HOME BUYER’S GUIDE

Buying into a new-home community may seem riskier than purchasing a house in an established neighborhood, but any increase in home value depends upon the same factors: quality of the neighborhood, growth in the local housing market, and the state of the overall economy. Many newer home communities now have HOA boards that can assure one that the neighborhood that you buy into will remain so over the years and thus give you the same measure of confidence as buying into an established neighborhood.

A home ultimately is worth what someone will pay for it. Everything else is an estimate of value. With that said, there are two primary ways to estimate value; the first way is to get your agent or broker to preform a comparative market analysis. Most agents will do this for free as part of their services. Your agent will compare your house to others in the proximity that have recently sold and therefore have a proven estimate of value. These sales should be no older than 4 months. The other way to estimate value is to have a certified appraiser do an appraisal on the house. The appraiser will also use comparable house sales to determine the property’s value. He/she will take into account the age of the property, the square footage, construction quality and design, as well as location to schools transportation and shopping. These typically run $300-400.

Appraisers use numerous factors when determining a property’s value. These typically are, age, square footage, construction quality and design, the condition of the house and the lot, the neighborhood and it’s proximity to schools, transportation, and shopping. They compare these values with comparable recent sales prices in the proximity to the property.

While an Internet search is not as exact as an appraisal, you can get a broad estimate of value through an Internet search. There are numerous web services that use public records to estimate value and they are a good resource. With that said, you should still get your knowledgeable real estate agent to do a comparative market analysis as he/she may know issues about the market and/or the neighborhood that an internet algorithm doesn’t pick up on.

The list price is the price that the seller has chosen and is what the house is being marketed as; this price is the one that the seller hopes to get for the house. The sales price is the price that a buyer is willing to pay for the home. This might be the same price as the list price or it could be higher or lower. The appraised price is the price that a certified appraiser gives to a property and it is based on comparable actual sales on properties in the neighborhood as well as the condition of the property.

There are two main methods to find a home’s value and you can perform one or both of them. The first is a comparative market analysis which is done by your realtor or broker. This is generally done as part of the agents proposal and it is an informal evaluation of your property based on current sales prices of homes in your neighborhood. The second method is to have a certified appraiser do an appraisal of your home which also takes into account the recent home sales but also compares your home to others that have sold in terms of size, quality and design of construction, age, etc.  Appraisals generally run $300-400.

If you are thinking about buying a foreclosure property, you should try and get as much information as you can. Lenders will often give you the range of bids expected. If you can get into the house , you should have an inspection done so that you won’t have an unforeseen major expense but many foreclosed properties will not let you inside before the auction and most are sold “as is.” You should definitely find out from the lender or the public records if there are any liens, encroachments, or title problems as many of these issues are non-negotiable or cannot be repaired.

Really, your home’s market value is what a ready, willing and able buyer is willing to pay at any given time. You should, however, have some idea of your home’s worth before listing it. There are two main ways to determine this. The first is to have a certified appraiser do an appraisal which most lenders require as part of the lending package. This usually runs about $300-$400. On the other hand, most Realtors or brokers will do a comparative market analysis as part of his/her services. This is a more informal estimate of value and it compares your house to the sales of comparable homes in your area.

Closing costs generally are 2 to 3 percent of a total home purchase but can run as high as 5 percent so you should know some tips on how to reduce them. Here are some tips to help you when the time comes:

• First, you should try to negotiate with the seller to pay all or part of the closing costs. If you’re successful with this, the lender must agree.
• If you don’t have a lot of cash for the down-payment, you may be able to get a no-point loan. Unfortunately , this usually comes with a higher interest rate but it might be worth it to get you into the house.
• Your lender is required by law to give you a Loan Estimate (previously known as a Good Faith Estimate). This will tell you exactly what your closing costs will be and there may be some things in it that are negotiable. Compare this Loan Estimate with other banks before locking anything in, and you may be able to save some money.
• You may be able to get a no-fee loan. Again this usually comes with a higher interest rate, but again, this is a way to save upfront costs.
• If you’re buying in a low interest-rate environment, you probably won’t need to pay extra for points to lower your interest rate. If not, that is always an option.

