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I have been a homeowner for less than a week and I'm already mad.
While we were looking at places to buy we were given much advice, some good, some benign, and some just plain bad.
Bad Home Buying Advice to Avoid
The bad advice was from people who weren't homeowners repeating things they've heard about buying like the amount of rent that you pay is the mortgage should aim for.
That's simply not true.
Besides your mortgage, there are several other expenses that you have to adjust your budget for that some people ignore.
- Homeowner’s Insurance
- Private mortgage insurance
- Home Association Fees
- Property Tax
- Maintenance & Improvement
If you’re looking at the above expenses and you're a bit hesitant, then continue renting and build your down payment.
Don’t buy a house and think that you can make it work somehow.
Have a specific financial game plan to be successful with your personal goals. Remember, though, that buying a house is not the end-all.
Don’t sacrifice other goals for this piece of property.
Buying a house is the biggest purchase most people make and yet many do it with money myths in mind.
It seems there has been a huge chunk of the population that became homeowners for the wrong reasons.
Keeping the Mortgage Interest Deduction
I'm in the car and I'm upset because the conversation is really not making any sense.
Two friends are in a position to completely own the houses in a few years. The other person says ‘My financial advisor says never pay your mortgage off. You'd be giving up your tax break.”
NoNoNoNoNoNoNoNoNoNoNoNoNoNoNoNo!
First off, who is his financial advisor? I want to know because if he is repeating what that guy told him then that ‘advisor' is an idiot and is hurting his clients.
Are you willing to spend a dollar just to get a ?
If so, please send me said and I will gladly send you back a quarter.
Taking the mortgage interest deduction while paying down your mortgage makes sense.
The problem is that when you delay paying off your mortgage just for the mortgage interest deduction, then you're paying so much more in interest payments to your mortgage company.
Get Some Free Money with the $8,000 Tax Credit/ $6,500 Tax Credit
Getting some ‘free' money in the form of the tax credit is another popular reason I've heard and read that people used to justify buying a house.
Going back to the list I had mentioned, you'll probably be spending much more than $8,000 just with your property taxes over the life of the loan. You really have to run the numbers yourself when you are house hunting.
Eligibility for the First-Time Homebuyer Credit for $8,000
There are some requirements you have to meet before you can get the First-Time Homebuyers credit.
- You must be a first-time home buyer and you must have a purchase contract by April 30, 2010.
- The house you purchase must be your primary residence and is not greater than $800,000.
- The buyer must live in the home for at least three years after the purchase date. You will have to repay the credit on a home only if the home ceases to be your primary residence within 3 years from the date of purchase. The full amount of the credit received becomes due on the return for the year the home ceased being your principal residence.
- The income limits have been raised for singles to $125,000 and married to $225,000.
Eligibility for the Existing Homebuyer Credit of $6,500
- You must have lived in your current residence for 5 of the last 8 years.
- The house you purchase must be your primary residence and is not greater than $800,000.
- The buyer must live in the home for at least three years after the purchase date. You will have to repay the credit on a home only if the home ceases to be your primary residence within 3 years from the date of purchase. The full amount of the credit received becomes due on the return for the year the home ceased being your principal residence.
- The income limits have been raised for singles to $125,000 and married to $225,000.
What If You Really Want to Buy a House?
Buying a house can be a great financial and personal goal to have.
You have basically some options to look at carefully before you make a final decision.
- Be patient and wait a bit until you buy your house. Give yourself more time to have a bigger down payment. This will lower your mortage loan amount you’d need. Prices could stay lower than normal with unemployment problems continuing.
- Focus on getting a starter home. You can still buy a home, but you might consider getting something a more inside your price range, so you have bigger amount of wiggle room. If you’re buying your first home, a starter home can a better option. You may upgrades years down the road or you might find you like the house and stay.
- Go for the home. If you’re in a position to get the home you want, that’s great. Just make sure you double check it is something within your budget. Otherwise, consider the first two options.
Thoughts on Home Buying Myths
What are some homebuying myths that you've heard?