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Tax Breaks For First Time Homeowners

The government provides tax breaks for first time home buyers as a way to increase homeownership in the United States. But did you know of all the tax breaks that are available to you?

Home Mortgage Interest Deduction

The biggest tax break you can get is the Home Mortgage Interest Deduction. In this deduction, you can potentially have your interest paid on loans up to $1 million. $500,000 for those who are married but filing a separate return. Why is this great for first-time buyers? This is great because interest charges on mortgages are usually higher in the earlier years of your mortgage. So you could use this tax break later, but the biggest break will be on those earlier years in the mortgage.

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Mortgage Interest Credit

The Mortgage Interest Credit and Mortgage Interest Deduction are very similar. Instead of deducting your income like the Mortgage Interest Deduction, the Mortgage Interest Credit lowers what you owe by crediting towards your tax bill. Depending on the purchase price of your home, a buyer can get 20 to 30 percent of the interest they pay every year as a straight tax credit. It is also important to note that the credit is not refundable, so you can’t receive a check if the credit is greater than what you owe.

To get this tax credit, you will need to issue a Mortgage Credit Certificate. This will normally be issued at the time you originate the mortgage. The certificate will tell you the amount of interest you can claim as a credit. If you’d like to do both, you have to claim the credit by the amount you deducted. You aren’t allowed to use both at the same time.

Mortgage Points Deduction

You can deduct what you pay in points to obtain the mortgage loan. The points are essentially prepaid interest that can help a borrower qualify for a lower interest rate over the life of the loan. They can qualify for a deduction as well. This is a great break to utilize because you can also use the points in addition to the interest paid!

Using the points is more complex when filing. You need to itemize on your return and your settlement disclosure statement must specifically cite these fees as “points.”

Tax-Free IRA Withdrawals

Did you know you can take money from your IRA without penalty if you use it to help save up for a down payment? Using your IRA does not stop you from having to pay taxes on the money, however. You shouldn’t use your 401K plan though because it does not qualify for the exception.

Sell Your Home Fast

Selling your home on your own isn’t a cakewalk! That’s why we always encourage you to have real estate professionals handle the marketing and pricing of your home for you! Not to mention having someone represent you when it comes time to negotiate repairs is always helpful so you make sure you get your home sold on the most favorable terms.

Price it right, not above market value.

To get a true estimate of what you should list your home for sale for, you should have one of our agents follow up with a comparative market analysis. A comparative market analysis will help you determine the best price based on other houses for sale nearby. So if there’s a lot of homes on the market in the area, you have to price more competitively to get your home to sell before the competition. However, if the opposite occurs and there aren’t a lot of homes for sale in your area, you have the upper hand and can be more flexible with your sale price. You can ask for a higher price because there are fewer homes similar to yours on the market!

Make sure it looks great online.

90% of buyers are starting their home search online. So making sure it looks great online increases your chances of selling by 90%! Having professionally taken photos of your home makes all the difference in how many showings you will get. The more showings you receive = the more likely your home is to sell. Our team has a professional marketing guru dedicated to making sure your home sells for its list price. After all, our team gets our asking price 99% of the time. We also encourage video to make sure your home’s floor plan can be understood by a potential buyer.

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Set the mood for your showings.

For showings, there are a few general rules we recommend you follow. First, your home needs to be pristine and clean! This also coincides with rule two, make sure your home smells good! Your home smelling good will put the buyers in a positive mood towards your home which also makes them able to better visualize themselves in your home! Third, play soft, relaxing music playing on low volume while the potential buyers are there. Why do we recommend this? Think about it. Buying a home is one of the biggest purchases you can ever make. That would make anyone pretty nervous! Having this music playing in the background while they walk through the home helps calm their nerves which means they are more likely to make the decision to submit an offer on your home!

The fourth rule is pretty obvious, but sometimes forgotten, but make sure to take your pets along with you! Not everyone is too fond of pets, so removing them from your home allows the buyers to have a more positive experience in your home! Lastly, make sure your house is nicely lit by opening blinds or turning all lights on before their entry! Following these few small rules allows for potential buyers to have an overall positive experience when viewing your home!

While there is so much more to the selling process, following these first three steps will help you sell your home fast! Contact us if you are interested in one of our team agents helping you sell your home!

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