Closing costs are either paid by the home seller or home buyer. In SC it generally is a buyer cost but it is always negotiable.

Closing costs are the fees, taxes and interest costs that are associated with purchasing a home. They include loan points,, attorneys fees, title insurance, escrow or closing day charges, property taxes, document fees, and any prepaid interest. Some lenders will let you incorporate some or all of these fees into the loan but most must be paid when the home is closed.

When shopping banks for a new mortgage, you should ask each lender for a breakdown of their closing costs as each bank will differ. While the amounts for all of the fees and expenses will vary, you can generally expect to pay between two and five percent of the purchase price. The following list covers some of the most typical costs incurred in a new mortgage.

• Mortgage application fees or loan origination fees. These are the costs to process the loan application and are generally paid for at closing.
• Inspection fee. This is the cost of the home inspection that is charged by a licensed inspector. It generally runs between $300-400 and is paid for by the buyer either before the closing or at closing.
• Brokerage commission: This is paid to the real estate brokers by the seller at closing.
• Fees for the survey, the title search, and the recording fees. These can be paid by either buyer or seller and are paid at closing.
• Appraisal fees. These costs are charged by the appraiser to determine the value of the home. They are paid buy the buyer, usually at closing.
• Property taxes. This amount has to be calculated to determine how much the buyer and seller must pay for the prorated portions of the current tax year.
• Points. This is optional and is used to reduce the interest rate through the life of the loan. One point is equal to one percent of the loan amount. It is paid by the buyer at closing.
• Property insurance. This is paid by the buyer to insure the property and can either be paid prior to closing or at closing.
• Home warranty. This is optional as well. It is usually paid at closing and can either be paid for by the buyer, the seller, or one of the Realtors.

Prior to closing, you should receive the Closing Disclosure which will provide the exact details of the loan and the actual closing costs so that you are aware of just how much money will be required from you at closing.

A title report is derived from a search of a real estate property’s title history and is required by lenders when financing a mortgage. A complete report will contain general property information such as a description, zoning, and tax rate, along with a complete history of the property’s ownership with the names of any titleholders. This report will show any liens, mortgages, or overdue taxes, or any questions about property boundaries like easements. It’s important to get the title report as early as possible in case there are any issues that may cloud the title so that you will have time to resolve them before the closing.

There are several things to consider when trying to decide whether to add on to an existing home or to purchase a larger house. After deciding square footage and room requirements, you should see if there are affordable homes that would satisfy your needs and, thus, avoid the headaches of renovation. If there aren’t, or you really love where you live, you might want to look into how much equity you have in your current home and investigate if you can get a home improvement loan. Before doing any building, however, make sure that local zoning and building ordinances will allow you to remodel and add the square footage that you are looking for.

Choosing between a smaller house in an affluent neighborhood, an older, bigger house in a more working-class community, or a brand-new home is not easy. If you’re in this situation, start by examining your priorities and asking the following questions:
* Is the surrounding neighborhood or the home itself the most important consideration?
* Is each of the neighborhoods safe?
* Is quality of the schools an issue?
* Do any of the areas seem to attract more families with children or adult residents? And where do you fit in?

As for the return on your investment, home-price appreciation is hard to predict. In the late 1980s, and again 10 years later, the more expensive move-up housing appreciated wildly. But during the recession that followed, smaller homes tended to hold their value better than more expensive ones.

Home ownership offers tax benefits as well as the freedom to make decisions about your home. An advantage of renting is not worrying about maintenance and other financial obligations associated with owning property. There also are a number of economic considerations. Unlike renters, home owners who secure a fixed-rate loan can lock in their monthly housing costs and make prudent investment plans knowing these expenses will not increase substantially. Home ownership is a highly leveraged investment that can yield substantial profit on a nominal front-end investment. However, such returns depend on home-price appreciation.

