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Wednesday, March 14, 2001 It's a great time to buy a new home By
JOHN HAYES When is the best time to buy a home? If you are a first-time home buyer, or if you are thinking about trading up, downsizing or buying a vacation home, the planets have aligned and it's time to act. Several factors, from low mortgage rates to new financing options, combine to make 2001 one of the most advantageous periods in years to buy a home, according to the National Association of Home Builders. Let's start with market conditions. You can get a jump on the 2001 selling season by shopping early in the year. The inventory of new homes has edged up over the past few months and consumer confidence has trended down, which translates into more opportunities for home buyers who act now. Next, let's look at the numbers. In the wake of the Federal Reserve Board's recent decision to cut short-term interest rates, you have an historic opportunity to lock in a low fixed rate on a mortgage. Buyers with good credit can expect to shop for a loan in the low seven percent range. With lower interest rates, you can afford a more expensive home without increasing your monthly mortgage payment, and renters may get their first opportunity to enter the market and become home owners. The federal government gave an additional boost to first-time home buyers this year by raising the loan ceiling and reducing the cost of mortgage insurance premiums on FHA-insured mortgages. The higher ceiling, which raised limits ranging from $86,317 to $170,362 up to $132,000 to $239,250, will enable thousands of buyers to take advantage of these low down payment loans. Mortgage insurance is a required expense for many home buyers who can't afford a 20-percent down payment. And new legal provisions for both FHA-insured loans and privately insured loans mean that you can cancel this insurance once your equity reaches a prescribed threshold, rather than paying the premiums for the life of your mortgage. For first-time homebuyers concerned about being able to save enough money for a down payment traditionally 20 percent of the mortgage there are many new options. You can withdraw up to $10,000 from an individual retirement account (IRA) without penalty for use as a down payment. Or, take advantage of new mortgage options that allow you to put ten percent, three percent or even no money down. If you're self-employed, lenders are working to reduce the additional paperwork typically required. Talk to potential lenders about making these new financing options work for you. Buy a new home now and you'll be glad you did come time to pay your 2001 taxes. The tax advantages of owning a home are many. First of all, home buyers can usually deduct loan points and origination fees for their mortgage, regardless of whether the buyer or the seller paid them. Since origination fees typically run one percent of the mortgage amount or higher, this can amount to huge savings. In addition, mortgage interest is deductible, and still one of the greatest ways to reduce your tax burden. For example, if you pay taxes in the 28-percent bracket, this provision may lower your borrowing costs by nearly one-third, depending on state taxes. In fact, you may be surprised to find how favorably owning a home compares to the cost of renting. It's certainly a great time to buy a new house. New home construction is better than ever, offering the latest in energy-saving technology, efficient heating and cooling systems, innovative design and a host of exciting new features, from pre-wired high-speed data lines to high-tech lighting and security systems. Plus, the decisions you make on layout, colors, materials and appliances will make your new home a true reflection of your individual tastes and preferences. Remember home equity accounts for approximately half of the total net wealth of the typical home owning family, making homeownership the primary source of a household's net worth and the fundamental first step toward accumulating personal wealth. About 900,000 new homes will be sold in 2001, according to NAHB. Will one of them be yours? John Hayes, who is with Torrey Homes, is president of the Home Builders Association of Midwest Georgia, which serves a membership of approximately 460 builders and associate members in Fayette, Coweta, Spalding, Heard and Meriwether counties.
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