
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SUNDAY, March 22, 1992                   TAG: 9203240076
SECTION: TODAY'S HOME                    PAGE: TH-2   EDITION: METRO 
SOURCE: By SARAH COX
DATELINE:                                 LENGTH: Long

HOME OF HER OWN SAVES RENT, TAXES FOR SINGLE MOM

Take the case of high school teacher and area real estate agent Judy Webber. As a single mother of a daughter going to college, as the sole supporter of that child and the sole contributor to her tuition, as a working woman faced with the complexities and challenges of this none-too-bright economy, one might conclude that buying a home was not in the cards for Webber.

Not so, said she.

"I bought it for the tax advantage," she said of her new home.

In the summer of 1988 when Webber bought her duplex - the first home she had owned alone - she figured that a duplex would help carry the mortgage, allow her to purchase in a neighborhood (South Roanoke) where her daughter's friends lived and give her tremendous tax deductions.

Since half the home is rental property, any maintenance done to the exterior is tax deductible, and any work on the interior of the rental side is also a tax write-off. In addition, Webber said that any lawn care or maintenance equipment could be written off.

Now, almost four years after she bought the duplex, it has been assessed at $20,000 more than its original purchase price.

"Had I been renting all those years, could I have set aside $20,000? No."

In addition to this direct savings advantage, Webber, as a homeowner, has been able to consolidate charge bills accumulated from her daughter's years in college into a home equity loan. This enables her to write off the interest on the loan - which is considerably lower, at 10 percent, than an average credit card interest of 18 percent.

Some real estate agents will answer the question, "Can people afford to buy in this economy?" with, "How can they not afford to?"

The first-time home buyer is faced with considerably more than those who have equity built up in mortgage payments. The latter have already accumulated the down payment and more. The former must be prepared to come up with something - the minimum depends upon the type of loan and the selling price of the house.

Take a $50,000 condominium, which could be a good starting point for first-time homeowners, as an example. The average down payment could be as low as $2,500, said Diana Crabtree of Mastin, Kirkland, Bolling Realtors. A home selling for $75,000 might demand about $4,125 in down payment and settlement costs.

One answer is to start small - "Everybody has to have a starting point and build up equity," said Beth Wilson of Owens and Company - and buy up.

Another alternative is to look into a veterans loan, which requires no down payment if you qualify.

Of course, you could always just wait until you save the thousands of dollars, in the meantime losing money in taxes and rent.

Or, you could appeal to the better nature of parents and generous relatives, in the form of the Uniform Gift to Minors Act (this allows each parent to give $10,000 per year, tax-free, to each child; it's a good way to dispose of the inheritance before taxes kick in).

Once the down payment is considered, you have now entered the forest of no return and must answer the following: Which one of the many conventional loans, federal or state-subsidized programs do you take advantage of? How do you figure out what you can afford and what you shouldn't even consider?

Here's where the agent in shining armor comes in: He or she is empowered to help you calculate the debt ratio, based upon your gross monthly income, a total of all your debts and which loan you can qualify for.

The state and federal government have awakened just in time to rouse a slumbering economy with various programs designed to induce new construction and first-time home buyers.

An example is the Operation Bootstrap Program, a Virginia Housing Development Authority program which began early this year. This bond-funded loan, offering low interest-rate mortgages, is specifically designed for lower-income families and sets a limit on gross income, net worth and sales prices of homes. According to the VHDA, about five times more low- and moderate-income families are obtaining home loans through this program than at the end of 1991.

Another state program, the Virginia Rural Homeownership Opportunity Program, also enables lower-income families to purchase new homes at fixed interest rates as low at 4.75 percent.

Both of these loan programs have opened up the housing market to an entirely new income bracket previously closed to those unable to qualify for loans.

But, in addition to all the above considerations, probably the one which is making the most impact is the interest rates, which Dr. Clarence Rose, director of Radford University's MBA program, said are the lowest in the last 18 years. "That's a whole lot of incentive for buyers now," said Crabtree.

Along this same track, Rose wrote in the "American Association of Individual Investors Journal" (February 1992) that mortgage interest rates have also "magnified the potential refinancing opportunities available to existing homeowners and real estate investors. As mortgage interest rates continue to decline to levels well below the contractual rates on existing outstanding mortgages, the homeowners and real estate investors holding these existing mortgages will have increasing opportunities for financial gains through mortgage refinancing."

The statistics back up the the optimistic mood of real estate agents. The Roanoke Valley Association of Realtors report that January 1992 sales of 245 homes are 109 percent over January 1991, which reported 117 home sales. February 1992 sales of 286 reflected a 61 percent increase over February 1991, which had 178 home sales.

According to Laura Benjamin of the Roanoke Valley Association of Realtors, the February 1992 figures are the highest in 18 months, since July 1990.

by CNB