“For some people, owning a home is a great feeling,” writes Mitchell A. Levy in his book, Home Ownership: The American Myth, Myth Breakers Press, Cupertino, Calif.; 1993. “It does, however, have a price. Besides the maintenance headache, the amount of after-tax money paid to the lender is usually greater than the amount of money otherwise paid in rent,” Levy concludes.

As for evaluating the risk associated with home ownership, David T. Schumacher and Erik Page Bucy write in their book, The Buy & Hold Real Estate Strategy, John Wiley & Sons, New York; 1992, that “good property located in growth areas should be regarded as an investment as opposed to a speculation or gamble.” The authors recommend that prospective buyers spend a few months investigating a community. Many people make the mistake of buying in the wrong area. “Just because certain properties are high-priced doesn’t necessarily mean they have some inherent advantage,” the authors write. “One property may cost more than another today, but will it still be worth more down the line?”

Home inspections, seller disclosure requirements, and the agent’s experience will help. Disclosure laws vary by state, but in some states, the law requires the seller to complete a real estate transfer disclosure statement. Here is a summary of the things you could expect to see in a disclosure form:
* In the kitchen — a range, oven, microwave, dishwasher, garbage disposal, trash compactor.
* Safety features such as burglar and fire alarms, smoke detectors, sprinklers, security gate, window screens, and intercom.
* The presence of a TV antenna or satellite dish, carport or garage, automatic garage door opener, rain gutters, sump pump.
* Amenities such as a pool or spa, patio or deck, built-in barbeque and fireplaces.
* Type of heating, condition of electrical wiring, gas suppl,y and presence of any external power source, such as solar panels.
* The type of water heater, water supply, sewer system or septic tank  should also be disclosed.

Sellers also are required to indicate any significant defects or malfunctions existing in the home’s major systems. A checklist specifies interior and exterior walls, ceilings, roof, insulation, windows, fences, driveway, sidewalks, floors, doors, foundation, as well as the electrical and plumbing systems. The form also asks sellers to note the presence of environmental hazards, walls or fences shared with adjoining landowners, any encroachments or easements, room additions or repairs made without the necessary permits or not in compliance with building codes, zoning violations, citations against the property, and lawsuits against the seller affecting the property.

Also look for, or ask about, settling, sliding or soil problems, flooding or drainage problems, and any major damage resulting from earthquakes, floods, or landslides.

People buying a condominium must be told about covenants, codes and restrictions or other deed restrictions. It’s important to note that the simple idea of disclosing defects has broadened significantly in recent years. Many jurisdictions have their own mandated disclosure forms as do many brokers and agents. Also, the home inspection and home warranty industries have grown.

If you find yourself stumbling over weird acronyms in a real estate listing, don’t be alarmed. There is method to the madness of this shorthand (which is mostly adopted by sellers to save money in advertising charges). Here are some abbreviations and the meaning of each, taken from a recent newspaper classified section:
* assum. fin. — assumable financing
* dk — deck
* gar — garage (garden is usually abbreviated “gard”)
* expansion pot’l — may be extra space on the lot, or possibly vertical potential for a top floor or room addition. Verify actual potential by checking local zoning restrictions prior to purchase.
* fab pentrm — fabulous pentroom, a room on top, underneath the roof, that sometimes has views
* FDR — formal dining room (not the former president)
* frplc, fplc, FP — fireplace
* grmet kit — gourmet kitchen
* HDW, HWF, Hdwd — hardwood floors
* hi ceils — high ceilings
* In-law potential — potential for a separate apartment. Sometimes, local zoning codes restrict rentals of such units so be sure the conversion is legal first.
* large E-2 plan — this is one of several floor plans available in a specific building
* lsd pkg. — leased parking area, may come with an additional cost
* lo dues — find out just how low these homeowner’s dues are, and in comparison to what?
* nr bst schls — near the best schools
* pvt — private
* pwdr rm — powder room, or half-bath
* upr- upper floor
* vw, vu, vws, vus — view(s)
* Wow! — better check this one out.

