9 Steps to BOOST your credit before you BUY!

The process of buying a home doesn’t just begin when you walk through the door of your first open house – it starts long before that. One of the first stops on the road to home ownership is figuring out your finances, and that includes understanding your credit, a critical piece of the buying puzzle.


Good credit often opens the door to success when it comes to buying a home, and, unfortunately, bad credit can close it. In recent years, the number of consumers who have a top score (800 or above) has increased due to the fact that more individuals have cut spending and paid down debt in response to the recession. And that’s good news considering that the new Qualified Mortgage Rules which came into effect in January 2014. The new rules have upped the scrutiny of mortgage applications and made qualifying for a loan much more challenging.


Whether your credit is in need of an overhaul or you’re looking to preserve your stellar score, now is the time to address your creditworthiness so you can position yourself to get the best mortgage at the best rate. Here are 9 steps to take to strengthen and solidify your credit score.



1. Get Your Hands On Your Credit Report – If you don’t have a current one, get your credit report now. You need to be aware that problems exist before you can solve them – and serious issues, and sometimes even minor ones, can take months to repair. There are a variety of ways to get your report, and you’re entitled to a free one from each of the three credit bureaus once a year under the FACT Act; just go to Annual Credit Report website to retrieve it.






2. Mistakes Happen – Get Them Fixed – Every year, a whopping 25% of people who get declined for a mortgage had errors in their credit report. (And by “errors,” I mean inaccuracies). When you spot them, it’s up to you to fix them. You can find step-by-step guides on how to file a claim on any of the credit bureau websites; your report itself will also have instructions. Follow them to a T, and keep a good record of your dispute, including copies of any documents you file with the bureaus. Once you make an initial claim, you should get a response within thirty to sixty days.




3. Stay Current – Pay your bills on time – It sounds like a no-brainer, but if you’re looking to increase those scores over time in a clear and steady upward climb, never miss a payment. Ever!







4. Pay Over The Bottom Line – Another credit building tip is to always make more than the minimum payments on your revolving credits each month. A history of minimum-only payments is not a positive indicator for anyone reviewing your credit report. Always pay more – even if it’s just a little bit. Not only will you be chipping away at your balances faster, but you’ll save money on the total amount of interest handed over to your bank.




5. Maintain Low Balances – Some say the best way to keep you score afloat is to avoid carrying a balance that’s over 50% of your limit on each card, so pay those debts down below that halfway mark as soon as possible.




6. Don’t Move It, Lose It – Pay off the debt on your existing card, don’t just move it to a new one. The credit card companies have caught on to consumers who try to reduce balances by shifting them back and forth between cards, and while they’ll still let you do it, they’ll charge you hefty fees. Incurring the extra cost is simply not worth the benefit. You’ll pay off debt quicker (and you’ll have less of it) if you just work hard to pay off what’s on the card you already have.





7. Cutting Cards – As with juggling debt, there’s a lot of controversy regarding whether you should close paid-off accounts. I say it’s better to play it safe than sorry: pay off all your credit cards, but don’t close any of them prior to applying for a mortgage.






8. Buying A Car Can Put A Dent In Your Credit Score – It’s best to avoid any big changes your finances right before a home purchase. That means no big purchases on credit, like buying a car or charging an expensive vacation. Any significant buys can alter your financial picture, and banks don’t like to see sudden changes just before approving a loan.







9. Plan Waaay Ahead – If you think you can get your credit spruced up and ready to go in a matter of days, think again. Even without any dings on your report, you’ll want to make sure all your credit cards are paid up prior to qualifying for a loan, and that requires planning. Get ahead of the game by paying down your debt, then try and lock up your credit cards until your credit score has been checked and you have been approved for your mortgage.

10 STEPS to BUYING a HOME

Buying a house requires time and effort, but these 10 steps can help make the home buying process manageable and help you make the best decisions possible.

