Homeownership is a dream for many Americans, but it’s important to be prepared before signing on the dotted line and closing the deal. After all, buying a home will likely be the biggest purchase you’ll ever make.
Inventory levels are higher in 2019 than the previous year, and real estate agents are saying that the market is favoring buyers. Here’s what you need to know if you plan to buy a home in 2019.
1. It’s Worth Saving for a 20% Down Payment
One of the biggest obstacles to homeownership is the down payment. Experts recommend putting down 20% of the home’s purchase price as a down payment, as this will save you from having to pay for private mortgage insurance, or PMI.
Yes, it’s possible to put down less than 20% on a home, especially if you’re a first-time buyer. However, it’s important to remember that PMI insurance can add several thousands of dollars to your homeownership costs each year.
Generally, PMI equals 0.5% to 1% of the value of your home loan. Keep in mind that these costs are in addition to your monthly mortgage payments.
2. You May Not Get a Tax Break
If you purchase a home in 2019, you may not get the tax break you anticipated.
You will be able to deduct the interest you pay on a mortgage of up to $750,000. If you’re purchasing a more expensive home, the interest deduction may be substantial. But if you’re buying an ordinary home in the $150,000-$250,000 range, you’re looking at a much smaller deduction ($6,000-$10,000). Yearly interest will start declining after the first year.
If you don’t accrue more than $24,000 in deductions, which is the standard deduction for married couples filing jointly, it won’t make sense for you to itemize. Itemizing is the only way to deduct homeowner expenses.
You can write off your property taxes, but your total SALT (state and local tax) deduction can’t be more than $10,000. So, unless you have other deductions, such as medical expenses and charitable donations, you’ll probably be going with the standard deduction for the foreseeable future.
Ultimately, your home purchase may not wind up factoring into your taxes at all.
3. You’ll Need to Pay Closing Costs
In addition to the home’s purchase price, you’ll also have to pay closing costs when finalizing the deal.
According to The Law Offices of Roger W. Stelk, all home buyers must now receive a five-page Closing Disclosure statement that outlines the final loan terms and closing costs. This statement must be provided to borrowers at least 72 hours prior to their closing dates.
4. You’ll Need Good Credit
You’ll need to have good credit in order to qualify for a mortgage. Generally, lenders are looking for a score of at least 620. If you’re in the 620-680 range, you have average credit. If you have a score of 680-740, you have very good credit. If your score is over 740, you’re golden.
Check your credit score before you even think about applying for a mortgage. If your score is on the lower side, consider taking steps to raise it before applying. The higher your score, the lower your interest rate will be.
Buying a home is a big step, but it’s a rewarding one if you’re prepared and know what you’re getting into.
Normal
0
21
false
false
false
EN-US
X-NONE
HE
/* Style Definitions */
table.MsoNormalTable
{mso-style-name:”Normal Tablo”;
mso-tstyle-rowband-size:0;
mso-tstyle-colband-size:0;
mso-style-noshow:yes;
mso-style-priority:99;
mso-style-parent:””;
mso-padding-alt:0cm 5.4pt 0cm 5.4pt;
mso-para-margin-top:0cm;
mso-para-margin-right:0cm;
mso-para-margin-bottom:8.0pt;
mso-para-margin-left:0cm;
line-height:107%;
mso-pagination:widow-orphan;
font-size:11.0pt;
font-family:”Calibri”,sans-serif;
mso-ascii-font-family:Calibri;
mso-ascii-theme-font:minor-latin;
mso-hansi-font-family:Calibri;
mso-hansi-theme-font:minor-latin;
mso-bidi-font-family:Arial;
mso-bidi-theme-font:minor-bidi;
mso-ansi-language:EN-US;
mso-fareast-language:EN-US;}