While it may not reduce the actual value, a cluttered landscape next door can detract from the positive aspects of your home. Review your local laws, which should be on file at the public library, county law library or City Hall. A typical “junk vehicle” ordinance, for example, requires any disabled car to either be enclosed or placed behind a fence. And most cities prohibit parking any vehicle on a city street too long. It also may be worthwhile to check into local zoning ordinances. An operator of a home-based business usually is required to obtain a variance or permanent zoning change in residential areas. In addition, if a neighbor’s repair work produces loud noises, he or she may be breaking local noise-control ordinances, which are enforced by the police department. Before bringing in the authorities, you may want to make a copy of the pertinent ordinance and give it to your neighbor to give them a chance to correct the problem.

Resources:
* “Neighbor Law: Fences, Trees, Boundaries and Noise,” Cora Jordan, Nolo Press, Berkeley, Calif.; 1991.

Home inspections, seller disclosure requirements and the agent’s experience will help. Disclosure laws vary by state, but in some states, the law requires the seller to complete a real estate transfer disclosure statement. Here is a summary of the things you could expect to see in a disclosure form:
* In the kitchen — a range, oven, microwave, dishwasher, garbage disposal, trash compactor.
* Safety features such as burglar and fire alarms, smoke detectors, sprinklers, security gate, window screens, and intercom.
* The presence of a TV antenna or satellite dish, carport or garage, automatic garage door opener, rain gutters, sump pump.
* Amenities such as a pool or spa, patio or deck, built-in barbeque and fireplaces.
* Type of heating, condition of electrical wiring, gas supply and presence of any external power source, such as solar panels.
* The type of water heater, water supply, sewer system or septic tank also should be disclosed.

Sellers also are required to indicate any significant defects or malfunctions existing in the home’s major systems. A checklist specifies interior and exterior walls, ceilings, roof, insulation, windows, fences, driveway, sidewalks, floors, doors, foundation, as well as the electrical and plumbing systems. The form also asks sellers to note the presence of environmental hazards, walls or fences shared with adjoining landowners, any encroachments or easements, room additions or repairs made without the necessary permits or not in compliance with building codes, zoning violations, citations against the property and lawsuits against the seller affecting the property. Also look for, or ask about, settling, sliding or soil problems, flooding or drainage problems and any major damage resulting from earthquakes, floods or landslides.

People buying a condominium must be told about covenants, codes and restrictions or other deed restrictions. It’s important to note that the simple idea of disclosing defects has broadened significantly in recent years. Many jurisdictions have their own mandated disclosure forms as do many brokers and agents. Also, the home inspection and home warranty industries have grown significantly to accommodate increased demand from cautious buyers. Be sure to ask questions about anything that remains unclear or does not seem to be properly addressed by the forms provided to you.

Absolutely. Even if you are buying a house “as is” you should have an inspection contingency on your offer. A professional and careful inspection of the house will let you know how much money it will take to make any necessary repairs. If you have an inspection contingency, and you find out that there are serious problems that you were unaware of during the negotiation phase, you can either renegotiate the price of the home, or you can back out of the contract and get your deposit back.

Your Realtor or broker is a good source. An experienced agent should have a list of competent inspectors. If, however, you choose to keep your agent and your inspector separate, there are things you can look at to do your own research. Always look at reviews which you can find on Angies List, Google, or Yelp. Interview some possibilities and ask to see some sample reports. Ask about experience and certifications as well as any professional inspectors group like ASHI, NAHI, or InterNACHI.

A home inspection is when a paid professional inspector, who is often a contractor or engineer, thoroughly inspects a house prior to the purchase. It’s vital to have a competent inspector so that the buyer is aware of all the potential defects of a home. If something unforeseen shows up on an inspection, the buyer can either renegotiate the price, ask the seller to make repairs, or cancel the offer, in which case, he/she can get the down payment money returned. The home inspection is arranged and paid for by the buyer in South Carolina.

