Wednesday, May 27, 2009

Q: I'm confused about this new $8,000 first time homebuyer's deal.

I owned a home five years ago but don't own one now. Can I still qualify? Where do I sign up to get the money?

A:
You are considered a first time home buyer if you haven't owned a home in the past three years, so you should qualify. You don't get the $8,000 in cash. What you get is a tax credit. When you file your taxes for this year you get to deduct up to $8,000 off the top! However, if you owe less than $8,000 in taxes, the government will send you a check for the difference. So if you owe only $5,000 in income taxes the government will send you a check for $3,000!

There is an income limit of $75,000 gross income for a single person and $150,000 for a couple, but you can still get a partial credit if your income is up to $95,000 for a single person or $170,000 for a couple.

This is not a loan and doesn't have to be paid back like some programs in the past. That means that you are basically getting a gift of up to $8,000 for buying a home. You must, however, close before December 1, 2009, to take advantage of this program. If you are building a home you may still qualify but you have to occupy the home before the December 1st deadline.

This program, combined with incredibly low interest rates, gives a great boost to first time home buyers. Prices have pretty much stabilized in our region but they are still affordable and offer those who have not owned a home in the past three years a really great opportunity for home ownership.

For more details go to the IRS web site and type in: first time home buyer to credit, or try www.federalhousingtaxcredit.com. This is really too good an opportunity to pass up, in my opinion.

Monday, May 04, 2009

Q: I’ve been a renter for the last 10 years because I just don’t see the value in home ownership

when prices can be as volatile as we’ve been seeing in the last year. Plus, I don’t want to be tied down. In my business I could be transferred anytime. I assume you disagree.

A:
Well I can’t speak to your fear of being tied down, but I can argue that your thinking is flawed about the value of home ownership. Let me give you an example. This is a real client of mine. I pulled him out of my files at random. Let’s call him Jack.

Jack bought a nice rambler on a large lot with a bit of a view in 1999. He paid $257,000 for it. Like all real estate on Vashon it went up in value every year. By this year, ten years later, King County has his home valued at $557,000. The home has more than doubled in value. Even with the decline of 10% in property values we saw on Vashon last year, he would still make a tidy profit if he were to sell.

Just as valuable is the tax savings he would have had each year he owned it. He was making about $50,000 a year when he bought the property and his wages went up about 3.5% every year since, so he now makes approximately $70,000 a year.

Using a spreadsheet to figure his tax saving--based on deducting his mortgage interest and property taxes every year--he would have saved over $43,000.00 in real money over the ten years! That’s money he could spend in other ways instead of giving it to the IRS. That’s impressive.

I probably haven’t convinced you, but if I have you should know that this is a great time to buy on Vashon. Interest rates are at an all time low, the government is offering an $8,000 buyer bonus this year, and real estate prices are stable. If you had your saving in the stock market, I would guess you didn’t come out half as well as Jack did.