Homeownership is about security, comfort, and fulfilling the American dream. The sense of community that comes with putting down roots in a place of your own, the security of owning the roof over your head, the opportunity for financial growth -- all these accompany the choice to become a homeowner.
But buying a home is also the single largest investment most people ever make. Along with all the benefits of homeownership comes the responsibility to manage that investment wisely.
Benefits of homeownership
The rewards of owning your own home include many benefits unavailable to renters. Among other things, homeownership allows you to:
Start building wealth: Making a mortgage payment every month builds up your equity stake in your home, contributing to your long-term savings and helping you solidify your financial future.
Reduce your tax burden: The interest you pay on your mortgage is usually tax-deductible, which can lead to significant tax savings -- especially in the early years of the mortgage term, when most of your monthly payments go toward interest. Make sure you consult your tax advisor about the deductibility of interest.
Build your credit history: Timely mortgage payments can contribute to a positive credit history.
Eliminate landlord hassles: You'll no longer have to fear non-renewed leases and rent increases.
Make the house your own: Aside from zoning rules, Homeowner's Association requirements, and local building codes, you'll be free to decorate, remodel, and renovate as you wish.
Responsibilities of homeownership
Before deciding to buy a home, consider the responsibilities that will accompany your purchase. You will most likely have to make some adjustments to account for the following:
Additional financial responsibility: Whether buying is more costly than renting depends on your individual circumstances. As a renter, some or all of your utilities may have been paid for, but now they will be solely your responsibility. You'll also be responsible for property taxes and homeowner's insurance in addition to your loan.
Maintenance and repairs: Maintaining your property will be up to you, not the landlord.
Less mobility: Unlike having a lease where you can move with minimal notice, moving when you own a home is more complicated since you're responsible for ensuring the mortgage gets paid. Depreciation: Real estate often increases in value over time, but not always. Owning a home means facing the risk that its value will depreciate.
Beyond the financial benefits, the personal rewards of homeownership can be tremendous -- as long as you prepare for the responsibilities that come along with it, and choose a home and a mortgage that are well-suited to your needs.
Free Prequalification Our home mortgage consultants will help you determine how much you may be able to borrow for a home.
Your Military Homebuyer's Guide Download this invaluable handbook today, and find out how easy buying a home can be.
Rick Sandon
Residential Mortgage Specialist
813/319-6500
www.SandonGroup.com
We are frequently asked this question by home buyers who want to find the very best value in a home (rightfully so). We will make an important distinction up front. This article is directed primarily to military families looking to purchase a home as their primary residence which is a completely different animal from purchasing investment properties. While they may consider keeping the home after a PCS and converting it to an investment property, the two require a totally different mindset and analysis.
This article will address foreclosure, short sales, and pre-foreclosures. Each is defined below.
For our discussion, a foreclosure is a property that is owned by the lending bank following the legal process after payment default.
Let’s examine how a bank or lending bank typically deals with a property that comes back to them as a result of a full foreclosure. Government regulations require the bank reserve an amount of money equal to the value of the loan against the property. This is money that cannot be freed up for further investment, thus costing the lending bank money. The bank basically does what most homeowners do when they wish to sell a home. They call a Realtor (TM). Generally they have an arrangement with a broker who will list all of the bank’s foreclosures for a reduced rate. The Realtor (TM) then places the home in the local Multiple Listing Service and a sign goes up on the property. So, once a property has been through full foreclosure, generally it is marketed like any other property and there really is no “secret handshake” or list to find foreclosed properties.
Here are five important distinctions that make a foreclosed property different than a typical home sale.
1. You are negotiating with an unemotional bank, not an individual. Ultimately the bank will have a bottom line established by the officer or board. Whether or not the home sells does not directly impact an individual or their personal finances. And that bottom line may or may not be below market value.
2. Banks rely heavily on processes and procedures … which take time. Do not expect the negotiations and decisions to move quickly. As opposed to the conventional negotiations with individual sellers, negotiations will not continue past normal working hours or into weekends. Likewise, expect the bank to impose additional contract requirements such as specific disclosures and addendums that will further encumber the process.
3. Most banks will list and sell the property “as is.” This term has specific legal meaning and may vary by state laws and traditions. It may mean that the bank requires the purchaser to sign a disclosure or addendum that precludes negotiations based on a home inspection and / or the traditional pre-settlement walk through inspection. So, before you sign a contract on a foreclosure property, you may want to seek permission from the bank to complete the home inspection before making the contractual offer. Work with your lender also as many programs require that the home is safe and fully habitable prior to closing.
