Q & A with Dottie Herman

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Q1 - We just heard that there is a new tax credit that is different from the $8000.00 for first time buyers. So if my wife and I decide to move out of our home and trade up we are eligible? What are the criteria?

A - You must have owned your current primary residence for at least 5 years. The tax credit applies to homes purchased for less than $800,000 before May 1, 2010. If you sign a binding contract to purchase a home before May 1st, you would need to close on the transaction before July 1, 2010. The income limitation for single taxpayers went up from $75,000 under the old rules to $125,000 under the new rules. For married taxpayers, the income limitation went up from $150,000 to $225,000.

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Q2 - My wife and I looking to purchase a home. We are looking into our financing options right now and we are wondering if a person can still get a 40 year mortgage? What are some pros and cons?

A - A 40 year mortgage is still available and should only be used if the borrower does not qualify for a specific property because of debt to income ratios, but thru a 40 yr loan, they can achieve ownership of this dream home as the payment would be a bit less and allows them to qualify. That is the "pro". The "con" is unless you are aggressive and prepay your principle; you could be paying an additional 10 years of interest which over time is a substantial amount of money.

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Q3 - I am a 25 year old man looking to buy a condo in Long Beach. I am currently employed and I have a stable income, but I am starting to be a bit nervous about my pending transaction. I am starting to feel like I stretched myself a bit too much- how do I know if I am making a poor financial decision?

A - Buying real estate for the first time can be like watching the most frightening horror movie. Whenever you go from renting a home to owning a home, you will experience what I refer to as "payment shock". What you need to understand is that although you are laying out more money every month, you are now building equity as well as tax advantages. The property you are purchasing over time will be worth more; in addition, your mortgage balance will be going down. The interest on the mortgage as well as the taxes is in most cases a deduction on your income tax returns and, therefore, you will save money. The old saying "no guts no glory" stand true in real estate. However always check with your accountant to ensure you are not over your head and that you are making a wise financial decision.

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Q4 - My wife and I are relocating from the west coast to New York for a job opportunity. We want to rent before we buy to make sure we like the area, etc. We both grew up in the Southwest and are not sure about how to get started with the rental process. Any tips?

A - Sounds like you and your wife are taking the right approach.  It is a good idea to get comfortable with a neighborhood or to live in several before deciding where you want to purchase.  Since you both are not from here, your best bet to set aside several days and explore different neighborhoods.  Find a local agent in New York who can take you around so you can see what you can rent at different price points.  Be sure to look at not just the apartments but the neighborhoods as well.  Have fun and explore!

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Q5 - My husband and I have been in the market for about a year. We finally found a few houses we like but are unsure how to take the next step in the process. How should we begin to place offers and ensure it is attractive to a seller?

A - It would be of immense assistance if you were working with a real estate professional who could remove the guesswork from your situation.  An agent can give you a firm sense of what the current fair market price is for that home.  Depending on your specific market there might be certain protocols on how to formally submit and offer.  Your real estate agent can prepare a properly worded offer letter along with any documentation that may be necessary. 

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If you have a real estate question for Dottie, please send it to; Dottie@RealEstateChannel.com.
 
NOTE: Due to high volume of questions, not everyone can be answered, but she'll do her best.

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