There are several ways to buy a home below market value but they take patience and careful, considerate shopping, especially if you are in a seller’s market. Here are a few scenarios where you can get a bargain. You might be able to find a house that needs some work in a transitional neighborhood. After an inspection, you might find that you can redo a fixer upper and resell it at a profit or live in it for a few years while the neighborhood is transitioning and sell it for a profit. Another idea is to buy a foreclosure property. A word of warning though, many foreclosures don’t allow an inspection, and unless you have a strong construction background you might want to avoid those. If, however, you are able to get an experienced, competent inspector in the house, you very well might find the bargain that you’re looking for. Make sure that there are no liens on the house and that the title is clear. Finally, many new-home developments have leftover homes that the developers are willing to sell below market so that they can close up a development loan.

The list price is the price that is being marketed and is what the seller hopes to get for the home, although there is usually some negotiating room built into this price. On the other hand, the sales price is what the property actually sells for, and this can vary from the list price. Some houses sell for list; some sell for above or below list depending on the market and the availability of competition.

A low-ball offer is the term used to describe an offer on a piece of property that is considerably lower than the asking price. If you want to make a low-ball offer on a house, you and your agent should have done your homework and believe that the house is substantially overpriced or there is a reason that your seller would sell at a very reduced price. An example might be that the homeowner is moving and needs to get his/her house closed quickly, or might have made an offer on another house and, again would be amenable to a low offer. If this is not the case, a low-ball offer can often provoke anger on the seller’s part and he/she could refuse to negotiate at all.

The list price is the price that the seller has chosen and is what the house is being marketed as; this price is the one that the seller hopes to get for the house. The sales price is the price that a buyer is willing to pay for the home. This might be the same price as the list price or it could be higher or lower. The appraised price is the price that a certified appraiser gives to a property and it is based on comparable actual sales on properties in the neighborhood as well as the condition of the property.

While your low offer in a normal market might be rejected immediately, in a buyer’s market a motivated seller will either accept or make a counteroffer. Full-price offers or above are more likely to be accepted by the seller. But there are other considerations involved:
* Is the offer contingent upon anything, such as the sale of the buyer’s current house? If so, a low offer, even at full price, may not be as attractive as an offer without that condition.
* Is the offer made on the house as is, or does the buyer want the seller to make some repairs or lower the price instead?
* Is the offer all cash, meaning the buyer has waived the financing contingency? If so, then an offer at less than the asking price may be more attractive to the seller than a full-price offer with a financing contingency.

Almost all purchase offers include two primary contingencies. The first is a financing contingency and this would protect the buyer should he/she not be able to get financing after seriously trying to do so. This is typical but is by no means required and a buyer who did not include a financing contingency would have a stronger position than someone who did and might even be able to get a better price when negotiating. The second common contingency is the home inspection. If a home inspection uncovered serious defects in a house and the seller refused to repair them, the buyer could back out of the contract and would be due their earnest money.

It depends on the particular buyer and seller. Typically, all fixtures, which are any kind of personal property that is permanently attached to the home (such as drapery rods, built-in bookcases, carpeting, light fixtures, etc.) would stay with the house unless it is written differently into the sales contract. This is not always the case, especially in beach property that is on the rental market. Many homeowners that sell rental property, choose to sell furnished. This would, of course, need to be specified in the sales contract. Other items that are negotiable might be appliances such as the washer, dryer, or the refrigerator, but it could be anything in the house that the buyer might want to negotiate for such as a piece of furniture or an area rug.

It varies from state to state but in South Carolina, it is the seller’s responsibility to disclose pertinent information about the property and he/she does so by filling out a Seller’s Disclosure Form. The Seller’s Disclosure Form includes any homeowner’s association dues, any regime fees and/or assessments, the state of the roof, electrical, HVAC systems, roof,  etc. along with any repairs done to the house. Although the seller is required to fill out this form, the agents as well are required to disclose all facts materially affecting the value or desirability of the property which are known or accessible to them. These kind of details might include whether or not any work done on the house meets local building codes and permit requirements, the presence of any neighborhood nuisances or noises that a potential buyer might not notice, any death within three years on the property, and any restrictions on the use of the property such as zoning ordinances or homeowners association rules.  It’s always advisable to check out a property thoroughly before putting in an offer.

