Tax Breaks for Homebuyers

Buying a home this year has many benefits, such as persistently low interest rates. Additionally, Realtor.com recently published an article outlining some of the best tax benefits for new homeowners. To get the best value, consider taking advantage of the following tax breaks:

• Buy Deductible Points. Deductible points are common tax breaks, and now is the perfect time to buy them. With historically low interest rates under 4 percent, extra points can further reduce the rate you receive. A point costs approximately 1 percent of your loan amount and usually lowers your interest rate by about .25 percent. For example, if you buy two points off a 30-year fixed rate mortgage of $350,000 with an interest rate of 3.8 percent for $7,000, your interest rate would fall to 3.3 percent. Even if points don’t significantly reduce your monthly payments, you can still receive a tax benefit because points are considered a form of interest and are tax-deductible in the same year for most first-home purchases

• Use Energy Credits. Energy saving systems permit you to write off 30% of the cost as part of the Residential Renewable Energy Tax Credit until the end of 2016. The many eligible items include geothermal heat pumps, solar panels and water heaters, fuel cell property, and wind turbines. There are no maximum credit limits for qualifying items (except for fuel cell property, at $500 per kilowatt). If the amount of your tax credit is greater than your tax liability (that is, if you can deduct more than you owe in taxes in 2015), you can roll the credit over to your 2016 taxes.

• Stop Renting! Renting is becoming increasingly common among young adults, but it’s not getting any less expensive: the Wall Street Journal reports that rent has increased by 15.2 percent since 2009. While it makes sense to fulfill short-term housing needs, you are not building any equity when you rent and your monthly payments can therefore be seen as sunk costs. Renters do not benefit from tax breaks the way homeowners do. Not sure whether renting or buying is more cost effective? Use Realtor.com's Rent or Buy calculator to find out. Your most trusted resource when searching for a home is an experienced REALTOR who is a good communicator and knows the market well. If you or someone you know is thinking about buying a home in Central Ohio, visit my website and contact me to see how I can help. 

Guidelines for First Time Homebuyers

Home ownership is a big investment in time, money, and lifestyle. To get the most for your money, follow these four guidelines.

1. Boost your credit score. How? Request your free credit report at the start of the year. Dispute issues and pay off debt. Refrain from opening new credit lines and avoid buying big ticket items such as cars and furniture, as this will cause your score to temporarily drop.  Your credit score influences your mortgage approval and rates.

2. Save for a down payment. Also to get the best mortgage rates, plan for a 20-30 percent down payment. Cut optional expenses and save that money for either a down payment or private mortgage insurance.

3. Do your research. Determine what type of loan you want (conventional or unconventional), what you can afford, and what you qualify for. An online mortgage term comparison calculator will help you get an idea of the cost. To see current rates and get quotes from local lenders, click here.

4. Find the best Realtor. In an age dominated by technology, a Realtor remains irreplaceable. Buying a house is stressful—let a professional guide you through the process, negotiate on your behalf, and handle paperwork. Realtor.com suggests looking at various Realtor’s client testimonials—read mine here. I work with both buyers and sellers in the Central Ohio area. If I can help you or someone you know, please contact me.