Step 1: Start Your Research Early

As soon as you can, start reading Web sites, newspapers, and magazines that have real estate listings. Make a note of particular homes you are interested in and see how long they stay on the market. Also, note any changes in asking prices. This will give you a sense of the housing trends in specific areas.

Step 2: Determine How Much House You Can Afford

Lenders generally recommend that people look for homes that cost no more than three times their annual household income if the home buyers plan to make a 20% down payment and have a moderate amount of other debt.
But you should make this determination based on your own financial situation.

Step 3: Get Prequalified and Preapproved for credit for Your Mortgage

Before you start looking for a home, you will need to know how much you can actually spend. The best way to do that is to get prequalified for a mortgage. To get prequalified, you just need to provide some financial information to your mortgage banker, such as your income and the amount of savings and investments you have. Your lender will review this information and tell you how much you can get approved for. This will tell you the price range of the homes you should be looking at. Later, you can get preapproved for credit, which involves providing your financial documents (W-2 statements, paycheck stubs, bank account statements, etc.) so your lender can verify your financial status and credit.

Step 4: Find a Realtor

Realtors are important partners when you’re buying or selling a home. Realtors can provide you with helpful information on homes and neighborhoods that isn’t easily accessible to the public. Their knowledge of the home buying process, negotiating skills, and familiarity with the area you want to live in can be extremely valuable. Your Realtor is compensated from the commission paid by the seller of the house.

Step 5: Shop for Your Home and Make an Offer

Start touring homes in your price range. It might be helpful to take notes on all the homes you visit. You will see a lot of houses! It can be hard to remember everything about them, so you might want to take pictures or video to help you remember each home.
Make sure to check out the little details of each house. For example:

• Test the plumbing by running the shower to see how strong the water pressure is and how long it takes to get hot water
• Try the electrical system by turning switches on and off
• Open and close the windows and doors to see if they work properly

It’s also important to evaluate the neighborhood and make a note of things such as:

• Are the other homes on the block well maintained?
• How much traffic does the street get?
• Is there enough street parking for your family and visitors?
• Is it conveniently located near places of interest to you: schools, shopping centers, restaurants, parks, and public transportation?

Work with your Realtor to negotiate a fair offer based on the value of comparable homes in the same neighborhood. Once you and the seller have reached agreement on a price, the house will go pending, which is the time period it takes to complete all of the remaining steps in the home buying process.

Step 6: Get a Home Inspection

Typically, purchase offers are contingent on a home inspection of the property to check for signs of structural damage or things that may need fixing. Your real estate agent usually will help you arrange to have this inspection conducted within a few days of your offer being accepted by the seller. This contingency protects you by giving you a chance to renegotiate your offer or withdraw it without penalty if the inspection reveals significant material damage.
You will receive a report on the home inspector’s findings. Before the sale closes, you will have a walk-through of the house, which gives you the chance to confirm that any agreed-upon repairs have been made.

Step 7: Work with a Mortgage Banker to Select Your Loan

Lenders have a wide range of competitively priced loan programs and a reputation for exceptional customer service. You will have many questions when you are purchasing a home, and having one of our experienced, responsive mortgage bankers assist you can make the process much easier.
Every home buyer has their own priorities when choosing a mortgage. Some are interested in keeping their monthly payments as low as possible. Others are interested in making sure that their monthly payments never increase. And still others pick a loan based on the knowledge they will be moving again in just a few years.

Step 8: Have the Home Appraised

Lenders will arrange for an appraiser to provide an independent estimate of the value of the house you are buying. The appraiser is a member of a third party company and is not directly associated with the lender. The appraisal will let all the parties involved know that you are paying a fair price for the home.

Step 9: Coordinate the Paperwork

As you can imagine, there is a lot of paperwork involved in buying a house. Your lender will arrange for a title company to handle all of the paperwork and make sure that the seller is the rightful owner
of the house you are buying.

