Been thinking about buying a home? Well, maybe you should put it on your Christmas list.
Although the holidays tend to be an off-season for the real estate and mortgage industries, there are some good reasons to buy a home toward the end of the year. Although if you’re going to do it, you need to get cracking now.
For one thing, the fact that the holiday season is a slow one for the housing market works in your favor. There are fewer people shopping for a home at that time, so you have less competition bidding for the good properties.
Good deals may be available
The asking price on some homes may have been reduced in price after they did not sell during the busier fall and late summer seasons. In fact, home prices are typically at their lowest of the year in December, although broader trends must still be taken into account.
People showing their homes at that time of year are often hopeful of getting a sale nailed down by year’s end, so they may be more amenable to negotiation. The fact that it’s the holiday season also tends to put people in a more generous mood as well.
Real estate agents, lenders looking for business
It’s also a slow time for many real estate agents, who may be keen for any business they can find and more available to focus on you as a customer. The fact that business is slow for both real estate agents and mortgage lenders during the holiday season often means you can get your transactions processed more quickly than at other times of year, because they’ve got fewer deals to handle.
Lenders may also be more willing to shave a few points off mortgage offer in order to make a deal, both because business is slow and also because they may want to get the loan on their books before year’s end.
Tax considerations
Closing on a home before the end of the year also means you can deduct certain settlement costs on your taxes for that year. These include any pro-rated property taxes and prepaid mortgage interest paid at closing. Since discount points are a form of prepaid interest, you can deduct those as well for the year in which you bought the home, but only on a home purchase mortgage — tax deductions for points paid for refinancing a mortgage must be amortized over the life of the loan.
This brings up a potential downside to buying a home late in the year, which you also need to be aware of. For many homeowners, mortgage interest is what allows them to itemize deductions on their tax returns, rather than just paying the standard deduction. This means they can start including smaller deductions they may not have been able to get credit for in the past, such as for certain work-related expenses, home improvements or charitable donations.
Possible downsides
However, if you’re not itemizing deductions already, buying a home late in the year may mean that you won’t pay enough in interest to be able to itemize deductions on your next tax return — including those other settlement costs you otherwise might have been able to deduct. Remember, if your total deductions don’t add up to at least your standard deduction ($5,950 for a single taxpayer, $8,700 for a head of household or $11,900 for a couple filing jointly for 2012), it’s not worth itemizing.
There can also be a few other downsides to buying a home over the holidays. Real estate agents may be on vacation, since it’s already a slow time for them. There may be fewer open houses where you can visit homes for sale. Your own schedule may be crowded with your own holiday preparations and activities.
That being said, there are still some pretty good deals to be had by buying a home over the holidays. If the timing works for you, a new home can make a very nice Christmas present for you and your family. Contact the Hutchinson, MN real estate experts at Hometown Realty for more information if you are thinking about buying or selling a home.
Source: Kirk Haverkamp – MortgageLoan.com