- Are you tired of Renting?
- Are you ready to pay your mortgage and not your landlord’s?
- Did you know you can write off your mortgage loan interest payments?
- Did you know that if you bought and later sold your home you do not pay capital gains on your investment?
- Are you looking to upgrade your home?
- Are you wanting an easier commute to work?
Your First Year Tax Deduction
Total Interest Paid in the first year on a $350,000 loan would be $13,887.83. You also paid approximately $3,500 in mortgage insurance which is also deductible. The total tax deduction is $17,387.83. With a combined state and federal tax rate of 31%, you could get a check from the government of $5,390.23 in the first year. Your average tax savings over the 30 year loan term is $2,635.46 per year. Your effective interest rate after taxes is 2.76%.
Finding Your Agent
Owning real property is one of the best investments you can have. If you are looking for your family home, a rental property, or to expand your investment portfolio investing in real estate is always a great bet. It is always your best interest to have a professional on your side when undertaking such a large purchase.
Here Are A Few Tips Before Choosing Your Real Estate Professional
- Look for an agent or broker that is full time.
- Be sure to choose an agent or broker that has experience completing transactions similar to yours.
- Interview a few agents to see if they are familiar with the area you want to purchase.
- Ask how much time the agent will have for you.
- Be sure your agent will be available to show you homes when you are off work or available.
- Ask about their credentials and any education in real estate.
- Can you count on your agent to return your phone calls?
- Ask for a list of homes they have sold.
- Ask for a reference list.
- Pick an agent that you trust and feel comfortable with.
Be sure to pick an agent that works full time as a realtor. It is of your best interest to have an agent that is always fundamentally involved. An agent that is familiar with properties similar to what you are looking for will be your greatest asset when buying a home.
Once you have received a pre-approval letter and found the agent that is right for you, it is time to decide what kind of house you want and which location works best for you and your family.
Take a Drive and Decide
Get to know the neighborhoods, schools, restaurants and anything else that my be a factor in buying. Take a drive to see if the neighborhood suits you. If you are buying with your significant other, it is very important that you both work together to decide on what is best for both of you. If you know what you are looking for it will make your home buying experience very easy.
Narrow Your Search
Select the properties that interest you the most and have your real estate agent show these homes only. Be sure to do your research and ask your realto to check comparable sales in the area to be sure the home is priced fairly.
Make the Decision To Buy
Looking at a number of homes will help you make a good judgment on price and location. As soon as you have found the property that is right for you, your agent can help you make an offer that the seller will accept. Your agent is an advocate of yours and should be willing to negotiate what is best for you. If your agent works full time in the industry they will know if the house if fairly priced or if you have room to submit a lower offer. If a home has been on the market for a number of days it could be a sign that the home is overpriced. Also, your agent should be able to leverage your offer with escalation clauses and other tactics that gives you an advantage over other buyers if the house is underpriced with multiple offers.
The Process Before Closing
The contract is a legal arrangement between a potential purchaser and property’s seller. This is a document has not bound you to the contract or the purchase of the home until objection deadlines have passed. The home under contract is inspected for quality and appraised at or below the contract price prior to closing. If the home has structural or mechanical problems you can still object and legally walk away or negotiate terms at this point. If the home does not appraise for the value on the appraisal objection deadline, you can object and legally walk away or negotiate terms at this point.
Streamlining The Process
- Keep written records of everything. To keep all of the verbal agreements clearly defined, transcribe these agreements including counter-offers and addendums into written agreements to be signed by both parties. Your agent will assist you with drafting all of the paper work and make sure that you have copies of everything.
The Closing Agent
Either a title company or an attorney will select the closing agent. The closing agent will hold the deposit in escrow and will research the recorded history of the property to ensure a free and clear title. Some properties are subject to restrictions which will limit building or parking. There may also be recorded easements or encroachments that can limit the use of the property.
How To Hold Title
It may be a good idea to consult an sttorney or tax advisor on how to hold title. There are a few different methods of holding title and they can grant different legal, estate and tax implications, especially when selling or upon death of the title holder.
Upon acceptance of your offer by the seller, you will want to have a licensed property inspector, inspect the property within the timeframe that was agreed upon in the contract. You are welcome to have a number of specialized inspectors; roof, HVAC, plumbing, electrical, structural etc. If you are purchasing a commercial property, you will need to have an environmental audit done on the site for your lender.
After the inspection you may proceed without any objections to continue the closing process or you can object to a variety of faults that were found during this inspection process. Your inspection objection must be given before the deadline in the contract and you will either ask for these faults to be remedied and repaired. You are also able to utilize your agent to renegotiate the terms of the contract, usually the asking price.
Appraisal and Lending
It is very important that you keep in close communication with your lender, who will let you know when additional documents are needed to approve your loan application. If the agreement is conditional on financing, then the property will need to be appraised by a licensed appraiser to determine the value. If the property is not valued for the asking price the lending institution cannot confirm their investment on your property. This is important for both you and the lending institution to be certain the investment is near fair market value. Appraisers specialize in determining the value of properties based on a number of variables, square footage measurements, building costs, recent sales of comparable properties, operating income and other factors. Once you are within two weeks of closing, double check with your lender to be sure the loan will go smoothly and on time. Your financing will make or break your deal. If you do not have the financing you will not be able to close. Be absolutely certain that you have a lender that is reputable. Your real estate agent should be able to refer a reputable lender that will come through for you at the end.
If you are financing your home through a lending agency, you will be required to purchase a certain amount of insurance. The value will depend on the lending institution and the purchase price of your home. It is recommended that you shop around for the right insurance for you. You can save hundreds of dollars a year on insurance if you know a few tips.
Consider a High Deductible. Increasing your deductible by just a few hundred dollars can make a big difference in your premium
Ask Your Insurance Agent About Discounts. You may be eligible for a lower premium if your home has safety features such as dead-bolt locks, smoke detectors, alarm systems, storm shutters or fire retardant roofing materials. Persons over 55 years of age or long-term clients may be eligible for additional discounts.
Insure the Improvement Only. After a disaster, the land is still there. If you do not subtract the value of the land when deciding how much homeowner’s insurance to buy, you will likely pay more than you should.
If you have made it to this point, there are only a few things left to do. Final walk through, home services and utilities and of course signing the closing documents.
The closing will require all parties involved a settlement statement. This summarizes and details the financial transaction enacted in the process. Both parties will sign the statement as well as the closing agent, certifying its accuracy. If you are obtaining the financing through a third party, you will have to sign all pertinent documentation required by the lending agency. If you are bringing personal funds to the closing you can elect to have the funds wired electronically into the closing agents escrow account or bring a certified bank check to the closing. The seller should arrange to have all property keys and any other important information to the closing.
It is know time to take your keys and move into your new home. It is a process, but the benefits of owning your very own real property are substantial. You will know be paying your own mortgage and not your landlord’s. You are now paying the principal of your loan and securing the tax incentives that are not available as a renter.