Step 10: Close the Sale

At closing, you will sign all of the paperwork required to complete the purchase, including your loan documents.  Once the check is delivered to the seller, you are ready to move into your new home!

Knowing the components of a GOOD offer when selling your home!

Price

Price is definitely a major factor to consider when evaluating a deal, and it’s hard to complain about a full-price offer. If the initial offer is too low, the seller can make a counteroffer. Sellers often agree to a lower price if the offer is for cash. Many transactions fail to close because the appraisal value is lower than the offered price, or the lender doesn’t approve the buyer for a mortgage loan. A cash offer can eliminate both potential pitfalls.

Earnest Money

Earnest money is proof of the buyer’s good intentions; the seller may receive this money if the buyer cancels the contract without a legal reason for doing so.
The buyer’s real estate agent collects the money from the buyer after the offer is accepted, and a real estate broker, attorney or title company holds the funds in a trust account. The money helps pay the buyer’s closing costs if the deal successfully closes. The amount of this good faith money varies by region and market conditions, but three percent of the offer price should be satisfactory.

Proof of Funds

Never accept a cash offer without seeing proof of the buyer’s ability to pay. This may include a bank or brokerage account statement with the buyer’s name visible on the printout.

Pre-Approval Letter

Think twice before accepting a financed offer without first seeing a pre-approval letter from a lender. At the very least, insist on seeing a pre-qualification letter from a loan originator stating that the borrower’s credit score and verbal discussion of debt and income is adequate for loan approval. Many deals fall apart because the buyer is unable to obtain a mortgage. Smart sellers want to minimize the chance of that happening to them.

As-Is Contract

An as-is contract allows the buyer to have a home inspection but eliminates the requirement for the seller to contribute money toward repairs. The MLS listing should specifically request that offers be submitted using an as-is contract.

Quick Close

If the sellers are prepared to leave or have already vacated the property, a quick close is preferable to a long delay. Unexpected events like a fire, wind damage or flood can ruin a deal. Financed transactions may take 40 days to complete, while 2-3 weeks is usually possible for a cash deal. Cash deals take that long because of the home inspection, lien search and property survey.

If you have any questions, feel free to call me at 248-875-5868, or email at kandiss@dwellingsunlimited.com

Kandiss

What Should I Expect At Closing???

Closing or “settlement” is when you will sign the final mortgage documents and the property will be legally transferred to you. It typically involves you and any co-borrowers, a closing agent and your real estate agent, although closing practices may vary in your local area.
When preparing for the loan closing, you should contact your closing agent to determine how much money you will need to bring to closing and any other steps for completing the purchase of your home. (They will usually provide the HUD-1 a few days prior to closing to see the exact breakdown of funds.)
You will sign many documents at closing and it is important that you read the documents carefully and ask as many questions as necessary. These documents include:

• The Mortgage Note. A legal document that provides evidence of your debt and your formal promise to repay the mortgage loan.
• The Mortgage or Deed of Trust. The security instrument that you give to the lender that protects the lender’s interest in your property. When you sign the deed of trust, you are giving the lender the right to take the property back by foreclosure if you fail to pay the mortgage according to the set terms.
• The final Truth-in-Lending Disclosure. This document reflects any changes to the terms of your mortgage loan since your application date.
• Affidavits and Declarations. Statements declaring something to be true, such as the property will be your principal place of residence.
• The HUD-1 Statement. Discloses the final details of your mortgage loan including:
  • The actual settlement charges you will be paying
  • A comparison of the costs disclosed on your GFE to the costs being charged at closing
  • Your final loan terms

• Avoid feeling rushed by reading all the documents that will be sent to you prior to closing. Oftentimes, real estate agents will review your documents in detail with you before the closing date to ensure you are comfortable. Don’t hesitate to ask your agent for this.
• Don’t be afraid to ask questions about the legal terminology in closing documents. It is important that you understand everything you are signing; most homebuyers ask a lot of questions and it is expected.
• The documents in the mortgage process are the same for everyone, regardless of race or ethnic origin.

