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Eastern Kansas Real Estate Source.
Serving Miami County, Linn County, Anderson County, Franklin County, and Johnson County.
Covering Residential, Commercial, and Farm Properties.
Hannes Poetter a Crown Realty Real Estate Agent.
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First Time Home Buyer - Can we Talk?
    How not to act foolish

    Buying a home is exciting, especially when
    you're buying for the first time. In the midst of
    all of the excitement, it's easy to become
    blinded by beautiful back-splashes, granite
    and quartz counter tops, hardwood floors, and
    fenced-in backyards. While looking at homes
    that are completely perfect from top to bottom,
    you may begin to rationalize a larger purchase
    than you had originally planned for — "This
    house is perfect for me; it's worth $50,000
    extra dollars for me to have a house with
    enough space in a perfect location," or "We
    were planning on spending a little bit of money
    on painting; we can spend $50,000 extra on
    this house because it doesn't need any work."

    1. Overspending

    Before you even look at a single property, you
    need to know exactly how much you can
    afford. There are several online calculator
    tools you can use, but these tools are only
    estimates. Use these tools as a guide, but then
    adjust the amount based on your individual
    situation. How much is your current rent
    payment? Did you meet that payment each
    month with ease, or was it a bit of a struggle
    each month? The payment you can afford right
    now is a good indicator of what you'll be able
    to afford in your new home.

    Meet with a lender and get pre-approved for
    an amount you can afford. Also, keep in mind
    that it's always better to lean towards a lower
    amount, rather than a higher amount. You do
    not have to use the entire amount you're pre-
    approved for. Once you know how much you
    have to work with, then and only then should
    you start your house hunt.

    2. Counting chickens before they hatch

    When determining how much mortgage you
    can afford, base this amount on what you are
    earning today. That is, the income that you
    and your spouse earn from stable sources. If
    you're in your last year of law school, for
    instance, don't assume that you will be earning
    much more money in a year or two, so you can
    afford a larger payment. If your wife is
    expecting a big promotion, don't base your
    mortgage payment off of her potential salary
    increase. No one can predict the future, and
    although you may very well be in a better
    financial situation a year down the road, there
    is no guarantee.

    3. Failing to account for closing costs,
    property taxes, HOA, and homeowner's
    insurance

    When you rent a home, you generally only
    have one payment — rent — and then maybe
    renter's insurance, which is optional. When
    you buy a place, your mortgage payment is
    only the beginning of an array of costs.
    Homeowner's association fees can be as low
    as $0 or as high as a few hundred dollars per
    month, depending on where you live and the
    amenities and services offered.

    Homeowners insurance and property taxes are
    based on your geographic location. Florida
    has notoriously high homeowner's insurance
    rates, where they average $161.08 per month.
    In Idaho and Wisconsin, rates are a bit lower,
    averaging below $50 per month, according to
    Value Penguin. Property taxes average higher
    in New Jersey, New Hampshire, Texas and
    Wisconsin and they're lower in Louisiana,
    Hawaii, and Alabama. Kansas is right in the
    middle of things.

    Then on top of all of those costs, if your down
    payment is less than 20 percent of the selling
    price, you may end up paying an additional
    cost — private mortgage insurance (PMI) —
    which is basically insurance for the lender in
    case you default on your loan.

    At the end of it all, your $800 mortgage
    payment can easily turn into a $1,200 house
    payment.

    4. Failing to protect yourself with home
    inspections, contingency clauses, etc.

    During your house hunt, you may find a house
    that looks great at first glance. Then, as you
    walk through a few of the rooms, you notice
    problems with the house — maybe the floors
    squeak or the kitchen island is off-centered.
    After walking through the house, you come to
    realize that someone simply put lipstick on a
    pig, and this house is in questionable shape.

    Home inspections provide you with some
    protection. The inspector will be able to find
    problems that you can't and you want to know
    these problems before you sign on. "The seller
    isn't likely to tell you there's mold in the
    basement or the walls are poorly insulated."

    Contingency clauses also offer a form of
    protection. "A mortgage financing contingency
    clause protects you if, say, you lose your job
    and the loan falls through or the appraisal
    price comes in over the purchase price.
    Should one of these events occur, the buyer
    gets back the money he used to secure the
    property. Without the clause, he can lose that
    money and still be obligated to buy the house."

    5. Being too naive or too paranoid

    Some first-time home buyers are naive. Overly
    optimistic, they think nothing could possible go
    wrong. If a home has a few problems, they view
    them as easy fixes and are unrealistic when it
    comes to the cost and time it takes to fix up the
    home. Some naive buyers will move to a
    neighborhood on the wrong side of town,
    forgetting that you can fix up a house, but you
    can't change your neighborhood or location
    without moving.

    Paranoid buyers are sometimes difficult to
    work with. They may not believe the price is an
    accurate assessment of the house's market
    value. They'll submit low-ball offers and then
    show frustration when they are consistently
    rejected. Paranoid buyers don't trust real-
    estate agents, and may even try to buy their
    home without an agent, which is generally an
    unwise choice.

    Tax Advantages owning a Home

    Buying a home is the biggest investment many
    people ever make. And it can be the wisest,
    due partly to a number of tax advantages the
    government has instituted to encourage home
    ownership. These benefits can help reduce the
    cost of buying and owning a home and also
    leave you with more money when it’s time to
    sell.
    Because tax rules vary based on income and
    other factors, you should consult an
    accountant or financial advisor for advice on
    your particular tax situation.

