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5 Basic Principles to Buy Houses in the U.S.

指南内容

1 5 Basic Principles

2 3 Expenditure Laws

2 10 Steps To Buy a

house

3 Question & Answer

3 Property Tax

4 装修房屋抵税案例

06/2013

Fidelity Guide

The first thing to be considered when new immigrant investors arrive to the United States is finding a house and settle down. The saying 'When in Rome, do as the Romans do', im-plies that we have to choose the right house for us from U.S citizens’ perspectives. Comparing the house price in China, buying a house is clearly better than renting in the United States. The United States also has stabilization policies, a strong legal system, a mature mar-ket, the a stable appreciation, and an active rental market. For long-term investment, in-vesting in real estate is low risk and high re-turn. Therefore, Fidelity Accountant recom-mend that new immigrants investors in the United States to buy a house. Buyers need to grasp the following five basic principles are to guarantee high return with low risk.

1st principle : Look local employment

The situation of local employment is the most important factor that influence the price of local real estate. If the employment situation in the city is poor, pop-ulation exodus, real estate is difficult to appreciate or will even depreciation. In the United States, we must avoid to buy homes in the rust belt area. The most typical rust belt region famous city is the Motor City - Detroit.

2nd principle : Look local education

In the United States, the primary and second-ary level of education do not much differ from states to states, so new immigrant investors should focus on university. If a city has several world-famous universities, the real estate there has great potential to appreciate. Real estate around universities will even has greater poten-

tial. The most typical example is Silicon Valley, which is located near Stanford University. Stu-dents and professors of Stanford University estab-lished entrepreneurial R & D base in Silicon Valley, which became the world's electronics and computer and Internet research and develop-ment center. Thus, houses around there become one of the most expensive real estate.

3rd principle : Look local population

American government advocates equality and human rights, but there are still differences be-tween different classes and ethnics in reality. Lawyers, doctors, accountants, professors and business owners are not living in the same com-munity as blue-collar. The houses in the blue-collar community residence are same as luxury villas in China. However, real estate in this kind of communities is not guaranteed to appreciate. Prices of houses may decrease a lot once criminal cases occurred in the community.

4th principle : Choose detached houses

In the U.S., new immigrant investors should choose independent houses. Chinese people call it villas, while Americans call it ‘House’. Compar-ing detached houses or semi-detached villas with townhouses or apartments, detached houses or semi-detached villas will create a greater increase in its value. Thus detached houses is the ideal choice for new immigrant investors.

5th principle : Look housing tenure

In the U.S. you can buy a property or residence houses. Property owners of houses can be traded and rented freely; while the owner of residence houses only has ten years of ownership, rental property can only through the neighborhood. Thus, the price is much more cheaper than a house property.

FIDELITY TAXES GUIDE FOR NEW IMMIGRANT INVESTORS II

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Page 2 Fidelity Guide

10 Steps to Buy a House

Buying a house is considered as an investment for American, so they will not have a house and let himself in order to become slaves, families purchase homes, pay more attention to consider their economic capacity and the debt burden on the normal lives. In general, we will comply with the three expenditure laws below when purchasing a house:

I. 28％ of the Golden Rule

There is a “28% golden rule” to determine whether you can afford to buy a house, which is the family's monthly mortgage payment amount does not exceed 28% of monthly gross income. For example, an annual income of $80,000 for a family, then the monthly mortgage loans should not be more than $1,866.

II. 32％ Law

“32% Law” means that monthly expenditure on hous-ing should not exceed 32% of the family monthly income. The expenditure on housing includes housing loans, home insurance, community fees and real estate taxes. For exam-ple, a $80,000 annual income a family, then their monthly

expenditure on housing should not be more than $2,133.

III. 40% Law

“40% Law” means that monthly debt payment of a family should not exceed 40% of monthly income. Besides house loans, credit card loans, car loans, student loans and other educational ex-penses are included in the monthly debt payment. For exam-ple, a $ 80,000 annual income family pay the debts should not more than $2,664. If the family has pay $ 2,133 per month for housing loans, then other debt can not be more than $531. If additional debt is too high, they have to re-duce the amount of the payment for housing loans, then you may have to consider to buy a cheaper house.

