Tax Credit or Not,... It's Still a Great Time to Buy
By Dale W Doughty
On December 1, 2009 the $8,000 tax credit will be gone,... or will it? Only time will
tell what Washington does with the first-time homebuyer tax credit but even if it is
allowed to expire it is still a great time to get in to a new home.
Real Estate prices and mortgage rates are at historic lows. For the first time in years
it is possible for a first-time home buyer to walk away from their rental and move in to
a home that they actually own for approximately the same monthly outlay.
Furthermore, some government backed mortgage programs allow homebuyers to
buy a home with less money out-of-pocket then your typical apartment rental that
may be looking for first, last and a refundable security deposit.
Here is one example of a recent Maine transaction that our office closed. A young
couple who was still living with their respective parents got engaged and wanted to
buy their first home. Being that they were quite young, their credit file was very thin
and their FICO scores were fairly low. They also had no savings to speak of.
After our intial meeting with them we pre-qualified them for one of several
government guaranteed loans that are currently available. They quickly found a
nice 3BR home with a nice yard that happened to be in an association neighborhood
with a lake and other amenities for $100,000 in Southern Maine. They were
approved and the loan closed. They paid no money at the closing table and their
new housing payment is just over $800/month including their municipal taxes,
insurance and homeowners association dues.
The nearest city to their work is Sanford, ME. So, in retrospect they could have
found an $800/month 3 BR apartment in Sanford, had a further commute to work, no
yard, no association and no lake plus would have probably had to give the landlord
$1600 to $2400 up-front.
Now, what about 5 years from now? Most experts agree that home prices will be
higher in 2015 then they are now. Let's assume that in the next 5 years home prices
in Maine only rise a paltry 10%. So, now this couple has a home that is worth
$110,000 and probably has a payoff around $95,000. So, they have a better living
environment for their new family and $15,000 in home equity. If they had chosen the
apartment path, they would have paid $48,000 in rent (assuming no annual
increases) and would have nothing to show for it.
Let's assume the extreme. Let's say that this couple at age 50 (30 years from today)
still live in this home. Let's say housing prices never grow like they used to and
average a disastrous 3% increase per year over the next 30 years. How is are
young couple doing as they near retirement? Well, the house is paid for and it's
current market value is $242,726. How about if you rented? Even assuming your
rent never went up (highly unlikely), you will have paid $288,000 over the past 30
years and have nothing to show for it.
Obviously, this does not take in to account maintenance and any repairs that may
come up as a homeowner but you get the idea.
So, the bottom line? Now is still a great time to buy a new home no matter what.
And, if the IRS happens to throw an extra $8,000 in your Christmas stocking for
doing so then BONUS!!
The next question I always get is how do I know I can qualify? That's simple. Thirty
minutes on the phone or in the office of a reputable Mortgage Broker and you can
typically be pre-qualified. Look for one that has high ratings with the BBB and is
available off hours in case you or your Realtor has questions while out looking. This
process will tell you how much home you can afford and what programs you will likely
qualify for. From there you can select a Realtor (many mortgage brokers have
relationships with reputable Realtors that they've worked with in the past or you can
find one on your own) and shop for the house of your dreams.
For more information on current loan programs or to apply for prequalification in
Maine or New Hampshire visit www.nemortgagemarketing.com.
By Dale W Doughty
On December 1, 2009 the $8,000 tax credit will be gone,... or will it? Only time will
tell what Washington does with the first-time homebuyer tax credit but even if it is
allowed to expire it is still a great time to get in to a new home.
Real Estate prices and mortgage rates are at historic lows. For the first time in years
it is possible for a first-time home buyer to walk away from their rental and move in to
a home that they actually own for approximately the same monthly outlay.
Furthermore, some government backed mortgage programs allow homebuyers to
buy a home with less money out-of-pocket then your typical apartment rental that
may be looking for first, last and a refundable security deposit.
Here is one example of a recent Maine transaction that our office closed. A young
couple who was still living with their respective parents got engaged and wanted to
buy their first home. Being that they were quite young, their credit file was very thin
and their FICO scores were fairly low. They also had no savings to speak of.
After our intial meeting with them we pre-qualified them for one of several
government guaranteed loans that are currently available. They quickly found a
nice 3BR home with a nice yard that happened to be in an association neighborhood
with a lake and other amenities for $100,000 in Southern Maine. They were
approved and the loan closed. They paid no money at the closing table and their
new housing payment is just over $800/month including their municipal taxes,
insurance and homeowners association dues.
The nearest city to their work is Sanford, ME. So, in retrospect they could have
found an $800/month 3 BR apartment in Sanford, had a further commute to work, no
yard, no association and no lake plus would have probably had to give the landlord
$1600 to $2400 up-front.
Now, what about 5 years from now? Most experts agree that home prices will be
higher in 2015 then they are now. Let's assume that in the next 5 years home prices
in Maine only rise a paltry 10%. So, now this couple has a home that is worth
$110,000 and probably has a payoff around $95,000. So, they have a better living
environment for their new family and $15,000 in home equity. If they had chosen the
apartment path, they would have paid $48,000 in rent (assuming no annual
increases) and would have nothing to show for it.
Let's assume the extreme. Let's say that this couple at age 50 (30 years from today)
still live in this home. Let's say housing prices never grow like they used to and
average a disastrous 3% increase per year over the next 30 years. How is are
young couple doing as they near retirement? Well, the house is paid for and it's
current market value is $242,726. How about if you rented? Even assuming your
rent never went up (highly unlikely), you will have paid $288,000 over the past 30
years and have nothing to show for it.
Obviously, this does not take in to account maintenance and any repairs that may
come up as a homeowner but you get the idea.
So, the bottom line? Now is still a great time to buy a new home no matter what.
And, if the IRS happens to throw an extra $8,000 in your Christmas stocking for
doing so then BONUS!!
The next question I always get is how do I know I can qualify? That's simple. Thirty
minutes on the phone or in the office of a reputable Mortgage Broker and you can
typically be pre-qualified. Look for one that has high ratings with the BBB and is
available off hours in case you or your Realtor has questions while out looking. This
process will tell you how much home you can afford and what programs you will likely
qualify for. From there you can select a Realtor (many mortgage brokers have
relationships with reputable Realtors that they've worked with in the past or you can
find one on your own) and shop for the house of your dreams.
For more information on current loan programs or to apply for prequalification in
Maine or New Hampshire visit www.nemortgagemarketing.com.
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Sanford Branch
909B Main Street
Sanford, Maine 04073
(207) 850-1007
(877) 440-2739
909B Main Street
Sanford, Maine 04073
(207) 850-1007
(877) 440-2739
