RaleighFirst Time Home Buyers

It truly is a great time to be a first time home buyer in Raleigh as the combination of tax credits, low interest rates and great pricing makes this truly the time to buy your first Triangle home. Here is some information to help you better understand the first time home buyer's tax credit that is now active thanks to the new stimulus bill that was passed.

Raleigh First Time Home Buyers Tax Credit

• First-time home buyers who purchase Raleigh homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit. Remember a tax credit is very different than a tax deduction – a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income. Want to learn more about how the tax credit works? Watch this very informative video from the NAHB:

• The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit if they sell their homes within three years.

Tax Credit Versus Tax Deduction

• It’s important to remember that the $8,000 tax credit is just that… a tax credit. The benefit of a tax credit is that it’s a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a Raleigh home buyer were to owe $8,000 in income taxes and would qualify for the $8,000 tax credit, they would owe nothing. Better still, the tax credit is refundable, which means the home buyer can receive a check for the credit if he or she has little income tax liability. For example, if a Raleigh home buyer is liable for $4,000 in income tax, he can offset that $4,000 with half of the tax credit… and still receive a check for the remaining $4,000!

Phaseout Examples

• According to the plan, the tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. To break down what this phaseout means to Triangle home buyers who are over those amounts, the National Association of Home Builders (NAHB) offers the following examples: Example 1: Assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time Triangle home buyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000. Example 2: Assume that an individual home buyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800. Remember, these are general examples. You should always consult your tax advisor for information relating to your specific circumstances.

Raleigh and Triangle Homes that Qualify

• The tax credit is applicable to any home that will be used as a principle residence. Based on that guideline, qualifying Raleigh and Triangle homes include single-family detached homes, as well as attached homes such as townhouses and condominiums. In addition, manufactured or homes and houseboats used for principle residence also qualify.

Higher Loan Amounts

• More good news – there is an extension on the additional tier of conforming loan amounts which had been first established in 2008. This tier of home loans are those greater than $417,000, and with a maximum that depends on the area, but is not greater than $729,750. These loans will again be eligible for rates that are slightly higher than conforming loan rates, but less expensive than the standard “jumbo” loan rates.

Important Steps For Raleigh First Time Home Buyers

Buying your first Raleigh home is one of the most important decisions you can make. It does not have to be a complex process. I will walk with you every step of the way to make the process smooth and successful. Here are a few quick tips provided by Coldwell Banker Howard Perry and Walston:

Step #1—Ask Your Lender About Available Mortgage Programs: An experienced mortgage company should be able to work with you one-on-one to determine exactly which mortgage programs will meet your individual needs and what you can qualify for based on your personal information. Applicants with higher credit ratings and/or higher levels of financial reserves generally receive more competitive mortgage rates. There are hundreds of available mortgage programs and there is usually one to meet the needs of almost any Raleigh home buyer. (For more information on this and other mortgage programs, contact me and I will put you in touch with a preferred lender.)

Step #2—Research the Terms of the Mortgage: Different mortgage lenders have varying price structures that can affect the amount that you pay for your home. An annual percentage rate (APR) includes the actual interest rate on the loan, as well as certain fees and costs associated with the loan. Because a customer may be paying points and other closing costs, the APR disclosed may appear to be higher than the actual interest rate quoted for the loan. Not all lenders calculate APR identically; however, it does give customers a relatively fair method of comparing price on their potential loans.

Step #3—Get a Pre-Qualified Loan Commitment: Even before the house hunting begins, Raleigh home buyers need to determine how much they can afford. Mortgage companies or other lending institutions provide pre-qualified loan commitments. Raleigh home sellers often will not take an offer seriously unless the prospective buyer has some assurance of creditworthiness from a mortgage company. A pre-approval means more because a full credit report is ordered on the customer so that a true loan decision can be made the same day a customer applies. Shopping for a home with a pre-approved mortgage enables a customer to negotiate as a cash buyer and submit an offer on a Raleigh home with confidence that the mortgage will be issued and the sale will be completed.

Step #4—Do Your "Home-work": Be sure to review this www.LiveinRaleigh.com site to check for MLS listings, neighborhood information, current mortgage information and home ownership services. The right amount of research will help you to better understand the Raleigh marketplace and Raleigh homes available in your price range when you're ready to work with me.

Step #5—Make a Checklist: To help make the home buying process a little easier, Raleigh home buyers should create a checklist of the important features they want in a home. Location and the number of bedrooms and bathrooms are usually important. Other important questions to answer: What will the commute to work be like? Are there shopping centers, parks, and schools located near the home?

Step #6—Let Jenn Nowalk Work For You As Your Buyer's Agent: As your buyers agent I will represent your best interests and help identify Raleigh homes that are for sale and in the right price range. I will work for you to identify properties, write contracts, negotiate the asking price, arrange inspections, and move to closing the purchase.

Step #7—Make an Offer: Once you find the right house an offer needs to be made. Contact me to make an offer. Make sure that your offer is contingent on two items: 1) You're able to obtain adequate financing (if you haven't done so already), and 2) you can pull out if the property doesn't pass the home inspection, and the owner can't come to terms about how to fix the problem. Be prepared for counter-offers from other buyers and some negotiation with the seller. Make an earnest money deposit, which is a check that is given to indicate that you're serious about buying the house. The check will be deposited and will apply toward the sales price if the deal goes through; if not, you get it back. You should also set a time limit that the offer will expire. If an offer is accepted, it goes to the contract phase.

Step #8—Hire A Home Inspector: Making an offer contingent on an inspection by a registered Raleigh home inspector can save thousands of dollars by avoiding unseen problems. Inspectors will check the house for any structural damage. In the contract with the seller, it should state any necessary repairs that must be made before closing on the house. Prior to closing, walk through the house and check that such repairs have been completed. I will help you hire a trusted inspector. Contact me with questions.

Step #9—Buy Homeowners Insurance: Lenders require homeowners insurance to protect the new Raleigh home buyer's interests as well as their own. There are many providers I can recommend.

Step #10—The Closing: This is where the Raleigh seller and buyer sign settlement-closing documents to transfer the ownership of the Triangle home and all transactions are finalized. Congratulations, you achieved the American dream and you are now a Raleigh homeowner!