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Southern Arizona First-Time Home Buyers
It's not uncommon for Arizona first-time home buyers to say, "just last week I called you about buying a home and now I'm in escrow, how did this happen so fast?" The answer is it didn't. First-time home buyers start the Arizona home search long before most even realize it. Here's what you can expect from your home shopping experience.
"You should buy a home." That's what you've been hearing from friends and family, right? So, by now you have likely already weighed the benefits and decided that Arizona home ownership was the best decision for you. That's a major hurdle now passed. You are focused. Good.
Almost 80% of all Arizona home searches today begin on the Internet. With just a few clicks of the mouse, Arizona first-time home buyers can search through thousands of online listings on MyOwnArizona.com, view photos and detailed Arizona property descriptions, and sort through dozens of other photographs and aerial shots of neighborhoods and Arizona homes. You've probably defined your goals and have a pretty good idea of the type of Arizona home and neighborhood you want. By the time you reach our OwnArizona real estate agent office, you are halfway to Arizona home ownership.
We will let you in on a little secret. We generally know which Arizona home a first-time home buyer is going to choose, and we suspect most other businesses operate the same way. It's an intuition. But we make it a practice not to steer Arizona buyers, and OwnArizona agents insist that first-time Arizona home buyers choose the Arizona home without interference from anyone. It's not our choice to make.
Real estate agents are required, however, to point out defects and should help first-time Arizona home buyers feel confident that the Arizona home selected meets the buyer's search parameters.
Ten Tips For First-Time Arizona Home Buyers
If you are looking to make the move from a rented property to an Arizona home of your own, you are not alone. The convergence of low Arizona house prices, still-low interest rates and appealing tax incentives makes this year a good time to buy an Arizona home for many people. If you are looking to buy, here is what you need to know as a first-time home buyer:
1. Arizona home prices are low. Arizona home prices dropped at a record annual pace of 20 percent. That means discerning first-time Arizona home buyers can find real bargains.
2. Interest rates are still good. While Arizona home mortgage interest rates have risen from their historic lows earlier this year, they still are appealing.
3. Arizona tax credits will help [described in detail below]. First-time homebuyers can get money back from Arizona tax credits implemented as part of the American Recovery and Reinvestment Act. An $8,000 credit is available to first-time home buyers (a category that includes people who have not owned a home for several years) for Arizona homes. Legislators are considering increasing the credit to $15,000 and expanding it to include other home buyers.
4. Credit scores matter. While Arizona houses are widely available, financing is usually limited to those with good credit. Credit scores range from 300 to 850, with the median U.S. credit score about 725. A score below 680 usually results in a higher interest rate or denial of credit. Check your credit score before you make any first-time home buying decisions. If your score is low, wait a few months and work to improve the score by paying every bill on time, paying down as much debt as possible and disputing any erroneous information on your report. Note that it can pay to do your homework researching mortgage rates and lenders.
5. A home mortgage down payment is essential today. Ideally, you can put down 20 percent of the purchase price. If not, talk to our OwnArizona mortgage lender about your options.
6. Do not stretch too far. Standard guidelines call for keeping housing expenses below 35 percent of total income. Breathing room in your budget will help you keep your Arizona home even if something unplanned does occur.
7. Understand private mortgage insurance (PMI). Mortgages with less than 20 percent equity (which means a 20 percent down payment for those purchasing a home) require PMI in case the owner defaults on the loan. When the Arizona home owner pays a conventional mortgage down to 80 percent or less of the Arizona home's value, the home owner can request the lender to cancel the PMI and then be able to stop paying the additional amount. Meanwhile, PMI is tax-deductible, at least through 2010.
8. Know the real costs of buying your first-time Arizona home. The principal and interest on a mortgage payment are only the beginning of Arizona home-related costs. Escrow payments - the funds withdrawn to cover Arizona home insurance and taxes - and PMI can add a few hundred dollars per month to a mortgage payment. In addition, Arizona home owners must pay for repairs and maintenance. A rule of thumb is to budget 1 percent of the Arizona home's purchase price per year for upkeep.
