Ultimate Guide to Buying a House
Part 1 - The WHY
So you’ve decided that you want a buy a home. Why? Do you need more space? Less space? Job relocation? Do you need your kids in a better school district? People buy homes for all sorts of different reasons:
- Pride of Ownership
- Nicer Place to Live
- Mortgage Interest Deductions
- Property Tax Deductions
- Capital Gain Exclusion
- Building Equity
- Equity Loans
- Save Money
The first step in the process is figuring out your reason. The big “WHY” behind your purchase will help guide you throughout the process.
Pride of Ownership
Home owners take pride in their homes. They maintain them better than rentals. They mow their lawns, landscape their flowerbeds, and keep their homes looking nice. Do you like living next door to the guy with his car on blocks?
Nice Place to Live
The monthly payment on a mortgage in the OKC Metro area is typically less than rental payments for comparable properties. This means that you can either save money, or get a much nicer place to live for the same money.
Have you ever lived in a rental property and the owner decides to sell it? You never know when you will be forced to move. By buying a home, you are in control of where you live and when you move.
Homes generally appreciate. There are good years and bad years, but overall homes can appreciate with or above the market. This is a great way to build wealth or retirement.
Mortgage Interest Deductions
Did you know that the interest you pay on a mortgage can be used as a tax deduction? That can be half of your monthly payment. This can save you thousands on your taxes.
Capital Gain Exclusion
How do you like tax free money? If you live in your home 2 consecutive years out of the last 5, when you sell any money you make on the property is not subject to any tax (up to $250,000 for single people, and $500,000 for married people).
Every month when you make your payment part of that payment goes towards paying down the balance on your home. It doesn't seem like much, but in 10, 15, or 30 years you could have a house paid for free and clear.
Now that you have all that equity, what's it good for? Once you have some equity in your house, you can always pull some out for anything you would like. Renovations, a new pool....oh the possibilities.
Did you know that typically, new construction prices rise 3 to 4 times faster than resales? In our market, new home sales did not drop as drastically as they did nationally (all data was pulled from MLSOK). However, when our market dropped, our new home prices stayed relatively stable - and now they are going up. WHY?
There are four major factors that influence new home prices:
- Upward pressure (demand)
- Labor Prices
- Commodity Prices (materials, concrete, lumber, etc.)
- Interest rates
As demand dropped in recession, it removed one of the four key factors that impact prices. The other three factors were enough to keep prices relatively stable, so when demand came back prices started to rise again. We expect the prices to continue to go up, and they go up faster than most current homes are appreciating. What does that mean to you? If you are wanting to buy new construction and have a home to sell, over the course of both transactions the longer you wait the more expensive it will be to buy a new home.
Stay tuned for Part 2 - Financing
All data and charts are based on data from MLSOK. Believed to be accurate but not guaranteed.