Real NEastate: Rhawnhurst home less than rental

Q: My friend is buying a house in Rhawnhurst next week. He is only putting $5,000 down, and is telling me that he is going to be paying less now he’s paying in rent. And then he’s getting $8,000 back in his taxes, so it’s like he’s getting paid to move. How is that possible? And can I do it too?

A: Owning a home sometimes can be cheaper than rent in some areas of the Northeast, so it’s quite possible, especially with the interest rates so low. It is one of the few legal tax shelters available. You can deduct interest payments, as well as property tax payments from your income tax. You can also deduct points paid for your home loan as well.

Maybe you can do it, too. It depends on your financial situation.

First, your credit has to be good, and you have to have a good enough income and job history to qualify for a mortgage. The smartest thing for you to do is to contact a mortgage professional and get an individual analysis of your mortgage options.

You are going to need some money for a down payment. The amount of down payment necessary depends upon the kind of loan you get. FHA loans can be had for as little as 3.5 percent down.

If your funds are low, you may be able to negotiate with the seller to help pay your closing costs. Relatives may also be a good source of funds for a down payment. Maybe that’s how your friend is only putting $5,000 down.

Finally, if you want to “get paid to move” too and get up to $8,000 back in your taxes, you must jump on the Homebuyer Tax Credit now and get into a contract by April 30, 2010.

Stacey McCarthy is a real estate agent with the McCarthy Group of Keller Williams. Her Real NEastate column appears every Wednesday on NEastPhilly.com. See others here. Read other NEast Philly columns here.