 First time homebuyers are at the greatest
disadvantage of any purchaser of real estate. Why? Because other
professionals know that they have more knowledge and experience, and
can take advantage of you.
Most first time homebuyers have no idea
how much money they need to have prior to purchase to put down on a
home, where to look, what types of loans they have available to
them, etc.
Renting is fairly cheap, but owning property
has multiple other advantages. Depending on your loan type and cash
available, you can likely own a property for nearly the same amount
of money you pay in rent. Most renters don’t realize that the
interest you pay on a mortgage (loan), is an income tax deduction.
So, at the end of the year, you receive a very large tax advantage
that renter’s do not. Plus, real estate value almost always
increases, so just paying the mortgage allows a property to increase
in value.
Here is a quick rent vs. buy example.
You earn $30,000 per year and rent an apartment
for $750.00 per month. No tax breaks and no equity in the property.
You probably pay around $6,000 in income tax per year, and pay
$9,000 a year in rent. With just rent and taxes deducted, you only
realize $15,000 of real money at the end of that year.
You earn $30,000 per year and own a condo you
bought for $150,000. As a first time homebuyer, you put 5% down and
have a mortgage payment of $773.00 per month. Again, you pay around
$6,000 in income tax that year. The first years mortgage payment is
almost all interest so, your interest payments are over $9,200 that
year, so you get to deduct that from your income tax. By paying the
mortgage that is slightly above the rent, you will get that $6,000
in income tax back from the IRS. So paying $9,276 in mortgage for
the year, you realize $20,724 in real money at the end of the year.
Plus your property has likely risen in value to $160,000, so if you
sell it you could make another $10,000.
I am not a tax advisor, and this is not tax
advice, but even with this very basic example, you can see how to
make much more actual money by owning real estate versus renting.
A Buyer’s agent for a first time homebuyer is
the best investment you can possibly make. As a real estate
professional and attorney, I am able to walk my clients through the
process, so they can feel confident in their purchase. Also, I know
the programs available, I know the market, and I can share that
knowledge and access to allow you to make a great purchase.
Did you know first time homebuyers are eligible
for special loans that allows them to put down less cash than anyone
else? Did you know veterans and some members of their family are
eligible for loans where they don’t have to put any money down?
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