If you are thinking about buying a foreclosure property, you should try and get as much information as you can. Lenders will often give you the range of bids expected. If you can get into the house , you should have an inspection done so that you won’t have an unforeseen major expense but many foreclosed properties will not let you inside before the auction and most are sold “as is.” You should definitely find out from the lender or the public records if there are any liens, encroachments, or title problems as many of these issues are non-negotiable or cannot be repaired.

The more you know about a seller’s motivation, the stronger a negotiating position you are in. For example, seller who must move quickly due to a job transfer may be amenable to a lower price with a speedy escrow. Other so-called “motivated sellers” include people going through a divorce or those who have already purchased another home.
Remember, that the listing price is what the seller would like to receive but is not necessarily what they will settle for. Before making an offer, check the recent sales prices of comparable homes in the neighborhood to see how the seller’s asking price stacks up. Some experts discourage making deliberate low-ball offers. While such an offer can be presented, it can also sour the sale and discourage the seller from negotiating at all.

South Carolina law states that the conducting of a real estate closing is the practice of law and therefor only an attorney can do so. You should ask your Real estate agent or broker to give you a list of names and contact these attorneys to determine experience handling real estate transactions and the fees.

Almost all purchase offers include two primary contingencies. The first is a financing contingency and this would protect the buyer should he/she not be able to get financing after seriously trying to do so. This is typical but is by no means required and a buyer who did not include a financing contingency would have a stronger position than someone who did and might even be able to get a better price when negotiating. The second common contingency is the home inspection. If a home inspection uncovered serious defects in a house and the seller refused to repair them, the buyer could back out of the contract and would be due their earnest money.

Mortgage interest and property taxes are deductible on a second home if you itemize. Check with your accountant or tax adviser for specifics.

If you are taking out a FHA or VA loan, the lender can require an impound account  (also called an escrow account, depending on where you live) which is simply an account maintained by the mortgage company to collect insurance and tax payments that are necessary for you to keep your home, but are not technically part of the mortgage. Most conventional loans do not require an impound account, however, they are often part of the mortgage if the deposit is less than 20% of the value of the home.

Property taxes on all real estate, including those levied by state and local governments and school districts, are fully deductible against current income taxes.

Contact your local tax assessor’s office to see what procedures to follow to appeal your property tax assessment. You may be able to appeal your assessment informally.  Mostly likely, however, you will have to go through a formal tax-appeal processes, which begin with an appeal filed with the appropriate assessment appeals board. Homeowners in South Carolina pay annual property taxes based on the assessed value of their property and on their local tax rate.  For owner-occupied primary residences, the assessment ratio is 4%. For non-primary residences, the rate is 6%.

Property taxes are what most homeowners in the United States pay for the privilege of owning a piece of real estate, on average 1.5 percent of the property’s current market value. These annual local assessments by county or local authorities help pay for public services and are calculated using a variety of formulas. Most states use assessments to calculate property taxes and these assessments have limits built into them. Assessment limits prevent a property’s assessed value from increasing by more than a fixed percentage between assessments. These limits can reduce a property’s assessed value below its market value and prevent rapid property value increases from raising the owner’s tax burden.

There are two primary methods to estimate the value of your home. First, there is an appraisal which is a professional estimate of your home’s market value which is based on age, square footage, construction quality and design in comparison with the sales price of other homes in your home’s proximity. The usual price for an appraisal runs about $300-$400. An alternative approach is more informal and less costly. A real estate agent or a broker can provide a free valuation your home which is called a comparative market analysis. Similar to an appraisal, this analysis compares your home to recent home sales in the neighborhood to establish an estimate of value.

