Annapolis Real Estate – by Charles Kraus

1. Interest Rates –Interest rates are near historic lows. Low interest rates increase the affordability of housing by allowing a qualified buyer to purchase a higher price home or by making the monthly payment lower. 
2. Tax deductions – the United States tax code allows an interest and property tax deduction for homeowner/taxpayers.
3. Affordability Index – In 1975 the Housing Affordability Index was established and right now the affordability rating is its best since it started in 1975. The affordability index looks at, among other things, interest rates, housing prices and income levels in determining affordability.
4. Inventory level – In a seller’s market, buyers compete for fewer listings and often pay more and get less. When inventory levels are high, which is the case right now, buyers have better choice, get a better price and terms when buying. 
5. Stability – Owning a home allows the owner the freedom of making changes to their home; the ability to manage the monthly payments and the stability of owning an asset.
6. Closing Help – FHA, VA, and Conventional loan programs allow the seller to contribute towards financing concessions for the buyer. The seller’s contribution can be used for buyer’s closing costs, pre-paid items or interest rate buy down.
7. FHA loan changes – Currently, a FHA allows a seller to 6% of the sales price in financing concessions, however the amount will be reduced to 3% later this year; the date has not been announced yet. The annual MIP for FHA loans may also be going up this year and that will increase the buyer’s monthly payment. Buyers who buy now will pay the current lower fees. 
8. Financial Planning – a homeowner can borrow up to $100,000 above their acquisition debt and deduct the interest regardless of what purpose the money is used. This is a great opportunity to consolidate debt at a lower interest rate and be able to make the interest deductible that otherwise may not have been.
9. Tax Advantage – A capital gain exclusion allows qualified homeowners to make a profit on their home without having to pay tax on the gain. Check with your tax advisor for current details.
10. Financial Advantage – Home owners can borrow against the equity in their home without incurring taxes on the transaction. Additionally, borrowing against home equity is not capital gains income. 

Most economists are predicting that Interest rates are going up in the near future. Although the home buyer tax credit helped absorb some of the housing inventory and increase sales, other economic forces may in the short term cause interest rates to rise. Additionally, inflation may soon begin to cause increases in housing prices.

Recognizing the current buying conditions and buying a home now will prove to be a great move for those taking advantage of the historic high affordability that exists right NOW!

AFFORDABLE BUYING OPPORTUNITY – WATER PRIVILEGED

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