It’s Tax Time!
For many Americans, taxes are the last word we want to hear right now. Owing money to the government can be as stressful as having credit card debt. Did you know, that tax time can also impact the home buying process?
The first thing to know, when wanting to learn about purchases and taxes, is that all states are not created equal. Pennsylvania for instance, is one of the few states where taxes are paid in advance, vs arrears like much of the rest of the country.
But how does this effect the home buying process?
Well, those taxes can make for a more expensive difference, in Pennsylvania. Nick Edwards, Royal United Mortgage LLC’s Vice President of Operations had this to say about states which pay their taxes in advance “Here is the difference, let’s assume your annual taxes are $1000 and you buy your home on July 1st (exactly ½ through the year). In the state of Indiana the seller owes you $500 as a proration. In the state of PA you owe the seller $500 because they in essence pre-paid for the whole year.”
These taxes have to be paid before a home can close, and oftentimes these costs will find their way into the settlement services of the lender. Or, if a homeowner purchases, or refinances, their home in a state which pays taxes in advance, they’ll get lower closing costs.
To understand exactly how tax season effects your home loan, or refinance, the best resource for anyone is to look at the Closing Disclosure. This five page document provides the final details about the specific mortgage loan, and until that is received, things are still subject to change.
For anyone interested in purchasing a home, or refinancing their current one, contact an expert Loan Advisor, to ensure you know how taxes in your state factor into your financial decision.