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Ugh...house buying questions...

December 11th, 2008 at 07:46 pm

MM-Congratulations!

I am looking for advice now…I live in California, near Sacramento, an area that has been hit with this whole mortgage thing and will continue to be affected because of the bad loans made into 2006.
I walked through the house I want to buy last Friday night. It is perfect and everything I said I wanted 5 years ago when I was dreaming (2 bedrooms, 2 bathrooms, 2 car garage, gas range to cook on, no large yard to upkeep (preferred a town house like patio with greenery)) just everything perfect. It is in a gated community (although the gate has been open each time I drove by.) The house even has an east facing master bedroom like I wanted. HOA is $115 a month.

Please do not tell me to keep the emotion out of it, there is no emotion as my line of thinking is either I get it or I don’t. This is the house plan I want but if it is not this house—that is ok.

The bank (it is a foreclosure) is asking 250k. Out of my price range but as they foreclosed on the house for 195k, what is a reasonable offer to make? They have dropped the price 10k since it went on the market Sept. 25th. I really didn’t want to go over 200 but might have to to buy this house. It is in a good neighborhood, nice homes less than 8 years old, they are zero lot lines homes so no large yard to up keep just a stamped concrete patio type with plant containers and a small tree and green zone. What sounds like a good offer? Other properties in the area that are the same floor plan as the one I like are asking around 270k.

(270K for a 2/2/2 with no yard? Are you kidding me??)

Anyway I was approved for a mortgage at 5.3% (and am hoping the rates continue to drop-4.5% would be fantastic!)

I also have to wait and see what happens with the state as I work for them and they are seriously in trouble financially. The latest is up to a 10% reduction in workforce (13k positions gone or open positions not getting filled) AND having state employees take somewhere between 5% and 10% reduction in salary. If they did that, there goes my house dreams.

What I cannot figure out is where the withholding should be to equal out at the end of the year. The whole deduction of mortgage interest thing confuses me. Based upon my current withholdings, what does it mean if you paid 10k in federal taxes in 2008 and paid 12k in home mortgage interest? How much would you get to deduct from your federal taxes, a one for one exchange or a percentage of what you paid interest wise on a mortgage? I know you can write off property taxes too, anything else?

MM-do you do any personal counseling? Since your in the area can I hire your company for my taxes this year? Smile

I bake a good chocolate chip cookie if that helps…

6 Responses to “Ugh...house buying questions...”

  1. Jane Says:
    1229026084

    I'll take a stab at your tax question. When you itemize deductions (claim mortgage interest, property tax, etc.) you add up all your allowable items on a Schedule A and then subtract the standard deduction from that. For 2008 the standard was single: $5,450 and married filing jointly: $10,900. Assuming you have, say, $12,000 in qualifying deductibles and are single, you'd subtract: $12,000-$5,450=$6,550. This is the amount you can deduct from your adjusted gross income, and becomes the amount you pay taxes on. If you are in, say, the 15% bracket, then the additional $6,550 you've itemized over the standard deduction will save you an actual $982.50 on your taxes. This is a simplification and I'm no accountant so someone will correct me if I got it wrong. But you do want to be careful not to get the notion that the interest paid on a mortgage saves you equal dollars on your taxes. It's a deduction, not a credit. Hope this helps!

  2. Jane Says:
    1229026395

    Just read that over and got something wrong and don't want to mislead: you can deduct the entire amount of your schedule A stuff, not just what is in excess of the standard (doh) but I was trying to show what the difference would be if you didn't itemize, which is you are limited to the $5,450 standard. In my example above I meant to show the additional savings in taxes with the $12,000 deductions, not to say that you have to subtract the standard deduction, I should have said it's either/or. I think I've now succeeded in confusing myself! Sorry.

  3. Ima saver Says:
    1229026909

    What is the square footage of the house?

  4. monkeymama Says:
    1229028037

    As for as the foreclosure, who knows. We have a lot in our neighborhood and one bank held out for YEARS with some insane price, and eventually sold WAY under market value is last minute desperation. So basically, depends on the bank. Some have been reasonable and took what they could get. MOST have held out and had an empty house for a year or 2.

    As far as taxes - we are way more (Expensive) than you need AND we don't take on any new clients anyway. Too swamped. If you would be willing to take me out to lunch it would be much cheaper and I would answer all your questions. (I do often for my more broke acquaintances who are just FINE with turbo tax but maybe have a lot of tax questions).

    Big Grin
    It would be my first SA meetup...

  5. monkeymama Says:
    1229029008

    P.S. just e-mail me from here.

  6. scfr Says:
    1229103651

    If you are wading in to foreclosure territory, I'd strongly recommend working with a realtor, specifically one with experience in foreclosures. (And no - I'm not a realtor myself.) They should be able to give you some idea of how low you can go on an offer.

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