Closing on a home involves a number of important steps. Make sure to pay the same level of attention to these steps as you did when you were house hunting. This is such an exciting process, with a HUGE reward at the end...YOUR HOME!

What is an FHA loan????

An FHA loan is a loan insured against default by the FHA. In other words, the FHA guarantees that a lender won’t have to write off a loan if the borrower defaults – the FHA will pay. Because of this guarantee, lenders are willing to make large mortgage loans.Almost anybody can qualify for a loan. There are no income limits – like you may find with first time home buyer programs. However, there are limits on how much you can borrow. In general, you’re limited to modest loan amounts relative to home prices in your area.

These loans are not perfect, but they are a great help to some borrowers. They allow people to buy a home with a down payment as small as 3.5%. Other loan programs generally require a much larger down payment.

FHA offers a few other bells and whistles as well:

• Easier to use gifts for down payment and closing costs
• No prepayment penalty (a big plus for subprime borrowers)
• An FHA loan may be assumable
• Possible leniency during financial hard times
• Funding for home improvement (through FHA 203k programs)

The FHA promises to pay lenders if a borrower defaults on an FHA loan. To fund this obligation, the FHA charges borrowers a fee. Home buyers who use FHA loans pay an upfront mortgage insurance premium (MIP) of 1%. They also pay a modest ongoing fee with each monthly payment. If a borrower defaults on an FHA loan, the FHA uses collected insurance premiums to pay off the mortgage.

You can visit http://www.fha.com/lending_limits_state?state=MICHIGAN to see the FHA loan limits for the State of Michigan.

What type of HOME are you looking for???

There's a wide selection of homes out there -- which is one is right for you? Depending on how much maintenance you want to do, how much privacy you need, or if you want something custom built to suit your particular tastes, each home type has its own features and benefits. And depending on the different stages of people's lives -- whether they have children or are retiring -- one type of home can be more attractive than the other.

Single-familly homes

These detached homes -- houses that sit on there own lot -- come in one- (ranch), two- and three-level styles. Their exterior appearance can be contemporary, Colonial, Tudor, Victorian or Georgian, for example. As the name implies, single-family homes are ideal for families, especially those with children. Elderly folks who prefer not to climb stairs usually opt for a single-level ranch home. Privacy is an attractive characteristic of these homes, which usually have a fenced back yard. On the other hand, you'll have to keep up with more maintenance than with other home types.

Condominiums (condos)

Condos are individually owned homes attached to one another in a building (like apartments), and feature common facilities, such as recreation areas and fitness rooms. Each condominium building belongs to an association of all its owners. The association determines the monthly assessment fees and rules and regulations that govern the entire building. The association also decides on maintenance and improvements to the condo building. Like a single-family home, you build equity when you own a condo, but unlike a house, you have less maintenance to deal with. Among the drawbacks of condos is less privacy, and during a housing-market downturn, they usually depreciate more than a house.

Cooperative apartments (co-ops)
Similar to condos but sometimes less expensive, co-ops are popular in large urban areas. New York City is known for them. A co-op is different from a condo, in that instead of buying the unit, you buy shares in a corporation that owns the building. And before you can buy shares, you have to be approved by the building's co-op board. Each shareholder has the right to lease a specific unit in the building. Keep in mind that you may have a more difficult time selling your co-op unit because of the board-approval process.

Townhouses
Whether they're one, two or three stories tall, townhouses (also called townhomes) are typically vertical in design. Some even come with attached garages. They blend the privacy of a single-family home with the benefits of the exterior condo maintenance, which is usually done by the homeowners' association. Many townhouses are built in what are called planned unit developments (PUD), clustered communities that have areas for residential and commercial use, and public areas such as schools, parks and the like.