The three expenditure laws listed above are the condi-

tions for Bank of America to consider the financial situation for the housing loan applicants. If you exceed these stand-ards too much, the bank will not approve the applicant's home loan requirement.

Many people want to buy houses in the United States, but they do not know where to start. In fact, it is only 10 short steps by taking the essence from the messy steps: 1. Ready to buy a house - buy a house is one of the big-gest lifetime investment, so you have to be fully prepared to do so and always think twice. 2. Choose an broker - you must find a broker to buy a house. Brokers have enough experience and information to understand the market, and also provides the service is free. 3. Apply for loans - after chose a broker, he will let you fill out a financial survey. The broker will recommend some loan lending companies to you according to your financial situation. 4, The election house - the broker will search the house automatically according to your requirements. If you find a satisfying house, then you can drive yourself to see the surrounding environment. 5. Signing a contract - after selected the satisfactory

house, the brokers will conduct a market analysis to help you determine the asking price, and ready to offer you a contract. 6. Check the house - besides from housing inspection, you have to do some radon inspection and termite inspection. In the contract offer, you can attach these three additional checks terms. 7. Apply for loans - After you applied loans to the lending company or bank, the loan company or bank will call the appraiser to apprise the house. 8. Buy insurance - unless you use cash to buy the house, loan company will let you buy insurance before transferring the house to you. 9. Transfer the house—ESCROW company will check the ownership history before transferring the house. You have to bring valid ID (eg driver's license), homeowners insurance policies, and bank cash check when doing the transfer. 10. Move into the house - The final step is to transfer the keys to the you from the seller, and then you can move.

3 Major Expenditure Laws for House Buyers

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Frequently Asked Questions

Fidelity Guide Page 3

Question：How to determine profit of selling a house ?

Answer：

Profit = Adjusted Sale Price – Adjusted Cost Basis

Adjusted Cost Basis = Purchase Price – (Sales Commission+Legal Fee+Other)

Adjusted Selling Price = Selling Price – Cost of Capital Improvement

*Attention：IRS requests house sellers to report the detailed profit calcula-

tion to them。IRS also strictly check the detail of the expenditure for house improvement, so you must keep all the receipt for house improvement.

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Question: What is real estate tax or property tax ?

Answer： Property tax is a tax that the owner of the house must to pay

to the state government.

Question: Does property tax rate change as the price of house

change?

Answer: Yes. Generally, the higher the price, the higher the proper-ty tax.

Question: Can I use property tax as a deduction for Federal income

taxes？

Answer： Yes. Property tax is included in the deduction, which is

also can be used as deduction on state income taxes.

Question: How to check Property tax ?

Answer： The seller would tell you the property tax for these years,

which is listed in the MLS. If you do not find it in the

MLS, you can ask your lawyer to check the property tax via municipal tax department.

Question：How does the American Government influence

real estate ?

Answer：

They plan the usage, building type, height, and density for each piece of land. Real estate manager s issue license to regulate the real estate market. The government also collect taxes to protect the public interest.

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第4页 龙诚指南

问：如果用重新贷款时额来座房屋装修是否可抵更多的税？

答：是的。如果您付了点数同时您又用重新贷款所得来做房屋

装修(Home Improvement)，你可在当年报税时多些抵税。

例如

这样，你可在今年的报税中抵税$500, 每年还可抵税$100。

Case—Use Home Improvement as tax

数额 百分比

今年贷款(15年期) $100,000 100%

已付款 $2,000 2%

装修厨房(贷款所得中) $25,000 25%

已付款 $2,000 100%

抵税(今年) $500 25%

剩余=已付款-抵税(今年) $1,500

每年还可以抵税 = 剩余/年期 $100

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The more you make, the more IRS

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The minimum wage will in-crease to $9.19 per hour in Washington State

Expect personal and dependent exemption to increase

There will be an increase in tax-bracket thresholds

Seattle Sick & Safe Time

Medicare goes up 0.9% for high income earners getting more than $200,000 for singles and $250,000 for married cou-ples filing jointly.

A Sneak-Peak of 2013 Fidelity Accounting Tax Service