Buying Your First Home? Enjoy These Benefits.
It is common to see a lot of dollar signs running through your mind when you are in the process of buying your first home. You knew you would need to pay a down payment and your monthly mortgage payment, but you may be surprised at the vast number of fees and expenses you will be responsible for. Well, if you are feeling a little overwhelmed just thinking about all these expenses, you may feel a little better to learn that you will enjoy a few financial perks, too.
1. Possible Reduced Down Payment – Lenders like to have 20 percent down on a home loan, but this is rarely realistic for the average homebuyer. Fortunately, there are plenty of lenders willing to accept a smaller down payment. You will have to pay private mortgage insurance, but that expense can be deducted when you file taxes.
2. Subsidized Interest Programs Available – First time homebuyers in a lower income bracket may qualify for a subsidized interest program, which makes your monthly payment more affordable. Most of these programs are offered by the government, but they can be subsidized through charities and organizations, as well.
3. Deduct Paid Interest Rates – Now, if you get a subsidized interest rate as mentioned above, then you won’t be able to take advantage of this perk. The home mortgage tax deduction allows you to deduct paid interest, if you qualify.
4. Real Estate Taxes Can Be Deducted – Most lenders will include taxes in your mortgage, so that amount can be placed in an escrow account. Any money paid out to cover taxes can be deducted. You will know the exact amount when you look at your year-end settlement sheet.
5. Prepaid Interest May Be Deducted – Prepaid interest is more commonly referred to as “points” in real estate lingo. You may choose to pay for points to get a lower interest rate. If you meet specific criteria, you may be able to deduct this expense.
6. Other Tax Deductions Become More Meaningful – If you ever deducted your health care costs and donations to nonprofit organizations in the past, you were probably a little disappointed that these deductions didn’t have a greater impact. Well, this is because for these deductions to be more meaningful, you need to exceed the specified standard deduction amount for an individual or couple. It is rare for people to hit these numbers, unless they are homeowners. So, when you buy a home, those other tax deductions will have a greater effect on your taxes.
From securing financing to choosing the right house, buying your first home can definitely be an intimidating experience. The thought of how much money you’re spending can be overwhelming. Focus on these perks you may be able to take advantage of to take your mind off of your expenses paid out.