4. Foreclosures are truly a sad event and it is likely that the previous owner would not maintain the property in excellent condition during the process. Some angry owners may in fact inflict intentional damage to the property upon departure. You should also consider that some or all of the utilities may be disconnected. It is even possible that utility meters have been removed, which can be quite expensive to reinstate. This can obviously present additional concerns and expenses as water seals in plumbing may dry out, the home may have been without heat or air conditioning for a period of time. All of these circumstances can increase your costs.
5. Although it is hard to believe, some states have a “Redemption” law. This law allows previous owners to “Redeem” their home … even after the sale by paying off their debt. Each Redemption State may have different laws. You should do very careful research on this aspect of buying foreclosures, and consult an attorney, before you write the contract.
Because of the soft market in many parts of the country, foreclosures are getting considerable press. We should acknowledge the human cost of a foreclosures as they cause good people a great deal of pain…including some our military families.
The continued degradation of our veterans’ job opportunities and personal finances after their service to the military, has spurred members of Congress to take action and pass the Heroes Earning Assistance and Relief Tax (HEART) Act.
The HEART Act, sponsored by the House Ways and Means Committee Chairman Rep. Charles Rangel, D-N.Y., was approved by the House of Representatives on Tuesday, May 20 in a unanimous 403 - 0 vote.
This Act provides $1.3 million dollars in tax relief to the military community, as well as expanded home ownership opportunities, and the ability for military personnel to secure employment before and after their service.
Some of the more notable permanent provisions of the HEART Act allows active-duty reservists to make penalty-free withdrawals from retirement plans, and makes the Earned Income Tax Credit a permanent inclusion into Soldiers’ combat pay. Additionally, the bill ensures that reservists called up to active duty do not suffer a pay cut; and provides a small tax credit to small businesses who continue to pay reservists and guardsmen who are deployed.
Other provisions will attempt to ease the financial burden on military families by doing the following:
• Permitting an employer to make contributions to a qualified retirement plan on behalf of an employee killed or disabled during combat.• Counting extra pay for active-duty military personnel from their previous civilian employer for retirement purposes.• Making thousands of veterans eligible for low-interest loans by changing the qualified mortgage bond programs used to help veterans achieve homeownership.• Permitting recipients of military death benefit gratuities to roll over the amounts received tax free, to a Roth IRA or Education Saving Account.• Revising tax rules relating to U.S. citizens and permanent residents (expatriates) who relinquish citizenship or residency to avoid U.S. taxation.
What’s more, the HEART Act will be paid for by Congress going after expatriates and federal contractors who go offshore to avoid paying U.S. Taxes.
“This tax relief for military families is the least Congress can do for our troops who put their lives on the line every day,” said, Nancy Pelosi, Speaker of the House, in a written statement.
“I look forward to the Senate passing the HEART Act and the President signing this critical legislation into law,” Pelosi added.
Congress hopes to have President Bush sign this new legislation into law by this Memorial Day.
Many home owners have found it difficult recently to pay their mortgages, but quick intervention by loan counselors at the Department of Veterans Affairs (VA) has actually reduced the number of veterans defaulting on their home loans.
"VA is reaching out to veterans -- both those who use our home-loan guaranty program and those who don't take advantage of our guaranties -- to keep people in their homes," said Secretary of Veterans Affairs Dr. James B. Peake. "I'm proud of our solid record of success in helping veterans and active-duty personnel deal with financial crises."
Accounting for much of this success are VA counselors at nine regional loan centers who assist people with VA-guaranteed loans avoid foreclosure through counseling and special financing arrangements. The counselors also can assist other veterans with financial problems. VA counselors have helped about 74,000 veterans, active-duty members and survivors keep their homes since 2000, a savings to the government of nearly $1.5 billion.
Depending on a veteran's circumstances, VA can intercede with the borrower on the veteran's behalf to pursue options -- such as repayment plans, forbearance, and loan modifications -- that would allow a veteran to keep a home.
To obtain help from a VA financial counselor, veterans can call VA toll-free at 1-877-827-3702. Information about VA's home loan guaranty program can be obtained at http://www.homeloans.va.gov.
Since 1944, when home-loan guaranties were offered with the original GI Bill, VA has guarantied more than 18 million home loans worth $911 billion. Last year, about 135,000 veterans, active-duty servicemembers and survivors received loans valued at nearly $24 billion.
About 2.3 million home loans still in effect were purchased through VA's home-loan guaranty program, which makes home loans more affordable for veterans, active-duty members and some surviving spouses by protecting lenders from loss if the borrower fails to repay the loan. More than 90 percent of VA-backed home loans were given without a downpayment.
April data shows that foreclosures are down more than 50 percent fromthe same months in 2003. VA attributes this to prudent credit underwritingstandards, its robust supplemental loan servicing program and VA financial loan counselors.
For more information about your VA Loan visit Military.com's Finance or Benefits channels.
www.sandongroup.com
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