personalize your surroundings. It will also improve your credit score provided that you make your monthly payments on time, and will increase your net worth as your home appreciates over time. You build equity in your home by making your monthly payments of which part is applied toward the principal and part to the interest expense. As you pay down the principal amount, your loan amount decreases increasing the amount of money you have invested in your home also called equity.
Mortgage Interest & Property Tax Deduction – Homeowners can deduct the interest part of their payments and also the property taxes paid on the home each year on their income taxes which usually results in a substantial tax savings. Renters on the other hand do not have this tax write-off, nor do they have control over rising rental amounts. With a fixed rate loan, a homeowner’s payments will remain the same throughout the life of the loan with property taxes and insurance being the only variable to the payment. With the tax benefits of owning a home, you may find that you are paying less to buy a home than you would to rent it.
Home Buyer Tax Credit - As part of the home buyer tax credit, first-time home buyers can quality for up to $8000 or 10% of the purchase price or whichever is less on any home with a binding contract by April 30, 2010 with a closing date no later than June 30, 2010. Home buyers who have not owned a home in the last 3 years can also qualify for this deduction. The net income limits for this deduction are $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return for the full tax benefit. The tax credit phases out to zero for single taxpayers making more than $95,000 and $170,000 for married filing jointly. Buyers must live in the newly purchased home for at least 3 years. Detached single family homes, condominiums, and townhomes all qualify for the tax credit as long as it will be used as a principal residence.
Down Payment and Closing Costs Deduction – Homeowners can usually deduct closing costs that they paid on their taxes for the year the sale took place. Sellers often times will pay all or a portion of the buyer’s closing costs.
Steps to Buying A Home
While buying a home is an exciting experience, it is also important to remember that it is a complex legal transaction that involves a financial commitment. It is imperative that you understand the process before you sign on the dotted line.
1. Determine how much you can afford – Your price range for a home will be determined by your income, credit rating, monthly expenses, down payment and current interest rates. (You can use the calculators on this website to give you an idea, but you must be pre-approved by a lender before you can make an offer on a home.)
2. Become an educated buyer – Real Estate laws vary greatly from state to state and rapidly change; it’s important to make sure that you are informed on Real Estate laws affecting you. An experienced Real Estate Professional can help you understand and guide through this complex process.
3. Shop for a home loan – First, get your credit score; then talk to several lenders and compare costs and interest rates. Many lenders offer FHA Loans with lower down payment requirements. Currently, FHA is offering to qualified home buyers, loans with a 3.5% loan down payment requirement, and may be a good option for first time home buyers. Next, get pre-approval for a loan amount. You have a 15 day window for lenders to pull you credit without it negatively impacting your credit score once you have it pulled for the first time. You should be able to get a quote from a lender if you know your own credit score without the lender having to pull your credit. Also it is important to avoid expensive credit card purchases or buying any big ticket items, such as a car, furniture or boat until you have closed on your home. After deciding on a lender, be sure to get a Good Faith Estimate of your closing costs.
4. Become familiar with your home market – You should visit several homes in your price range and compare the homes that fit your criteria so you will recognize a good buying opportunity. As Realtors, we have access to the complete Multiple Listing Service (MLS) with all the current information on all of the homes listed by every Real Estate company and can streamline the process by making appointments and showing you all the homes that you would like to see without having to go through several different agents and schedules. We also understand construction and property issues that could impact you later on if you are not an informed buyer; a good Realtor will point out these potential problem areas.
5. For Sale By Owners (FSBO) – Sometimes home buyers decide that they want a home that is “For Sale By Owner” thinking they can save money. Many times the FSBO is over priced by the seller or may have undisclosed defects. On a home listed by a Realtor, the seller will provide you with a Property Disclosure Statement that should list any problem areas with the home and the repairs are negotiable.
6. Choosing a Realtor – Buyer representation is a free service to the buyer in Georgia because the seller pays the commission for both buyer and seller. It’s important to choose an experienced Realtor who can advise and guide you through the complicated legal process to ensure that you make an informed decision. Also, as your Realtor, we will provide you with a list of sold comparable homes in the neighborhood and tax records to help you determine a fair price to offer for a home.
7. Making an offer – After deciding on the home you want to purchase, you will need to make an offer by signing a contract (Purchase and Sale Agreement) with the seller. At this time, negotiations between the buyer and seller will settle issues of price, possession date, repairs, and closing costs paid by seller. This critical document spells out the rights and obligations of both buyer and seller. The seller will usually counter your offer, and it may be necessary to negotiate back and forth between buyer and seller until both parties agree to the terms of the sale or reach an impasse. When an agreement has been reached, it is binding on both parties. Furthermore, issues overlooked by the contract are not binding on either party. This is not the time to save money. If you are not working with a good Realtor, you will need to hire an attorney to review and advise you prior to making an offer.
8. Get a home inspection – Make your offer contingent on a home inspection. An inspection will reveal the condition of the home, and can help you avoid buying a home that needs major repairs or has major defects.
9. Shop around for homeowners insurance – Lenders require that you have homeowners insurance, and shop around for the best rates.
10. Review the HUD Statement - We provide you with a preliminary HUD Statement from the closing attorney's office prior to closing and review the closing cost with you.
11. Closing - We set up the closing with a Real Estate attorney, and they will review and explain every page to you before you sign.
Although the buying process can be daunting, with a little help, you can avoid being overwhelmed and may find it an extremely pleasurable experience to become a homeowner.
