A reader named Brett recently wrote in to ask for advice on finding a good deal on a new home. He and his wife are in seemingly stable jobs, and they’re looking to buy their first home. In a nutshell, he was wondering how to: (1) tax advantage of the forthcoming homebuyer tax credit, (2) get a great rate on a mortgage, and (3) find a good property at a good price.
That’s a pretty tall order, but I’ll take a whack at it.
Taking the Tax Credit
Changes to the first-time homebuyer tax credit have been fast and furious over the past week or so and, frankly, I’m getting a bit worn out from talking about it. If you’re sick of hearing about it, feel free to skip down to the next section. But if not, please read on…
In the beginning, it was essentially a $7,500 interest free loan. Then the House of Representatives decided to remove the repayment requirement. The Senate then followed up by increasing it to a $15,000 tax credit with no repayment requirement and no first-time homebuyer limitation. But then… When the House and Senate got together to work through their differences, it got knocked back down to an $8,000 first-time homebuyer credit.
As of right now, the details surrounding this are still somewhat murky. It sounds like it will apply to homes purchases between January 1 and August 31 of this year, and that the income limits will be $75k for single filers and $150k for joint filers. My best advice here is to simply keep your ears open and listen for details as they come available. There should be more info soon.
Getting a Great Deal on a Mortgage
Unfortunately the 4% mortgages that were floated by the Senate never materialized. Nonetheless, there are still great deals to be had when it comes to finding a mortgage. Given that lenders have become increasingly risk averse, one major factor in landing a great mortgage rate will be having a high credit score. Unfortunately, while there are things you can do to improve your credit score, they all take time. Thus, if your score is currently in the crapper, finding a low rate might be tough.
The only other advice that I can offer here is to ask around and find a reputable mortgage broker. If you get multiple recommendations, all the better. Contact them all to establish a relationship and see what they have to offer. Then, when you get closer to actually buying a house, take the best offer that you can get and shop it around to the other brokers. See if they’ll beat it. Many brokers are hungry for business, and will do whatever they can to win you over. Beyond finding a low rate, you might be able to get some concessions on closing costs, etc.
Getting a Great Deal on a House
Real estate is so intensely local that it’s hard to give good advice from afar. On top of that, there’s a lot of disagreement about where we are with regard to finding the bottom of the market. That being said, I can offer one fairly generic tip, and that is to keep a close on how long various properties have been on the market. One trick that many realtors/sellers will use is to de-list and then re-list a property that has been on the market for awhile. With a fresh listing date, it won’t look like it’s been on the market as long, but that doesn’t make the sellers any less desperate to sell.
What About You?
Do you have any tips to add to what I’ve written above? If so, please don’t hesitate to share them in the comments.