Sunday, October 19, 2014

What Does it Really Cost to Buy a Home?





An Idea of the Cost
When you do the calculations on the initial costs, the recurring costs and the net proceeds, you will see that buying a home is certainly advantageous. In addition to your deposit(s) and money down, you will pay fees to your mortgage company, title insurance, prorated taxes/water/sewer, recording charges and other fees. You will be required to secure homeowners insurance (paid in full) and have your declaration page in hand as required by your mortgage company. Depending on your mortgage program, you can expect to pay roughly 5 to 8% of the sale price in closing costs.

Remember, there are some fabulous advantages to owning a home that go way beyond being the master of your own domain ...
  • Tax Deductibility You can deduct the cost of your mortgage loan interest from your state and federal income taxes. Since interest generally will account for most of your payment during the first half of your mortgage, the savings can be significant. Some of your costs at the time of closing (including prepaid mortgage interest) can be taken as deductions on that year's income tax return, and points paid up front at the time of closing represent additional mortgage interest and may be taken as a deduction.
  • Tax Deductibility of Property Taxes You can deduct all of the property taxes you pay.
  • Appreciation Potential Real estate is considered a good long-term investment because it usually appreciates in value. The effects of borrowing potential can increase as the value of the home appreciates.
  • Capital Gains Exclusion When it's time to sell your home the amount of capital gains you have to pay is reduced. A homeowner can exclude up to $500,000 per couple if married and filing jointly, or $250,000 if single or filing separately for homes that have been the taxpayer's principal residence for the previous two years.
  • Capital Gain Treatment Congress allows preferential tax treatment on gains from capital assets held for more than one year. This would be important for a homeowner who has gains in excess of the allowable exclusion.

Know your monthly nut
Before meeting with a loan officer, work with your real estate agent to determine your monthly nut. How much can you comfortably afford to pay for a mortgage and all of the costs that go into monthly homeownership each month? Your Realtor(r) can give you an estimate of your monthly mortgage payment at a few different price points and in a few different areas to assist you in narrowing things down.

If you are not ready to reach out to an agent yet, do some homework on your own. Access market data for 400+ areas here: www.cbhearthside.com/marketdata. Click on "click here to find market data on a specific area or zip code" in the middle of the page to get started. Here is a peek of what you will get:


Bottom line: What does it really cost to buy a home? It depends. Some of it is up to you! Your agent and loan officer will make sure you are aware of all the fees to purchase.

Do some research, talk to a Realtor(r) and have a little faith! You can totally do this ... if your financial situation does not allow it at this time, your agent and loan officer can give you some great information and guidance to put you on a path to homeownership.

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