Fixer-Uppers
These are usually condos and single-family homes that are in need of extensive repairs, maintenance or updating. Fixer-uppers are usually a good value to buyers who want to put some 'sweat equity' into a property and add some personal touches to it. On the other hand, they can also be a financial drain if they have any major defects, such as foundation cracks and defective heating and air conditioning units. Have a professional home inspector check the home from top to bottom before you decide to buy it.

New-Construction Homes
How would you like your home to look? New construction housing allows you to design a home from top to bottom. You can pick your choice of finishes, cabinets and bath fixtures and more. Some builders also allow you to move walls in predesigned models and pick the lot within their community to place your home. Expect to pay more money for a new construction. Preconstruction typically offers you reduced pricing before a development or building gets under way. You need to be fairly creative to visualize your new home from floor plans, because there usually aren't models to view until the project gets underway. If you decide to purchase new construction, make sure you research the developer or builder's track record before you sign the purchase contract.

Mortgage Points....should you pay more upfront?

Pay more now for a chance to save much more later? That's the idea behind paying "points" on a mortgage loan. But it doesn't necessarily make sense for every homeowner.

Mortgage points provide an opportunity for borrowers to lower their monthly mortgage payments by paying a lump sum at a loan's closing in exchange for a lower mortgage interest rate over the course of a loan.

Mortgage points are a smart option for borrowers who plan to stay in the same mortgage and not refinance for a relatively long period of time. But points are not recommended for borrowers who are likely to relocate or refinance in the not-so-distant future.

Borrowers pay points in order to lower their mortgage interest rates by a certain amount. The cost of one point is equal to one percent of the mortgage amount. In the case of a 30-year fixed-rate mortgage, paying one point will typically lower your interest rate by somewhere around one eighth of a percent.

So if borrower A paid one point on a $200,000 mortgage with what would have been a 4 percent interest rate, she would lower her interest rate to 3.875 percent (4 percent -- 1/8th percent) for the cost of $2,000.

A good way of looking at points is to view them as an investment that yields a return for the longer you stay in your house.

If Borrower A stays in the same mortgage for only a few years before selling her home or refinancing, she may end up not saving enough in monthly payments to justify paying the $2,000 upfront. But if she stays in the mortgage for a longer period of time, she eventually breaks even on her investment and enjoys saving money every month from there on out.

"If the points are reasonable, I want to pay that upfront and enjoy the interest rate savings over 10 years because I know I'm not going to refinance," Dwyer says. But if "you're a young couple" and "you know you're going to have more babies, you know you're going to be moving out," then you should avoid paying points.

In a perfect world, borrowers would pay points only if it benefited them in the long run. But, in fact, many borrowers pay points out of necessity. Why?

Lenders will only allow borrowers' monthly mortgage payments to equal up to a certain percentage of their monthly income. Often they will only approve loans for borrowers whose monthly mortgage payments would not exceed 28 percent of a borrower's monthly income.

Paying points allows a borrower who otherwise wouldn't qualify for a loan because of income limitations to lower his or her monthly payment to the extent that the bank is willing to make the loan.

What should you expect when you're INSPECTING?

If you’re a first-time buyer who just nabbed your first place, you’re likely in one of the scarier places in the real estate transaction. After weeks or months of looking, your new home is becoming a reality.

But before you can pick out the paint colors and decide how you’ll redo the basement, the property needs to be inspected.

A property inspection is one of the most important parts of the purchasing process, yet many buyers don’t know what to expect from the various players involved. Here’s a guide to the roles and responsibilities each of the players has during a typical property inspection.

You, the buyer

You’re there to learn as much about the property as possible. But you should have already done your homework before the big day.

Prior to the inspection, review the seller’s property disclosures and know up front what questions you have for the inspector. Things may have come up during the marketing or during a walk-through that concerned you. Or maybe the seller disclosed that some unpermitted work was done in the basement years ago. Before you release your inspection contingency, know exactly what you’re getting into and that there aren’t any surprises down the road.

