Here are the basic tax brackets for your taxable income:

There are two important things to know about your tax bracket: 

1. What does it cost you to spend money?
2. If something is tax deductible, what does it really costs you, and how much does the government pay?

To understand this better, let’s consider someone who is in the 25% Federal Tax bracket.  For a married couple filing together, this means their taxable income is between $70,700 and $142,700.  To spend money, you have to pay taxes first on your income earned – so in this bracket, you have to earn enough to pay 25% Income Tax, and still have enough left over to buy what you want. 

If this couple spends $1,000 a month on rent for an apartment, they need to earn 25% first to pay income taxes.  The way to calculate this is to divide $1,000 by (1- the tax rate, or 1-25%, or 0.75).  To pay $1,000 in Rent, this family needs to earn $1,333.  ($1,333 – 25% = $1,000).

Of course, that’s not the whole picture – you also have to pay:

• Social security tax – 4.2% for 2012, normally 6.2%
• Medicare tax – 1.45%
• State Income Tax - 7% to 7.75%  for North Carolina Residents

If you add these up, the family now has a total income tax burden of 25% + 4.2% + 1.45% + 7.75% = 38.40%!

In order to pay $1,000 in rent, you really have to earn ($1,000.00 X (1-38.40%) = $1,623.38.  OUCH!  But, to keep things simple, let’s just use the Federal and State income tax, which means you have to earn $1417 to have $1,000 left to pay rent.

This is the first key point to understand about Income Taxes – you have to earn enough to pay the tax man first, and still have enough left over to spend money on what you want to, or need to spend money on.

Now, what if we are looking at spending money on something that is tax deductible?  Two common examples are Mortgage Interest and Charitable Contributions.  If the family in the example own a home with a mortgage rather than paying rent, they won’t have to earn the income to pay income taxes on the mortgage interest. 

The math is a little more complex than a blog post allows, but the bottom line is that a family in the 25% federal tax bracket only needs to earn $1,108 to pay Federal and State taxes and have a $1,000 mortgage payment – a savings of $309 each month, or over $3,700 a year.

On a mortgage, Interest is generally tax deductible, so a family with a mortgage only needs to earn enough to pay taxes on the money that goes towards principal and not the interest payment.

The Income Tax code is designed to enourage some behaviors and discourage others.

For example, the income tax code encourages home ownership because you don’t pay income tax on mortgage interest, while it discourages renting as you have to pay income tax on all the income that goes towards a rent check. 

The second key point to know about your income tax bracket is how much things really cost – if you have to earn enough to pay taxes on some things and not others. You pay far different amounts for some items compared to others – like rent versus home ownership.

Currently, the tax code encourages home ownership by not charging income tax, or allowing you to deduct interest on mortgage interest and property taxes, and it discourages renting as the tax code forces you to pay tax on all of money you would earn before you write the rent check.

Bottom line – what to do about your tax brackets:

1. Know how much you need to earn in order to have money left over to spend!
2. Recognize the true cost of things – including whether something will be tax deductible or not, when you are making financial decisions, such as owning your home or renting an apartment.

There is a ton of information out there on “Why it is a great time to buy a home in Charlotte“, but that is a different question from, “Are YOU ready to buy a home?”

Overall, home prices are lower than they have been in several years, and interest rates remain at the lowest they’ve ever been so, it is a great time to buy a home. But, not everyone is ready – maybe you are.

Here are the key things to consider:

• Is your income steady? If you have been working in the same job, or same line of work for at least two years, your income should be reliable enough to handle a mortgage payment.
• Do you have a good record of paying your other bills on time?  Being on time with Student Loans, an Auto Loan, Rent, or credit card payments for at least the past year is a good indicator to both you and a Charlotte Mortgage Lender that your credit history makes you a good credit risk for a mortgage.
• Do you have any savings?  While there are a few options to get a mortgage with no down payment, it’s still a good idea to have some money in the bank after you buy your new Charlotte house for unexpected surprises.  You do NOT need to save 20% of the home price as a down payment, despite what many people are saying  – you may need 3.5% to 5% as a down payment, however.
• If you were to change jobs, or need a new job, would you likely stay in Charlotte, NC, or would you have to move to Alaska?  If you work in a field that has opportunities in Charlotte, then changing jobs in a few years isn’t a big deal.  However, if your career field is very specific and a job change also means a move, you might want to be really sure of the time you will stay at your current job.

