Rates improved yesterday afternoon b/c of a looming debt crisis in Europe, primarily sparked by Greece’s inability to pay its national debt (sending investors to the US and lowering our rates). Why should we care about a “debt crisis”? B/c if it becomes global, ALL investors will pull out of bonds in a quasi-panic, and rates could instantly go through the roof. We are precariously perched.
We have had several buyers this week overly concerned about “payment shock” b/c they did NOT take into account the immediate TAX BENEFITS from buying a house. Remember that homeowners can deduct ALL of their interest and property taxes from their taxable income.
A $400,000 FHA purchase can result in annual interest and property taxes of over $25,000. This could translate to income tax savings of over $10,000, or about $800 per month in real tax savings that needs to be taken into account when evaluating payments. And this savings can be realized immediately by adjusting one’s take- home-pay immediately after buying a home.
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