Block out a few hours on the day of the inspection, depending on the size of the home. Nearly everyone from the transaction will be present, and these few hours can be critical. Most inspections go smoothly, but some can be the beginning of tough negotiations.

The buyer’s agent

Your agent should  be standing by your side to walk you through the inspection. Good agents have been through dozens of inspections and know how they work. They should have basic knowledge of what to look for. Most importantly, they know what’s important and what matters in the big picture. If you’re getting a really good price on the home, your agent would likely advise you not to bother the seller for small fixes. If you’re paying top dollar and discover serious flaws, your agent can guide you on how to best proceed after the inspection.

The listing agent

For many reasons, the seller won’t be present during the inspection. But the seller’s listing agent will be front and center as the eyes and ears of the property inspection.

By this point, the listing agent should be familiar with the property and is there to address anything that comes up. For the seller and the listing agent, the inspection is one of the last hurdles to get through and a big unknown. Issues, questions or concerns could arise during the inspection, which 
could kill the sale or affect the property’s value.  That’s why many agents advise sellers to get a property inspection before going on the market, to prevent any last-minute unknowns or red flags.

Sometimes, it seems as though the listing agent is there to “defend” the property against the buyer, her agent and their chosen inspector. Some feel the inspection is a “three against one” situation. It shouldn’t be.

Though the listing agent is there to be an advocate for the seller, everyone should come with the same goal in mind: to facilitate a clean sales transaction.

The inspector

As the buyer, you hire the property inspector, who should be licensed by the state. You sign an agreement with and pay the inspector. Most buyers get a referral for an inspector from their real estate agent.

The inspector is not a contractor, though some inspectors were contractors in their previous careers. While they may be able to shed light on what you can or can’t do to a property and its potential costs, their main purpose is to inspect the property, its systems and the overall state of the home.

A good inspector will remain impartial and not be an alarmist, though they will point out things to be addressed. The inspector isn’t a part of the transaction and shouldn’t get into the nitty-gritty of your deal, nor would they want to.

The inspector should look around, make notes and provide you with a detailed report as well as some feedback on future maintenance. Be sure to walk through the property with the inspector. Whenever possible, go where the inspector goes. Get on the roof, go into the basement, venture into the crawlspace. It will be helpful for the inspector to point things out to you in real-time and demonstrate where the systems are and how they work. Also, some things are better understood in person than read about in a report later.

Your Uncle Bob

Finally, it’s important to understand why having Uncle Bob on hand during the inspection isn’t necessarily a good idea. While it may seem logical to bring a relative or close friend who is a contractor, be mindful that these people aren’t licensed property inspectors. Sometimes, the most well-intended people can end up causing harmful consequences. Uncle Bob may feel it’s important to point out as many negative things as possible, just to seem helpful. He’s far from impartial, however, and you run the risk of raising red flags when they don’t need to be.

Time for a huddle

After the inspection, you and your agent will likely huddle to talk about what went on and to strategize next steps. Hopefully, the inspection was flawless and you are one step closer to picking out your new paint colors.

Or some additional negotiations may be needed after the inspection.

Either way, it helps to know what to expect going in and to be prepared for anything.

TOP 10 Real Estate Tax Deductions for Homeowners

As April 15 is rapidly approaching I thought we would talk about one of the biggest advantages to owning a home...TAX DEDUCTIONS! Here are the top 10.

1.  Mortgage Interest Deduction

The mortgage interest deduction has always been the most-beloved tax benefit of home buyers in the U.S.  New homeowners’ monthly mortgage payments are made up almost entirely by interest for the first few years. Their ability to deduct that interest can result in a healthy reduction in tax liability. Affordability for first-time home buyers is directly linked to their ability to deduct the interest on their mortgage.

Homeowners who itemize their deductions can deduct the interest paid on a mortgage with a balance of up to $1 million. While there is some movement to limit the total itemized deductions for taxpayers with higher incomes (over $400,000), the current deductions holds for all tax brackets. Americans save around $100 million every year by deducting mortgage interest on their tax returns.

