HOME ZONE

 

with Andrea Hoffmann

 

Answers to your home and real estate questions.

 

Q: I’m ready to buy my first home. Where should I start?

 

A: Nice job! That’s a big, exciting milestone. Don’t dial up your Realtor just yet. Your first step is to get a pre-approval from a lender, which will only take a few days once they get all your information. If you haven’t been through it before, the process can feel a bit invasive. To prepare, find your W-2 and last two pay stubs. Also, download statements from the bank or brokerage accounts that hold your down payment funds. Remember, a pre-approval is more in-depth than a pre-qualification: it demonstrates your seriousness to a seller. Your real estate agent will include your pre-approval letter with any offer you present. Happy hunting!

 

Q: I want to help my adult son with a down payment. Are there rules around giving him money?

 

A: Lucky him! Families in a strong financial position often help the next generation with a home purchase. Before doing anything, please seek financial advice from a licensed professional. That being said, the IRS Gift Tax Exclusion for 2022 is $16,000. This means you and your spouse can each give anyone you know up to $16,000 (or $32,000 combined) before triggering a taxable event. In the case of a home purchase, you may need to gift more––and you can do that without current tax implications as long as you file a gift tax return to help the IRS keep track. A gift in excess of the annual $16,000 limit will count against your Lifetime Gift Tax Exclusion (currently $12.06 million per person; $24.12 million for a married couple). The recipient of your gift will need to provide a gift letter to their lender showing where the money came from.  

 

Q: What’s the relationship between mortgage rates and the real estate market?

 

A: Mortgage rates dictate what buyers will be required to repay on a monthly basis. Lower rates usually mean people can afford the monthly payment of a higher priced home. When rates rise,their buying power erodes. To illustrate the difference of one percentage point, a 30-year fixed rate mortgage of $700,000 at 4% would cost a buyer $3,341.91 per month. At 5%, the payment would go to $3,757.75––a $415 increase per month. Right now, rates are on the rise, predicted to approach 5% by year end. If this happens, it could potentially result in deflating home sale prices or a shrinking pool of willing buyers. If you’re interested in selling at the top of a competitive market, now may be a smart time to list.

 

Have your own question featured in The Home Zone! Email Andrea.HomeZone@gmail.com. This is a paid advertisement. 

Andrea Hoffmann is a licensed Realtor on The Stan Kay Team at Compass, 

1200 Morris Turnpike, Short Hills, NJ 07078. M: 917.714.1369; O: 973.310.6816

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