Tax Credits Are Over, But Rates Are Lower!

Earlier this year, there were a couple of fairly widespread predictions regarding what would happen to the housing market right around April of 2010. First, it was predicted that the Federal Tax Credit would expire on April 30th, and not be extended. This, of course, turned out to be true. Second, it was predicted that when the US Government stopped buying mortgage backed securities in March, interest rates would begin to tick upwards, with some predicting rates in the 6% range. This has turned out to be untrue. In fact, rates have actually moved the opposite direction and have dropped into the upper 4% to 5% range. And, if we do some simple math, we can see that in many cases our buyers have a better purchasing opportunity than when we had the tax credit!

Let’s look at a couple of scenarios:

-  In April, a homebuyer purchased a $180,000 home with 20% down on a 30-year mortgage at 5.21%, which is about what rates were in April. So, they financed $144,000 and the monthly principal and interest payment was $791.61. Let’s assume they qualified for the $8,000 homebuyer tax credit.

-  Today, a homebuyer purchases that same $180,000 home with 20% down on a 30-year mortgage, but at a rate of 4.84%. Financing the same $144,000 at this new rate will save the buyer $32/month, or $11,738 over the life of the loan. Sure, it’s not money in their pocket at tax time, but it’s a much greater dollar amount than the tax credit was able to provide!

Let’s look at it another way….

-  Today, a homebuyer purchases a house with 20% down on a 30-year mortgage, but at a rate of 4.84%. Keeping the monthly payment at the same $791.61 as the April tax credit buyer used, today’s buyer with today’s rate will have another $7,732 in purchasing power with no payment increase. And just like the tax credit, improved purchasing power provides an immediate benefit.

And of course, mortgage rate reductions benefit ALL HOME BUYERS, not just first time home buyers. Plus, unlike the Federal Tax Credit, there’s no deadline forcing you to make a decision right away. As long as rates stay favorable, your buyers can take the necessary time to find the home they want.

It’s a simple, but powerful concept. The opportunity for buyers didn’t end when the tax credit expired. In fact, in most cases it has improved.

You can follow Jake Stanton on Twitter @JakeStanton.

photo credit: Dano

Have more questions about moving to the Des Moines area? There are definitely more answers.

Feel free to connect with me via Facebook, Twitter, Text, Email, or by cell. I’m happy to help.

While emailing yesterday with a friend I realized that my super duper buyer packet may be a bit “boring”.  Buyers need more than checklists, things to look for, and more exciting information about buying a home.  When my friend emailed yesterday about passing the packet on to her friend, she said:

“I think my friend is looking for detailed information. She may have read
some beginning home owners stuff already. It’s really the experiences
that I would appreciate knowing — someone’s first hand experiences
and problems they’ve encountered.“

AND SO IT BEGAN

I posted on Twitter to see what other tweeps thought a new homeowner might need to know.  I got great information, REAL information, and even made some new friends along the way. The power to Twitter is AMAZING! So…let us learn from these great (and experienced) homeowners. (My comments are in RED)

Tips You Should Know…

• Don’t Assume You’ll Have Cable & Internet
  

@SandraTB says: Tech infrastructure limitations–only way to get broadband at our rural home is satellite or Verizon card. You need to make sure your home can support a home office, if you need one!  I have friends that can’t get DSL or cable yet because they’re first in their area and there is not yet enough demand. So it’s all about not assuming you can just get what you want in terms of tech utilities! (Great one…often forgotten!)

• Are You An Educated Buyer?
  

@THoffman06 says: I wish I had more details on property taxes, escrow, etc. We had no idea of the ins and outs of escrow and how the mortgage payment you start with can and will go up. (A GOOD mortgage professional should sit down with you and discuss this if you are confused. Make them repeat it if you are still not understanding. This purchase is HUGE!)

@rerockstar says: As someone who bought his first home in L.A. (and therefore spent more than he conceived he would ever have) I would say that the process is one of those things that I wish I had known better. It was frightening and new to me. (The process is a HUGE thing…sit down with your Realtor and talk through before you start looking at homes.)

@DawnKuehn says: Wish I would have known my builder didn’t care AT ALL about his clients!!!!!!! (Big one too…ask the builder for referrals or check the BBB to see if there are complaints)

• How Well Do You Know The Area?

@SandraTB says: Oh yeah, we found out after moving here that the neighbor down the road was wanted for meth production.  Found out after I called sheriff for shouts and screams coming from there…and 8 cars and a helicopter came. (Some things you could never know before moving in. You can check for predators here www.familywatchdog.us/)

@kateschneider says: Wish I’d known there were 14 (going on 15) kids in our cul de sac. Realtor said it was “young couples, just a few kids.” Puke. (Try driving the area at different times of the day to get to know your potential neighbors. Weekend days are huge if the weather is nice.)

• Are You Prepared If A Problem Pops Up?

@TanyaKeith says that things can and will go wrong. The previous owner of her home turned off the power and flooded basement by shutting off sump pump.  When the power company turned on power they did not turn on the gas. She had no hot water at 2am after moving in all day. She wishes she was told to take the week off! (You can call to switch utilities before you move, but that won’t always solve the problem.  Sorry about your cold shower Tanya!)

• Have You Done Your Research?

@ibuys says: I wish I would have known that the value of the house was going to drop a year after I bought it! Also… I wish I would have known how weak the material of the cupboards was. Will eventually need to be replaced.

@HollyEgg says: I wish I had researched the condo market! Oversaturated!! Can’t re-sell! (For both of these comments I would say that no one can accurately tell you what the future brings for your neighborhood. Your Realtor should be able to tell you what’s happened in the past though. Be sure to have your Realtor run numbers on your home to be sure you are not overpaying.)

@TonyBibbs says: All the financing stuff. (Short and sweet, but true.) Financing can be a big mystery. Find a mortgage professional that will provide many options for you to choose from.)

@ranchoweb says: I wish I had known that the banks had no intentions of refinancing our ARM loan, it was in their best interests for us to fail. (I’m hoping a lender will jump in and comment on this one…)

• What About Inside?

@Jennic says Look if the toilets are loud and/or cheap! Affects daily life more than one realizes. Is the dishwasher in good condition? Is it LOUD? How much are utilities? How are the attic and wall insulation? What about the garage doors? Do they function properly?

@dustinson says: I got a great bargaining tip: have them include an irrigation meter. Wish I had basement framed too. (You’ll never know unless you ask)

There You Have It

Straight to you from the mouths of homeowners.  I know there is MUCH more, so please add more in the comments below.  New home buyers need to know these tips!

Thanks to all of my Twitter Friends for your help!  Much appreciated! By the way…I’m working on a new buyer packet! Promise it’ll be a good one!

Have more questions? There are definitely more answers. Feel free to connect with me via Facebook, Twitter, Text, Email, or by cell. I’m happy to help.

asalmon@firstrealtyhomes.com

photo credit: jakevol2