2.  Home Improvement Loan Interest Deduction

The interest on home equity loans used for “capital improvements” to a home can also be a tax deduction. On loans with balances of up to $100,000, the interest is tax-deductible for a homeowner who uses the loan to make improvements to the home such as adding square footage, upgrading the components of the home, or repairing damage from a natural disaster. Maintenance items like changing the carpet and painting a home are usually not included as capital improvement projects.

3.  Private Mortgage Insurance (PMI) Deduction

Homeowners who make a down payment of less than 20% are usually paying some sort of Private Mortgage Insurance. PMI (sometimes abbreviated MIP or just MI), can be a few dollars to hundreds of dollars per month, and it is a large portion of many homeowners’ mortgage payments.

If your mortgage was originated after Jan 1, 2007, and you have PMI, it can be a tax deduction. The deduction is phased out, 10% per $1,000, for taxpayers who have an adjusted gross income between $100,000-$109,000 and those above that level do not qualify. The extension of this tax deduction in 2013 was one of many last-second saves by real estate industry advocates.

4. Mortgage Points/Origination Deduction

Homeowners who paid points on their home purchase or refinance can often deduct those points on their tax returns. Points, often called origination fees, are usually percentage-based fees which a lender charges to originate a loan. A one percent fee on a $100,000 loan would be one point, or $1,000.

On a home purchase loan, taxpayers can deduct the entirety of the points that they paid in the same year. On a refinance loan, the points must be deducted as an amortization over the life of the loan. Many taxpayers forget about this amortized benefit over time, so it’s important to keep good records on the deduction of points on a refinance.

5. Energy Efficiency Upgrades/Repairs Deduction

Homeowners can deduct the cost of the building materials used for energy efficiency upgrades to their home. This is actually a tax credit, one which is applied as a direct reduction of how much tax you owe, not just a reduction in your taxable income.

10 percent of the total bill for energy-efficient materials can be used as a tax credit, up to a maximum $500 credit. Insulation, doors, new roofs, and many other items qualify for the energy efficiency credit. There are also individual limits for certain items, such as $150 for furnaces, $200 for windows, and $300 for air conditioners and heat pumps.

6. Profit on Sale of Real Estate Deduction

If you’ve sold a home in the past year, you’re likely aware that individuals can claim up to $250,000 of profit from the sale tax-free, and married couples can claim up to $500,000 tax-free. Of course, there are some requirements to escaping the capital gains tax on this profit.

The home must be a primary residence. This means that you must have lived in the home, as your primary residence, for two of the past five years. You could rent it out for years one, three, and five, while living in it for years two and four. In this way, a homeowner could potentially claim this tax break on multiple homes within a fairly short time frame, but each tax-free sale must occur at least two years apart from the previous tax-free transaction.

7. Real Estate Selling Cost Deduction

For those lucky folks whose profits on the sale of their home might exceed the $250k/$500k limits, there are still some ways to reduce the tax burden.  The costs of selling the home can be significant, and those in themselves can be claimed as tax deductions.

By adding up all of the fees paid at closing, capital improvements made to the home while you owned it, money spent to make repairs to damaged property, and marketing costs necessary to sell the home, you can add a significant figure to the cost basis of your home.  This basically raises the original price you paid for the home.  Your cost basis begins with the original price of the home, and then adds in the improvement and selling costs.  When the new cost basis price is compared to your selling price, it reduces your potentially-taxable profit on the home significantly.

8. Home Office Deduction

The home office tax deduction is often cited as a deduction that increases your likelihood of being audited.While the raw numbers might add some credibility to that perception, it’s really the way a home office is deducted that gets some taxpayers into audit purgatory.

This deduction, when used correctly, is just as safe as any other.  Homeowners deduct a percentage of their mortgage, utilities, and repair bills in direct proportion to the amount of their home that is dedicated office space.