9. Know whether you can pay off early. If the mortgage has a prepayment penalty, borrowers face hefty charges if they pay it off early. This provision also can apply to future refinancing, so be forewarned.
10. First-time Arizona home buyer beware. Some of the lowest prices on homes today are "fixer-uppers" or homes sold "as is" because of foreclosure. Invest in a Arizona home inspection (typically costing under $500) before agreeing to purchase any Arizona home. The inspection will inform you of any faults in the first-time Arizona home and help you determine the approximate cost to remedy those problems.
For many Americans, the time is right to take advantage of today's excellent first-time Arizona home buying opportunities. If you are among them, shop carefully and enjoy the journey to Arizona home ownership. OwnArizona™ agents are very patient and can answer any of your concerns. First-time Arizona home ownership is an exciting part of life!
First-Time Homebuyers Tax Credit Information
Over the last, few months OwnArizona™ has had an enormous amount of questions come our way on the new First-Time Homebuyers Tax Credit. Here are the basics about the First-Time Homebuyers Tax Credit:
• A first-time Arizona homebuyer is defined as someone who has not owned a home in the last three years.
• Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.
• You cannot purchase the Arizona home from a related party like a spouse, direct ancestor, or direct lineal descendent (child or grandchild); however, you can still qualify for the credit if you purchase a property from siblings, nephews, nieces, and others.
• The credit amounts to 10% of the purchase price of the Arizona home not to exceed $8,000.
• The tax credit does not need to be paid back if you continue living in the Arizona home as your primary residence for three years without selling it.
Common Questions and Answers on First-Time Arizona Home Owner Tax Credit
Once I have closed on my Arizona home and I am ready to file for my tax credit how do I get started?
You will need to pick up tax form 5405 at your local CPA/Tax Preparer office or go online at www.irs.gov. There on the form you will need to fill in the date of closing and new address along with your other tax information. Once the form is completed, it can be filed with the IRS.
Do I really get $8,000 in my pocket from the IRS?
Yes, it is an actual $8,000.
If I am already getting a tax refund back, do I get the $8,000 in addition to this?
Yes, the tax credit is in addition to your normal refund.
If I have not paid $8,000 in taxes can I still get the tax credit?
Yes, you are still entitled to the full tax credit.
Can I file for my tax credit before I close on my home so I can use the money for my down payment?
No. For two reasons: (1) It takes anywhere from 8-12 weeks to get the money back from the IRS and (2) The 5405 requires you to put the closing date of when you closed on your home. Since you have no ownership interest in the property you are purchasing yet, then you cannot file for the credit.
Are mobile homes eligible for the Homebuyers Tax Credit?
Yes. The guidelines state that the following types of properties are eligible: Arizona houseboat, Arizona house trailer, Arizona cooperative apartment, Arizona condominium, or other type of Arizona residence. It has to be the one you occupy most of the time. No second home or vacation properties allowed.
Can I still file for my tax credit and get my money this year?
Yes, you can file the 5405 anytime and still get the money this tax year. If you have extended your taxes and you have closed on your Arizona home you can just attached the 5405 form to the rest of your tax return.
Do both spouses have to be first time homebuyers to receive the credit?
Yes. However, if they are married filing separate they will split the return on the credit.
Can the tax credit be split amount those who are buying the home if they are not married?
Yes, they can split it.
How much does it cost to file the amended return?
It depends. You need to check with the person who filed your tax return for you.
If I have any other questions or would like more information on the tax credit where can I get it? You can go online to IRS.gov and search for form 5405. There it will tell you more information about the credit. To make it easier, you can contact OwnArizona™ by email or you can call or text 520-822-6575 and we will be more than happy to answer any specific questions you may have.
We hope this information has been of great value to you. OwnArizona™ has the goal in our practice is to provide valuable financial services to all that we serve through education and prudent financial advice.
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