3 Great Reasons for Buying a Home in 2018
Buying a home is something that most folks would love to do, but many believe they could never afford it.
Today, buying a home is much easier, and access to affordable mortgage payments is now a reality for most Americans.
Buying a Home in 2018
This really is a unique opportunity for home buyers. An exciting combination of factors have come together recently that may make buying your first home a no brainer.
1. Interest Rates are Going Up
I know this doesn’t sound like a “great reason” for buying a home, but it is. While rates are rising, they are rising slowly as a result of an improving economy. Increasing interest rates help to control inflation.
There are some renters that are waiting until rates hit the bottom before they buy. I get it. Everyone wants to save money. The problem with this thinking is that “low” or “high” interest rates can only be identified after the fact.
Once rates are at their lowest, all you know at the time is that they are what they are. As rates go up, you can then say “rates were lower”. When you see rates increasing, the sooner you act, the smarter you look.
My professional opinion is that interest rates will continue to rise slowly throughout the year. I’m not pulling any fire alarms here, there’s no reason to panic. Rates are trending up, but I don’t expect them to rise out of control.
2. Tax Cuts, Tax Deductions and Tax Credits
Rents are crazy high in todays market. As the cost to rent continues to rise, the cost difference between paying rent and paying a mortgage gets smaller.
Many real estate professionals like to talk about how buying a home will have the same, or a lower payment than renting. While this is mostly true, it takes some math to make that comparison.
Tax Cuts. It is projected that 90% of Americans can expect to take home more money after the new 2018 tax brackets go into affect next month. This is, in effect, a pay raise for many families.
Tax Deductions. When you buy a home, the interest that you pay on your mortgage is tax deductible up to a loan amount of $750,000. Most home buyers can deduct 100% of the interest if it makes sense for you to itemize at tax time.
Example: If you borrow $300,000 at an interest rate of 4%, you will pay $12,000 of interest over 12 months. If you itemize your deductions at tax time, you would be able reduce your taxable income by $12,000.
This might even put you in a lower tax bracket!
In addition to being able to deduct your mortgage interest, you can also deduct property taxes up to $10,000 a year.
I strongly recommend that you consult a tax professional to explore exactly how these deductions will impact your tax savings.
Tax Credits. A mortgage credit certificate [MCC] is a dollar for dollar tax credit. This program is only available to first time home buyers, and it does have income limits.
A MCC will convert a portion of your mortgage interest deduction into direct reduction in the taxes you have to pay.
You should seek out a loan officer that has experience working with first time home buyers.
3. Record Stock Market Gains
If your employer offers a 401k retirement plan, you may have already saved up for the down payment on your new home and you don’t even know it!
Most 401k and IRA plans allow you to borrow up to half of the balance of your retirement account for buying your first home. You are borrowing money from yourself, and you will pay yourself back with interest.
The payments on your 401k loan will be deducted from your pay check by your employer. If you adjust your pay check withholdings to account for your mortgage interest tax deduction, this might offset the payments from your 401k loan.
Down Payment and Closing Cost Assistance – If you do not have access to a 401k loan, there are other creative ways to pay for your down payment and closing costs.
Other options include State and local first time home buyer programs, as well as using gift funds to cover your initial investment.
Finding the Best Lender
Many people think that finding the best lender is the key to getting the best deal. The truth is, most lenders offer the same loan programs.
The most important decision you have to make is choosing a loan officer that has experience with first time home buyers.
What most home buyers don’t realize is, your options are limited to the experience of your loan officer. It’s important that you understand the difference between working with a professional, and getting tricked into working with a mortgage call center.
The difference is drastic. Working with an inexperienced call center lender could put you at risk of being told that you do not qualify, when in fact, you do qualify.
Call center lenders depend on automated underwriting systems to tell them if you qualify for a home loan. A professional loan officer can still approve you, even if you you cannot get an automated underwriting approval.
Get Expert Advice
If you have any questions about finding the best lender, we’re here to help. With close to 20 years experience helping first time home buyers, this is your chance to speak to a professional loan officer and get expert advice.
You can either ask a question here, or leave a comment below. Happy house hunting!