Press Room

Home ownership: Are you ready?

Money Management

Monthly financial advice
from the MACPA

For release: November 2009

The purchase of a first home is an exciting time in anyone’s life. It’s also a large financial undertaking, a fact that leaves many people wondering whether they’re prepared for this big step.

The Maryland Association of CPAs suggests you answer these questions to help you decide if the time is right for you.

What’s the hurry?

Owning your own home is a tempting prospect, but make sure that you are not hurried into making a decision. Home sales have generally been slow for the past year, which makes it less likely a house you like will be bought overnight.

Even when the market is hot, though, it’s best to look around in different neighborhoods and at various types of homes to see what you can afford and to be sure you have all the information you need.

How much will it really cost me?

You are probably aware that you will need a down payment, usually about 20 percent of the home’s purchase price, to buy a home and that you will then make monthly payments on a mortgage that covers the rest of the total purchase price.

Those aren’t the only costs of home ownership, however. You will likely also have to make monthly payments for local property taxes, utilities and home owners’ insurance, as well as cover one-time upfront costs for moving and any furniture or appliances you need. Consider also the price of any renovation or repairs the house may need, and for general upkeep of the home and property around it.

How do taxes come into it?

There are many potential tax deductions associated with home ownership that you should be aware of as you plan your purchase.
For example, many people are able to deduct the interest they pay on their home mortgage loan. In the early years of a mortgage, that interest is the lion’s share of your monthly payment, so this potential deduction is a good thing. That’s because when you take deductions, they lower your taxable income and, as a result, you end up paying fewer taxes overall. In many cases the points you pay on a mortgage loan may also be deductible.

And, while real estate taxes are one of the hidden costs you should be aware of, they are also deductible. All of these deductions added together could mean a little more money in your pocket each month.

What about the first-time homebuyer credit?

If you have purchased a home this year or plan to do so before Dec. 1 of 2009, you may qualify for this tax credit. Using the credit for a home purchased in 2009, you are allowed to claim 10 percent of your purchase price, up to $8,000, or $4,000 for married people filing separately, as long as you meet certain income limits (slightly different rules apply for homes bought in 2008).

Under revised rules, those who purchase in 2009 don’t have to repay the credit if you don’t sell your home within three years of purchase. The credit can be used for the purchase of a principal residence in the United States if the buyer or his or her spouse has not owned a principal residence at any point during the three years before the title closing date. (The credit does not qualify for vacation homes or rental properties, however.)

If you think you might qualify, you can find out more information about this credit in Internal Revenue Service Form 5405 or by speaking to your local CPA.

Your CPA can help

Your local CPA can help you determine how much house you can afford and what your monthly or one-time costs will be, as well as the tax effect of a home purchase. Turn to him or her with all your financial questions.

Only CPAs are equipped to address your full range of financial needs with integrity and insight. In Maryland, CPAs must pass a rigorous two-day examination, adhere to strict ethical and professional standards, and, beyond college, complete 80 hours of continuing education every two years to be certified by the state — accountants do not.

Your doctor is certified; your lawyer is certified. Make sure your accountant is a certified public accountant.

For CPA referrals in your area, contact the MACPA at (410) 296-6250 or click here.

The Maryland Association of Certified Public Accountants (MACPA) is a statewide professional association that provides leadership, information and services for its nearly 10,000 CPA members, who are employed in private practice, industry, government and education. CPAs are business and financial professionals who have passed a rigorous two-day examination in order to be licensed by the state. CPAs are committed to protecting the public interest, and must adhere to stringent ethical and professional standards and continuing professional education requirements.

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