January 11, 2022 | Sexton Real Estate Group
Are you in the market to buy a home? Have you been putting off buying because of taxes? You’re not alone. Many people believe that purchasing a home is too costly because of the taxes associated with it. However, what you may not know is that there are many tax deductions and credits available to homeowners. In this article, we will dispel five myths about taxes and buying a home. Read on to learn more!
Myth #1: You Need To Pay A 20% Downpayment To Buy A Home
This may be one of the biggest misconceptions people believe! As if purchasing property wasn’t expensive enough with all the associated fees and closing costs – did you know there are also additional real estate taxes on top of that? You can expect an increase in tax bills every year after you purchase your new place. In most cases, this will add up to around $100-$300 per month or more depending on where exactly you live and how many bedrooms and bathrooms your property has.
The good news is, in the first few years you can actually deduct a significant part of your tax bill from your taxable income as an adjustment itemized deduction. However, it’s important to note that this applies only to those who have enough deductions and expenses in order not to be taxed at a higher rate – once again proving how beneficial it is for self-employed people or anyone else with business/investment activities because they usually bring their taxes down significantly every year and they are able to take advantage of these opportunities.
This is a common myth about buying a home. In fact, you can buy a home with as little as three percent down in some cases. There are also many programs available that offer low or no downpayment options. So don’t let this myth stop you from buying your dream home!
Myth #2: If You Purchase A Home, Your Taxes Will Automatically Go Up
Not necessarily. While it is true that some homeowners will pay more taxes than they did as renters, this does not happen to everyone and depends on your specific tax situation. Do you automatically lose all of the deductions available when renting a home? No way: just because you own a home now doesn’t mean you have to stop taking advantage of those great rental-related deductions like moving expenses or depreciation!
In fact, depending on where you live, your property taxes may even go down when you buy a home.
Additionally, many people believe that they cannot deduct their mortgage interest from their taxable income. However, this is another tax myth – in most cases, homeowners can indeed deduct their mortgage interest from their taxable income.
Myth #3: You Have To Pay Taxes On The Entire Sale Price Of Your Home
This is one of the most common misconceptions about taxes and buying a home. In reality, you only have to pay capital gains tax on profits made from the sale of your home – not the entire sale price. For example, if you buy a home for $200,000 and sell it for $300,000, you would only have to pay taxes on the $100,000 profit.
Myth #4: Getting A 30-Year Fixed-Rate Mortgage A Good Idea
Many people believe that getting a 30-year fixed-rate mortgage is always the best idea. However, this may not be the case for everyone. There are a few factors to consider when deciding which type of mortgage is right for you.
First, think about how long you plan to stay in your home. If you plan on staying in your home for less than five years, a 30-year fixed-rate mortgage may not be the best option. You could end up paying more interest over the life of the loan than if you opted for a shorter-term mortgage.
Second, consider your current financial situation. If you are struggling to make ends meet each month, it may be wise to opt for a shorter-term mortgage. You could end up paying a lot more in interest over the long-term if you take out a 30-year fixed-rate mortgage.
Third, know your credit score and history. If you have excellent credit it may be worth getting a 30-year fixed-rate loan (the rates on these loans are typically lower than other types of mortgages). On the other hand, if your credit is not great then opting for another type of home financing option might make sense.
Finally, consider how much money or equity you have for a down payment or closing costs when buying a home with cash versus using a mortgage to finance the purchase price. In some cases, it can actually save you thousands of dollars simply by taking advantage of the low-interest rates available with today’s mortgages.
It is important to do your own research and consult with a qualified mortgage advisor when making such an important decision as buying a home. There are many options available, and the best one for you will depend on your unique circumstances.
Myth #5: You Can’t Buy A Home Unless You Have Great Credit
While having good credit is definitely an advantage when purchasing a home, it’s not always necessary. There are many lenders who work with borrowers who have less-than-stellar credit scores. And, as long as your debt-to-income ratio is low, you’re likely to get approved for a mortgage.
In fact, there are many benefits to buying with less than perfect credit or no credit at all. So don’t let this myth discourage you from buying your dream home.
If you’ve been putting off the purchase of a home because it seems like an overwhelming process, we can help. We have years of experience in real estate and taxes, which means that our team is equipped to deal with any tax-related issue you might be facing when buying your first house. Whether you want more information on how mortgage interest affects IRS deductions or whether there are some hidden advantages for homeowners under the new U.S. Tax Code, call us today! Our friendly representatives will answer all of your questions so that you feel confident about making this important investment into your future. Which myths about taxes and buying a home still concern you?
Are You Looking to Buy a Home in Northern California?
The top real estate agency in Northern California, Sexton Group Real Estate in Berkeley, California is a boutique real estate company specializing in residential sales for properties throughout the San Francisco Bay Area. To better serve our clients we have three local offices, one in the heart of picturesque Berkeley, one near downtown Oakland and the third in the heart of historic Lafayette, California. The Sexton Group encompasses the essence of Berkeley’s charm, Oakland’s history and Lafayette’s family-oriented vibe all with a relaxed, down-to-earth nature. We are an amazing group of real estate agents whose wealth of experience spans more than 25 years in the industry. Looking to buy a home in Contra Costa or Alameda County? Contact us today for your free consultation!