7 Tips to Buying a Home

March 21st, 2016

 

No matter if you’re in a buyer’s or seller’s market, here are 7 steps you can take to make a smarter purchase. Since buying a home is likely the biggest single investment you will ever make, being prepared will help you make a better purchase. Here are our best tips to help you buy a home from McFall Group Realtors.

1. Know your buying power

 

What is your buying power? It is the combination of your credit-worthiness and how much you can realistically pay for a home.

 

First, you need to understand the hidden costs of buying a home. You will need to save for:

  • the down payment of your home — which is typically between 3-20%  of the offer price, depending on the type of loan
  • closing costs of the transaction, such as transfer tax, PMI, title insurance, and legal fees.  This could be as much as 10% of the price of the home.

 

Then you need to know what you can realistically afford each month to understand how much house you can buy. Your mortgage rate will depend on your creditworthiness — if you have a high credit score, your lender will likely approve you for a lower mortgage rate, which can save you thousands of dollars per year in interest.

 

How much of your budget should go to your monthly home costs? According to SmartAssets, you can use the 36% rule as a rough guideline. This means that your monthly obligation shouldn’t be more than 36% of your monthly gross income.

 

A loan professional can help you figure out how much house you can afford.

 

2. Fix your credit with the help of a loan professional

 

According to CreditKarma, a good credit score is usually 720 or above. You want to clean up your credit as soon as you can, and definitely before you go to a lender for a loan preapproval.  If you think your credit might be in need of help, a loan professional can always work with you to improve your score over a period of time.  You don’t have to go it alone.

 

When you apply for your loan pre-approval, you don’t want to have anything to hide on your application. So don’t lower your credit score by doing anything that will originate more inquiries into your credit. For example, don’t open any new credit cards. Also, don’t omit any debts or loans when you apply. If the loan officer discovers them in the application process, they may deny you a pre-approval.

 

Get a loan professional to check your credit score for you. A professional can give you a clearer idea if your score is in the ‘good’ range, or if you need to do some credit cleanup before getting a mortgage preapproval.

 

 

3. Work with a knowledgeable buyer’s agent

 

Do you understand what kind of market you are buying into? Even within a city’s limits, there can be micro markets that are increasing or decreasing in value.

 

That’s why it’s important to hire a highly competent real estate agent who knows the specific market. You want to make sure that the professional who you’re working with really understands what the market is like and will help you find the home that you desire.

 

How can you tell if your agent knows the market? See if they can provide you with a buyer’s market analysis.

 

A buyer’s market analysis report outlines which neighborhoods are still up and coming — with potential for increased property value — versus those that have peaked with inflated home prices. Having this analysis at your fingertips will help you know if a home’s list price is above comparable properties so you don’t overpay for a home.

 

4. Don’t try to time the market…

 

Even in a hot market, there’s never a perfect time to buy a home. It can take a while to know exactly what you like, and you may have to look at 10 or more homes before you can recognize what suits your lifestyle best. While you’re shopping, take photos of your favorite properties and the details that you liked the best so that you can remember what you liked.

 

Another good reason to slow down the buying process: you might find a better deal if you do. Investigate expired listings. Expired listings may have gone off the market because they didn’t get any offers at the listed price, so you may be able to underbid the original listing price. It’s not likely worth your time to look at FSBO (for sale by owner) listings, though. Since they are not represented by a professional, they are often overpriced.

 

When you start shopping, have a one-hour initial consultation with your realtor. Give them every single detail that you know about your lifestyle, buying power, needs, wants and desires for your home. The more detail you can provide, the easier it will be for them to help you find your future home. Your agent may also know of exclusive listings not available to the general public.

 

5. Make the offer as soon as you find the right home

 

If you love it, make the offer. Otherwise, that dream home may disappear faster than you think, especially if you’re buying in a hot market.

 

Your buying agent should contact the listing agent before you submit an offer so that they can decide what’s important to include in the offer. If you’re serious about it, you want to increase the chances that your offer is accepted.

 

Show that you’re serious about the purchase by creating a buyer’s offer packet. It should include your lender’s preapproval letter, a screenshot of your down payment money in your bank account, and comps that support the rationalization of the offer you are presenting.

 

6. Get a home inspection

 

Once you’re in the negotiation process, it’s essential that you get a third-party inspector to run a thorough home inspection. The inspector will be looking for major structural issues, including problems with the foundation, plumbing, and electrical systems. Your inspector should be extra picky, pointing out the most minor of faults.

 

Make sure to have the inspection conducted before it is too late to back out of a deal. If there are any major structural issues, you may be able to make the seller repair them as a contingency to solidifying your offer. Minor issues that you can repair on your own may be points for negotiating a lower offer.

 

7. Protect your credit before you close

 

Don’t raise any red flags with your creditworthiness in the weeks before closing. Any one of these moves could mean that you’re denied the loan and the deal falls through — even if you’ve already been preapproved!

 

  • Keep your spending to a minimum and don’t make any major purchases before closing — that includes buying furniture, or a car, truck, or van, or any excessive charges on your credit card.

 

  • Keep your bank accounts stable. Don’t change banks, spend any of the money you have set aside for closing, or make any large deposits to your accounts without checking with your loan officer first.

 

  • Keep your employment situation stable — do not change jobs, quit your job, or become self-employed. Any sudden change in your income can have that preapproval offer rescinded.

 

  • Do not cosign a loan for anyone. It will open an inquiry into your credit and add to your debt, which could raise your mortgage rate and cost you thousands of dollars over the life of the loan.

 

Looking for a home in the area? Let us help you find the home that works for you and your family. We’re well versed in our local real estate market, and we can provide you with a buyer’s market analysis to help you find the right neighborhood for you. Contact David or Cathy Sage today.

