Buyers: Take the Leap of Faith & Reap These Benefits

A veteran buyer was looking at looking at some nice homes in Hollister.  There seemed to be a disconnect between their enthusiasm for the homes and making the comment to buy one of them.  It wasn’t that they didn’t qualify.  I had already pre-approved them for much more than they were looking at.  As we talked the light bulb came on!  The transition from their comfortable rent to a significantly higher payment was a quantum leap for them and it was hard to swallow – until…….

I sat them down and shared what many homeowners have learned over the years.  Your accountant can tell you what your new tax liability will be if you buy that tempting home.  In most cases the amount  you will be required to pay in income tax will DROP because of the larger amount paid toward interest and taxes.  Some of us have figured that it is better to reduce our income tax withholding from our paychecks each payday rather than get our refund in a lump sum (with no earned interest) at the end of the year. 

Here is their example:  Sales Price: $650,000; New VA Loan: $591,800; Total Principal, Interest, Taxes and Insurance: $4,210; Income Tax Deduction at a 26% tax bracket: $898/mth; Net “House Payment” after income tax deduction: $3,312. 

Same home, same terms but a house payment that feels like $3,312.  That made the difference.  They will simply need to take a new W4 form to their employers and have them reduce their withholdings by $898 so they will have that much more to take-home each month.  While they still make the actual payment of $4,210 the additional take-home pay makes the leap in house payment more palitable. 

They will break even at the end of the year: they won’t owe much income tax nor will they get much of a refund.  HOWEVER, they will have received their refund during the year to help offset their new, higher payment. 

Everybody was happy and moved forward with what they really wanted to do. 

I love solving problems for people!  Have you done this yet?

5 thoughts on “Buyers: Take the Leap of Faith & Reap These Benefits”

  1. Sean Meyers

    Thank you Mike. We needed that nudge. Timely information.

  2. Thanks for your comment Sean. Share this with your friends. Not many new buyers know about it.
    Mike

  3. Shanna Opdyke

    Love that picture! It caught my attention. Thank you for your encouragement. We’ll need to hurry so we don’t miss that $8,000 gift from the Fed.

  4. Mike Walters

    Hello Shanna,

    Let me know if we can help you capture that Fed. Tax Credit of $8,000. You’ve only got roughly 90 days before it expires.

    Mike

  5. Michael Walters

    Jose,
    You will need a new W4 form for each of your employers. You can get them on line, through me or your accountant. Your accountant can tell you how much less you will need to withhold from your paycheck(s).

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