The Internal Revenue Service publishes a number of real estate publications. They are listed by number:
* 521 “Moving Expenses”
* 523 “Selling Your Home”
* 527 “Residential Rental Property”
* 534 “Depreciation”
* 541 “Tax Information on Partnerships”
* 551 “Basis of Assets”
* 555 “Federal Tax Information on Community Property”
* 561 “Determining the Value of Donated Property”
* 590 “Individual Retirement Arrangements”
* 908 “Bankruptcy and Other Debt Cancellation”
* 936 “Home Mortgage Interest Deduction”
Order by calling 1-800- TAX-FORM.

As of Jan. 1, 1991, homeowners have been able to deduct points paid by the seller. This deduction previously was reserved only for points actually paid by the buyer.

The bottom line is that you shouldn’t buy a house until you can afford the monthly payments and the maintenance expenses that come with owning a home. When that time is right, however, there are some benefits to buying. Along with equity that you are building, there are tax breaks like mortgage interest deductions that can be beneficial. You shouldn’t look for instant equity, however, as there are costs to buying and selling a home that include real estate commissions, lender fees, and closing costs that can sometimes amount to more than 10% of the sales price. For this reason, you should look long term, and plan on staying in the house long enough to cover your transaction costs. Finally, you should study the local market; if you are considering buying a house in a cooler market, you may be able to get a good price that will boost your equity from the start. Conversley, a hot market might get you into a bidding war that could inflate the price you have to pay to purchase.

Any points you or the seller pay to purchase your home loan are deductible for that year. Property taxes and interest are deductible every year. But while other home-buying costs (closing costs in particular) are not immediately tax-deductible, they can be figured into the adjusted cost basis of your home when you go to sell (any significant home improvements also can be calculated into your basis). These fees would include title insurance, loan-application fees, credit report, appraisal fees, service fees, settlement or closing fees, bank attorney’s fees, attorney’s fees, document preparation fees and recording fees. Points paid when you refinance an existing mortgage must be deducted  over the life of the new loan.

The Mortgage Credit Certificate program is an IRS tax credit that reduces the federal tax liability of a qualified borrower which has the effect of subsidizing the monthly mortgage payment.  It is a home buyer assistance program designed to help lower‐income families afford home ownership. The program allows home buyers to claim a dollar‐for‐dollar tax credit for a portion of mortgage interest paid per year, up to $2,000.The MCC is effective as long as the homeowner resides in the home and pays the mortgage interest. An additional benefit is that because the MCC reduces the borrower’s federal income taxes and increases his/her net earnings, it can help the buyer qualify for the initial loan.

Along with the enjoyment of having a vacation home, there are some tax benefits to purchasing a second home. The interest and the property taxes are tax deductible which may help you make the decision to buy a vacation home, especially if you plan on turning it into a retirement home later. A vacation home also can be depreciated if you live in it fewer than 14 days a year, or 10 percent of the rented days – whichever is greater.

There are several ways that a homeowner can save on taxes. First keep in mind that points, or loan origination fees, are deductible no matter who pays them, either the buyer or the seller. Then, mortgage interest on loans up to $1 million is completely deductible for the year in which you pay it to buy, build, or improve your principal residence plus a second home. Finally, most homeowners don’t have to pay capital gains taxes when they sell their home. The exemption has been raised to $500,000 for married couples and $250,000 for single owners and it can be taken every two years. If you do have to pay capital gains taxes, these costs can be added to your adjusted cost basis. Consult your tax adviser for more information.

Mortgage interest and property taxes are deductible on a second home if you itemize. Check with your accountant or tax adviser for specifics.

If you are a buyer, and you or the seller pays points, they are deductible for the year in which they are paid only. You also can deduct any points you pay when you refinance your home, but you must do so over the life of the loan. Consult your tax or financial adviser.

Deciding whether to rent or own doesn’t have to be a gut-wrenching decision if you logically compare the costs between renting or owning. Before doing so, you might assume that buying is better because you will never see a return on rent payments. There are, however, costs to buying that you should be aware of. First of all, you should only be looking at houses that you can afford. Experts recommend that you should spend no more than 33% of your gross monthly income on housing…if you make $3500 a month, then no more than $1155 should go toward housing. This probably means that you can spend more on rent than you can on a mortgage but you have to factor in taxes, insurance, and maintenance. Then, decide how long you will be staying in the house. You should probably be planning on staying for at least 5 years to cover your transaction costs of buying in the first place. Make sure that you can afford the down payment; if you’re not able to put down 20% on the purchase price, you will wind up paying more in fees and interest. Estimate your closing costs which generally run about 2-5% of the home purchase price. Finally, analyze the personal factors at play between owning and renting which include how much work you are willing to put into your home, how risk tolerant you are, how important having control over where you live is to you, and how much you value home ownership.