 

 

 

Consider These Homeowner Tax Deductions

February 22nd, 2016

 

You can’t avoid paying taxes, and we all need to pay our fair share. However, paying your fair share shouldn’t place an unjust burden on you. As a homeowner, your tax burden is doubled because you pay both income and property taxes. To boost your tax savings, take advantage of these homeowner tax deductions. As a result, you can use your tax savings to go on a vacation, increase your child’s college fund, build upon your retirement fund, or complete another home improvement project.

 

Home Improvements That Are Tax Deductible

 

You spend so much of your time at home, and you try to make it as comfortable a place to live as possible. If your home needs some upgrades, consider improvements that will not only help foot the bill for themselves with your homeowner tax deductions.

 

You can get an energy-efficient tax credit of up to $500 for installing storm doors and energy-efficient insulation and air-conditioning and heating systems. Switching out your old windows for energy-efficient ones could earn you $200. This credit expires this year on December 31st. So, this year will be your last chance to take advantage of getting tax credit for making your home more energy efficient.

 

Also, installing equipment that uses renewable sources of energy makes you eligible for the Renewable Energy Efficiency Property Credit. The credit covers 30 percent of the cost of equipment and installation. This credit also expires this year on December 31st.

 

Mortgage Interest and Refinancing Deductions

 

If your mortgage payment makes you cringe each month, you’ll be glad to know you can take tax deductions on the following:

 

* Interest towards mortgage

* Mortgage payments for additional property

* Rental properties

* Refinancing and home equity lines of credit (HELOC) up to $100,000 of debt.

 

If you own multiple properties, the mortgage interest on additional property is tax deductible as well. The cool thing is that it doesn’t have to be a house. It can be a boat or RV; as long as it has cooking, sleeping, and bathroom facilities, it counts as additional property.

 

Regarding using your second home as a rental, you need to vacation at least 14 days at the property or spend more than 10 percent of the number of days you rent it out to take the deductions.

 

Furthermore, you can claim points on your mortgage the year you paid them if the following happened:

 

* The loan was to purchase or build your main home

* Payment of points is an established business practice in your area and the points were within the usual range

 

Property Tax Deductions

 

Now, this is the big one. Property taxes you pay each year are considered tax deductions. The amount of property taxes you paid for the year shows up on your lender’s annual statement. You must deduct them as an itemized expense on your Schedule A tax form.

 

First-time homebuyers, look at your settlement sheet to see additional tax payment data. You may deduct the portion of property taxes you paid during the first year of your homeownership.

 

Protesting Your Assessment to Lower Your Property Taxes

 

Although you must pay property taxes, you can make sure that you pay a reasonable amount based on the true value of your home and land. Many homes get overvalued because assessors err in valuing a home and homeowners don’t pay attention to these mistakes. Consequently, homeowners unwittingly pay more than they should in property taxes.

 

However, if you’ve owned your home for more than a year, you can potentially lower your property tax burden by showing that your home has been overvalued, meaning that your tax assessment claims your property is worth more than it is.

 

Even if the number on the tax assessment seems close, you should still consider protesting your property tax. Typical savings from a successful tax protest is over 15%!

 

According to SmartAsset, the national median property tax paid is roughly $2,839.00. That’s about 1.192 percent of a home valued at $238,200.00.

 

If you’re able to reduce your assessed value by 15 percent to $202,470.00 and consequently save 15 percent on tax deductions, your new tax bill will be about 2,413.00. That’s a savings of $426.00!

 

To get started protesting your property tax, read your assessment letter. Your assessment letter will list data about your property and the assessed value of your house and land. Make sure your assessment letter has the correct information about your property.

 

Understanding assessors can make mistakes assessing your home value will help you with your appeal. There are three key mistakes assessor make when assessing property. These mistakes include:

 

  1. Outdated Historic Sales Data: Sometimes assessors will use sales data from previous years. Because the real estate market is fluid, this data changes quickly, as a result; this data can overvalue your home.

 

  1. Mass Appraisal Methods: Also, when assessors use mass appraisal methods, they do not take into account all the market adjustments that occurred over time. Consequently, there sales data can’t always produce useful comparable properties to set future sales.

 

  1. Living Area: Assessors notoriously make mistakes about the living area of your house. This is especially true if you live in a 1.5 or 2 story home. Check any previous appraisals to ensure correct measurements and description of our home. Does the assessment letter show the right number of bathrooms and bedrooms? Does it report the correct size of your lot? .5 acres differs greatly than 5.0 acres.

 

After reading your assessment letter, consult the Realtors at McFall Group with Keller Williams Realty. We can find three to five approximate values of comparable properties similar to yours, and these comps can then be used to support your claim that your home is overvalued. This is especially useful if the assessor used poor historical sales data, and thereby decrease you tax burden.

 

You’ll have 30 days to file an appeal of your assessment, so you’ll want to get the comps as soon as your assessment arrives. You can speak with an assessor on the phone or request a formal review.

 

You’ll then need to fill out a form and follow specific instructions regarding your supporting evidence. Typically, it’s not necessary for you to appear at the review. The review can take one to three months to complete, and you’ll receive a decision in writing.

The majority of assessment appeals are successful. However, if at first you don’t succeed, appeal. You’ll need to pay a small filing fee for an independent appeals board to hear your second appeal. This process could take up to a year to complete, so you’ll need to decide whether it’s truly worth it.

 

As a homeowner, you have plenty of options available to utilize the current tax deductions in place. The benefit that you can use your tax savings for major life events such as weddings, vacations, and home improvements.

 

To find out more about your homeowner tax deduction options, check out tax information for homeowners. You can also contact us directly and we’ll gladly lead you in the right direction towards saving you money on your taxes.