Purchasing a New Home

Assume for this CheckPoint that purchasing a new home is a major decision requiring a substantial financial outlay where the wrong decision has long-term financial consequences.

Submit a 250- to 300-word response addressing the following points:

Purchasing a new home is a big decision and should not be entered into lightly and should be given a lot of thought. The marginal benefits and the marginal costs associated with the decision to buy a home can be altered by the state of the economy. Some things can be affected by the actions of the government’s efforts to strengthen economic conditions.   An example could be as we talked about in the economic readings; when banks are allowed to lower their reserves, this will make more money available for investment groups as well as potential home buyers who need a loan.   This would more than likely result in a decrease in interest rates and strongly encourage borrowers to shop for a loan to buy a new home.

If you remove the tax deduction for mortgage interest this can remove one of the strongest incentives some have when purchasing a home.   A lot of people will not enter into a long contract that does not provide any sort of tax break?   Most adults young and old would find it hard in our current economy to put themselves in a position to have a mortgage they may not be able to pay when there is no tax break.

When there are changes in federal income tax rates this factor could also affect my decision.   If taxes are high, I have less money earned due to taxes to spend on a mortgage payment. When taxes are low, then I would be more likely to consider making a large monetary commitment such as home ownership.