Any Charlotte Mortgage lender is going to look at your Income, Savings, and Credit History when deciding to approve your mortgage application.  As someone who is considering buying a home in Charlotte, you should look at the same things.

Yes, it is a great time to buy a Charlotte Home – but, make sure you are ready to do so.  Buying a home when you are not ready to be a home owner can be a different kind of dream than the dream of owning your own home.

At Fairway Independent Mortgage, our Path 2 Buy Home Ownership Coaching service is a free plan we offer Charlotte renters to put them on the Path 2 Buy their first home.  If you would like more info about the Path2Buy, call us at 704-541-1172 and ask to speak to a Certified Path2Buy Coach.

For Charlotte Home Buyers and for people that are renting in Charlotte, the American Dream is still alive.  Contact a Certified Path 2 Buy Coach today to get started and re-kindle your American Dream.

 Charlotte renters, especially, should make this the year to buy their first home.  The combination of lower house prices, low mortgage interest rates and a stable job environment in Charlotte make this a great opportunity for those renters who have been waiting to buy their first Charlotte Home.

Click here to watch the video:

The CNN segment highlights two main reasons for buying a house in 2012:

1. Home Prices are forecasted to stabilise in 2012.
2. Interest Rates will remain in a low range throughout the early part of 2012.  In fact, recently the Federal Reserve Open Market Committee said they planned to keep short term rates low through late 2014.  This should keep mortgage interest rates, auto loan rates and credit card rates low as well.

At Fairway Independent Mortgage, we offer a free Home Ownership Coaching Program that will help renters overcome the 7.5 reasons why Renters are failing to make the decision to buy a home (even when they would be better off buying a home).  To learn more about the Path2Buy in Charlotte, watch this 9 minute video.

With our Path 2 Buy program, we have discovered the 7.5 reasons why Renters are failing to make the decision to buy a Charlotte House today.  Our Charlotte Path2Buy program is an educational system that discovers the obstacles to home ownership and creates a plan to overcome each obstacle.  There are only 7.5 obstacles to a Charlotte Renter that are potentially keeping them from buying a house.  What is stopping you?

Watch this short video for an overview of the Path2Buy for Charlotte Home Buyers:

After watching this video, the next step is to contact one of our Certified Path2Buy Coaches and schedule a free Path2Buy Home Ownership Coaching Session.  At this 45 minute session, you will review the 7.5 reasons and discover what is keeping you from fulfilling your dream of home ownership.

1. Visit www.optoutprescreen.com. When you visit the website, you will be asked to provide certain personal information, including your home telephone number,
   name, Social Security number, and date of birth. The information you provide is confidential, and will be used only to process your request to opt out. Don’t enter any personal information until you have checked for indicators that the
   site is secure – a lock icon on your browser or a web address that begins https.Opting out of prescreened offers does not affect your ability to apply buy a home in Charlotte or from refinancing the mortgage on your Charlotte house. Your opt out request will be processed within five days, but it may take up to 60 days before the prescreened offers stop coming. If you have a joint mortgage, both parties need to opt out to stop the prescreened offers.
2. Put your phone number on the federal government’s National Do Not Call Registry to reduce the telemarketing calls you get at home. To
   register your phone number or to get information about the registry, visit www.donotcall.gov. You will get
   fewer telemarketing calls within 31 days of registering your number. Your number stays on the registry for five years, until it is disconnected, or until you take it off the registry.That said, the FTC wants you to know that many companies use other tools to identify marketing prospects, and that the Do Not Call Registry won’t shield you from all telemarket­ers.  Even if you opt out of prescreened offers and put your number on the National Do Not Call Registry, you can expect some unsolicited offers.

The Credit Bureaus, Transunion, Equifax, and Experian, have decided to make a few more bucks by selling your information to marketing firms when your credit report is run.  This is known as a “Trigger Lead”.  Unscrupulous mortgage companies have been know to buy these trigger leads and then call Charlotte home buyers posing as mortgage lenders that were asked to take over your loan application.

If you get a random marketing call about refinancing your Charlotte Mortgage or buying a house in Charlotte, you might expect that a Credit Bureau put your name on their trigger lead list.  Using OptOutPreScreen.com and DoNotCall.com to keep this from happening.