Many city and county governments offer Mortgage Credit Certificate programs, which allow first-time home buyers to take advantage of a special federal income tax write-off, which makes qualifying for a mortgage loan easier. Requirements vary from program to program. People wanting to apply should contact their local housing or community development office. Here is a list of four general requirements to keep in mind:
* Some credit may be claimed only on your owner-occupied principal residence.
* There are maximum income limits, which vary by locality and family size.
* You must be a first-time home buyer, which means you must not have had any kind of ownership interest in a principal residence during the past three years. This restriction may be waived, however, if you are buying property within certain target areas.
* Allocations must be available. A local MCC program may have to decline new applications when it runs out of funds.

The mortgage interest deduction entitles you to completely deduct the interest on your home loan for the year in which you paid it. Mortgage interest reduces taxable income and is, therefor, not a dollar-for-dollar tax cut. You must itemize deductions in order to do this, which means your total deductions must exceed the IRS’s standard deduction.

Homeowners association fees are considered personal living expenses and are not tax-deductible. If, however, an association has a special assessment to make one or more capital improvements, condo owners may be able to add the expense to their cost basis. Cost basis is a term for the money an owner spends for permanent improvements throughout their time in the home and is used to reduce eventual capital gains taxes when the property is sold. For example, if the association puts a new roof on a building, the expense could be considered part of a condo owner’s cost basis only if they lived directly underneath it. Overall improvements to common areas, such as the installation of a swimming pool, need to be considered on a case-by-case basis but most can be included in the cost basis of any owner who can show their home directly benefits from the work.

To find out more about how the IRS views condo association fees, look to IRS Publication 17, “Your Federal Income Tax,” which includes a section on condos. Order a free copy by calling (800) TAX-FORM.

Real estate agents would say that the more you tell them, the better they can negotiate on your behalf. However, the degree of trust you have with an agent may depend upon their legal obligation. Agents working for buyers have three possible choices: they can represent the buyer exclusively, called single agency, or represent the seller exclusively, called sub- agency, or represent both the buyer and seller in a dual-agency situation. Some states require agents to disclose all possible agency relationships before they enter into a residential real estate transaction. Here is a summary of the three basic types:

* In a traditional relationship, real estate agents and brokers have a fiduciary relationship to the seller. Be aware that the seller pays the commission of both brokers, not just the one who lists and shows the property, but also to the sub-broker, who brings the ready, willing and able buyer to the table.

* Dual agency exists if two agents working for the same broker represent the buyer and seller in a transaction. A potential conflict of interest is created if the listing agent has advance knowledge of another buyer’s offer. Therefore, the law states that a dual agent shall not disclose to the buyer that the seller will accept less than the list price, or disclose to the seller that the buyer will pay more than the offer price, without express written permission.

* A buyer also can hire his or her own agent who will represent the buyer’s interests exclusively. A buyer’s agent usually must be paid out of the buyer’s own pocket but the buyer can trust them with financial information, knowing it will not be transmitted to the other broker and ultimately to the seller.

Experts generally agree that you can plan on annually spending 1 percent of the purchase price of your house on repairing gutters, caulking windows, sealing your driveway and the myriad other maintenance chores that come with the privilege of home ownership. Newer homes will cost less to maintain than older homes. It also depends on how well the house has been maintained over the years.

A standard ratio used by lenders limits the mortgage payment to 28 percent of the borrower’s gross income and the mortgage payment, combined with all other debts, to 36 percent of the total. The fact that some loan applicants are accustomed to spending 40 percent of their