by Joffrey Long

Created on: October 15, 2009   Last Updated: October 16, 2009

First Time Homebuyers - Why Some Still Rent

We keep looking, but we still don't have a house. Like many potential first time homebuyers, Mark and Tara Carlson have been pre-approved for a loan and have looked at a number of homes. There's just one thing missing - they haven't bought.

Every time my husband and I find a great house, the monthly payment scares us away. We know we qualify - we just get scared.

Most people are paying less in rent than what a mortgage payment would be. They're not used to making a larger payment. Then - there's maintenance, insurance, and other home ownership expenses.

For some buyers, their monthly housing payment will increase by 50% or more but their true housing cost won't. Part of the equation is largely overlooked income tax savings.

Homebuyers are aware that there's some income tax advantage to owning a home, but how much will they save? They don't know.

Even with the tax refund, we're worried about the payments, added Tara.

What if you knew exactly how much you would reduce your income taxes when you buy?

Better yet.what if you could take home more in your regular paycheck? And use that money toward the house payment?

You can!

Here's how: Find out your home ownership tax savings. Put together some financial information. Then, make an appointment to meet with an accountant or tax preparer. Just follow these simple steps:

Put together your information:

Meet with a loan officer: Find out how much you'll be paying per year in interest and property taxes, as a dollar figure. (For example, a $100,000 mortgage at 5% would be $10,000 per year in interest.) Next, ask either the loan officer or your real estate agent to tell you how much you'll pay per year, in property taxes. Get copies of your last tax return, the W-2 form(s) for last year, and a recent paystub from your job.

Make an appointment with a tax preparer*. Ask them these questions:

1) Based on the mortgage interest and property taxes, how much less in income taxes will I pay?

2) Based on these savings, how do I change the amount my employer withholds

for income taxes, so I can get more net pay?

3) How much more take home pay (after taxes) will I get?

Does this really work? You're worried about that $2,200 a month house payment. Then - because of the tax savings, you get $450 a month more in take home pay. Based on the taxes you know you're going to save, you can actually change the tax withholding at work so that you take home more pay. For many homebuyers, a bigger paycheck helps them more than a big refund at the end of the year. Remember to look carefully at the numbers. You don't want to have too little taken out for taxes, and wind up owing a lot at the end of the year.

Knowing about the tax savings made a big difference for us. We didn't know we would save this much and that we could get the savings in our take home pay!

This one simple step could make the whole process a lot less stressful. Soon - you'll be celebrating your new house just like the people on TV!

*Don't have a tax preparer? Ask your mortgage loan officer or real estate agent. They may be able to refer you to someone who's familiar with the process.

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