    Mortgage interest

    One of the biggest incentives to owning a
    home is that the interest you pay on your
    mortgage is tax-deductible, up to a limit of $1
    million. This deduction, like most other tax
    breaks for homeowners, applies to any kind of
    home. That includes a second home, as long
    as you spend a certain amount of time there:
    either 14 days each year, or 10 percent as
    much time as it’s rented.

    In addition, you can deduct the interest on up
    to $100,000 of other debt that uses your home
    as security -- for example, a home equity loan.
    However, the amount you can deduct may be
    limited if the money you borrow raises your
    debt above the home’s actual market value.
    This can sometimes happen when a lender
    extends you a loan based on more than the
    value of the house.

    You can also deduct any amount you pay for
    points to reduce the interest rate of your
    mortgage or other loan linked to your home. In
    most cases, the points on a mortgage to buy
    or build your principal home can be deducted
    fully in the first year. However, if you refinance,
    take a home equity loan, or a loan secured by
    a second home, the points must be deducted
    over the life of the new loan. The exception is if
    you use part of a refinanced mortgage to
    improve your house; that portion of the points
    can be deducted in the same year.
    Tax-free profits

    Another major advantage of home ownership
    is that, in most cases, you don’t have to pay
    taxes on any profit you make when you sell
    your home. The law allows you to exclude from
    taxes up to $250,000 in profit from the sale of
    your principal home -- $500,000 for a couple
    who file jointly. This exclusion also covers the
    sale of a parcel of land adjacent to your
    house, unless it’s used for business.

    There are some stipulations, however. The
    home must be your principal residence, and
    you (and your spouse, where applicable) must
    have lived there for at least two of the previous
    five years. You can only claim the exemption
    once every two years. If you don’t meet those
    requirements, you may still claim a partial
    exemption if the sale was due to a change in
    your place of employment, necessary for
    health reasons, or due to other unforeseen
    circumstances.

    Property taxes

    You can claim property taxes you pay as an
    income tax deduction. This applies to both
    your principal home and any others you may
    own. Any money held in escrow to pay future
    taxes, however, is not deductible.

    Moving expenses

    The government allows you to write off many of
    your moving costs when you buy a new home if
    it’s at least 50 miles closer to your job than
    your old home. To qualify, you must continue
    to work full-time in the general area of your job
    for 39 weeks during the following year. If you’re
    self-employed and work in your home, any
    move of 50 miles or more will make your
    moving expenses deductible. However, you
    must also work full-time near the new location
    for 78 weeks during the next 24 months.

    Of course, because tax rules vary based on
    income and other factors, be sure to consult
    an accountant or financial advisor about your
    particular situation.

    In the market for a new home or a second
    home? Call me and I will point you in the right
    direction.
text or call
(913) 731 6600
    Pre-Approval and Pre-Qualify

    One of the most important steps is what's
    known as pre-approval. Pre-approval will help
    you immensely when you're searching for a
    home.

    It might even give you an edge on the
    competition once you're ready to make an
    offer. In a competitive market, some sellers
    won't even entertain offers from buyers unless
    they have a pre-approval letter in hand. So
    what exactly does it mean to be pre-approved
    for a mortgage?

    What It Means To be pre-approved for a
    mortgage means that a bank or lender has
    investigated your credit history and determined
    that you would be a suitable candidate for a
    mortgage. (If you want to see where your credit
    currently stands, the free Credit Report Card
    grades your credit history on the basics and
    also provides two free credit scores.)

    Pre-approvals might only be good for a certain
    amount of time but they usually signify that a
    lender is ready and willing to lend you money.
    It's a big step in showing sellers that you are
    serious about buying a house and that your
    offer should be treated accordingly.

    What It Involves Getting pre-approved is a
    somewhat lengthy process. But at the end of it
    all you'll know whether you can buy a home or
    not. The process starts before you even find a
    home. First, you'll need to go to a lender and
    complete a mortgage application and provide
    documents related to your financial history.
    The bank or lender will then do a thorough
    investigation into your finances in order to
    determine how much money they are willing to
    loan you.

    At the end of the pre-approval process, you
    should be given an exact loan amount. This
    allows you to look for homes at that price point
    or lower. At this point, you'll also have a good
    idea of the interest rate you'll be given at the
    end of the pre-approval process. The real
    benefit of getting pre-approved is that when
    you find a place you'll be able to move quickly.
    Once you make an offer, you won't have to
    scramble for financing since you're pre-
    approved.


    Pre-Qualified vs. Pre-Approved

    You may have heard the term pre-qualified in
    the past and assumed that it was the same
    thing as being pre-approved. Although similar,
    they are actually two different things. Getting
    pre-qualified involves sitting down with a lender
    in order to get an idea of how much money you
    can borrow. But it is only informational.

    You would supply the lender with data such as
    your income, assets and debts and the lender
    would give you an idea of how much you can
    borrow, what type of mortgage options there
    are, etc.

    A lot of people make the mistake of thinking
    that pre-qualified means pre-approved, but
    this is not the case. Getting pre-qualified
    doesn't mean the bank will loan you that
    amount, but it can give you an idea of how
    much you can expect to be given once you get
    pre-approved.

    Those who are not sure if they are ready to
    buy a home may want to get pre-qualified, but
    though it's not necessary to the mortgage
    process, a good Realtor will only work with you
    if you have been pre-qualified by a lender.
HP-
Kansas Real Estate LLC - Hannes Poetter - President
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