|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.
|First Time Home Buyer - Can we Talk?
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."
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
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
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
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
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
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.
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.
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
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.
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
In the market for a new home or a second
home? Call me and I will point you in the right
|text or call
(913) 731 6600
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
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
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-
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
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
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.
|Kansas Real Estate LLC - Hannes Poetter - President