For the best mortgage experience for Charlotte Home Buyers or Charlotte Home Owners looking to refinance, be sure to deal only with a local, dedicated, mortgage professional such as Fairway Independent Mortgage.

This segment on the Today Show has some truth to it.  Unfortunately, there are some un-truths that will keep people from making the best decision for themselves in 2012:

Key Points from this video:

• 1 in 3 cities have seen home prices hit bottom and start back up. Charlotte home prices, in the most recent Case Shiller report, showed a decline in October, but an increase from last March.
• “Banks are going out of their way not to lend money” – False – Banks simply follow the guidelines spelled out in advance by the FHA, VA, Fannie Mae and Freddie Mac. There are limits to credit scores, loan amounts, down payments and income, but these aren’t arbitrarily made up by loan officers.
• “You need a 720 credit score, minimum” – Ouch, wrong again – you can get a great mortgage rate with as little 3.5% down using an FHA loan, or 5% down with a conventional loan.
• “One in Two people commit to a deal who can’t close” – Maybe true, and maybe not – but totally preventable!  A Charlotte Home Buyer should look to get Approved, not just Pre-Qualified before writing an offer.
• Home Sellers are more willing to sell their home at today’s prices.  After years of hoping for higher home prices, sellers, and banks holding foreclosures, are recognizing that they are better off to sell the house at today’s market prices rather than waiting for a high offer that will never come.
• Mortgage Interest Rates are still historically low.  Last year at this time rates were almost a full percentage point higher than they are at the start of 2012.

Predictions:

1. We’ll still see a bunch of foreclosures – high unemployment and 3 years of falling house values will cause this.
2. low Mortgage Interest Rates will be in favor of buying a home.  Rates today save you $300 a month compared to just 3 years ago for the same sized home loan.
3. Lending guidelines will never get back to when a buyer didn’t need a job, down payment, or good credit.  But, with a pre-approval, a Charlotte Home Buyer doesn’t need to be surprised and ba

If buying a home is right for you in 2012 – a face to face meeting with a local Charlotte Mortgage Professional is the best place to start.  Learn where you are and what you need to do to get ready to buy a house in 2012.  Starting with your home loan will make your Charlotte home purchase an easy and stress-free process.

Simply lowering your mortgage interest rate may or may not be in your best interest.  There are two main factors to consider in order to make a great home loan decision:

1. Will you reduce the Total Cost of your home loan?
2. Will you recoup the closing costs of your home loan in a reasonable time?

It’s simple to say, “Hey, if I lower my payment by $100, I should refinance”.  However, if you save $100 a month, but extend your existing loan from 26 years remaining back out to 30 years, you will actually spend more on your Home Loan than if you never refinanced your home.

The Total Cost of a Home Loan is a key number to look at. The Total Cost is the sum of all the interest you will pay on a loan, plus the closing costs you would pay for a new home loan.

At Fairway Independent Mortgage in Charlotte, we try to make it easy for Charlotte Home Owners to decide if refinancing their home loan is the right thing to do.  The easy way to check is to use our Mortgage Calculators on this website.  The “How much will I save by refinancing my loan?” calculator gives you a quick look (takes less than a minute) at the total cost of a new mortgage loan compared to your current mortgage loan.

If this calculator shows you a worthwhile Total Savings and Monthly Savings, then give us a call and one of the Mortgage Planners will create a custom “Total Cost Analysis” for you that will show you how long it takes to recoup your closing costs and the Total Cost of a new Home Loan for your Charlotte Home.  We can be reached at 704-541-1172 or send us an email.

1. Home values are still dropping.  When you refinance your mortgage, your mortgage lender will most likely need to get an appraisal done on your house.  Homes with the most equity get the lowest interest rates.  If you refinance your Charlotte home now, or soon, you will get the highest appraised value and the best interest rate on your mortgage refinance.
2. An improving economy will cause mortgage interest rates to increase.  Mortgage interest rates tend to drop when the economy is slowing down, and interest rates go back up when the economy starts to pick up steam.  With 2012 being an election year, you can be sure that there will be more articles written about the improving economy.

In 2011, the best interest rates were available from August to November.  Even though rates have climbed ever so slightly in December, they will likely be the lowest during the early part of 2012.

Low interest rates, combined with the highest appraised value of your Charlotte home, mean it is better to refinance your Charlotte home now, rather than waiting any longer.

For iPad users, this link is the video in non-flash: goo.gl/qokUr