There are a few hard and fast rules to live by when deducting the costs of your home office. The home office must be your principal place of business (the primary office location where you get the majority of your work done).  It needs to be exclusively used for business (it can’t be your kitchen by day and office by night).  You need to be realistic with its size and use (unless you enjoy audits).

9. Property Tax Deduction

New homeowners often don’t know that their property taxes are deductible.  While it may sound strange to have a tax-deductible tax, the overall effect is that you don’t pay income tax on money that was spent on property taxes.

Homeowners should be careful to only deduct the amount of property tax actually paid to their local municipality for the year. This is not necessarily the amount you paid to your escrow account, and should not include any other city/county fees that might potentially be on the same bill as your property taxes.

10. Loan Forgiveness Deduction

The Mortgage Debt Forgiveness Relief Act of 2007 was created when short sales were becoming a new and growing part of the real estate market. An underwater homeowner might convince their lender to agree to a short sale of their home at $100,000, even though they owe $150,000 on their mortgage. While the lender forgives the extra $50,000 owed after the short sale, the government views it as $50,000 in taxable income (a gift from the lender to the borrower).

The Debt Forgiveness Act temporarily relieved the taxpayer of that burden, but was set to expire this year. Through much effort, it was extended along with many other homeowner tax relief measures this year and homeowners can continue to claim this tax relief in 2013.

(This is only a informational summary of current tax issues in the news.  If you need tax advice, contact your tax attorney or CPA.)

~Kandiss

How does your CREDIT SCORE affect your home loan?

 A better CREDIT SCORE generally means you can qualify for a lower rate, which can save you hundreds of dollars a month and thousands over the life of your loan.

When you order your FREE credit score, really examine your credit report.  If there is anything on your credit report that is wrong or simply shouldn’t be there contact the lender reporting the error to clean up your report.  An accurate and cleaned up credit report can translate into higher credit scores.  Remember to pay down any outstanding balances that you can afford to pay before you shop for a mortgage.  And never close any accounts before you buy or refinance as it may harm your credit score.

While credit scores are important, they are not the only thing a home loan expert will take into consideration when approving a mortgage.  If you have a large down payment, high cash reserves or an overall low debt-to-income ratio, you could qualify for a mortgage and possibly a rate that satisfies your needs.  With our current market of record low mortgage rates, it’s important that you never assume you can’t qualify.  Talk to a home loan expert and evaluate your options with them.  With so many great programs available today, you’ll probably be pleasantly surprised.

There are many, many options! Let's talk about it!

Kandiss

248-875-5868

Financing your home...which loan is RIGHT for you?

So you found the house of your dreams, and now you have to figure out which loan is right for you. Here is a quick guide to the types of loans that are available.

FIXED-RATE & ADJUSTABLE HOME LOANS 

Fixed-Rate mortgage: This type of home loan carries the same interest rate for the entire term (length) of the loan. The interest rate makes up part of your monthly payment. It's also the only component that has the potential to change over time. So if you get a mortgage with a guaranteed fixed rate, your monthly payment is guaranteed to stay the same -- for the entire life of the loan. 

Adjustable-rate mortgage: These are also referred to as ARM loans for short. Unlike the previous option, this type of mortgage has an interest rate that changes over time. This also means that the size of your monthly payment will change over time. It might adjust up or down, depending on market conditions at the time of adjustment. But they usually adjust upward, resulting in a larger monthly payment.

Hybrid ARM loan: Most of the adjustable-rate mortgages offered today are considered "hybrid" loans. They get this name because they start off with a fixed rate for a certain period of time. After that period, the rate will begin to adjust. The most popular example is the 5/1 ARM loan, which carries a fixed rate of interest for the first five years. The rate will change every year after that. Some lenders offer 1-year, 3-year and 7-year ARMs, as well.

GOVERNMENT LOANS

FHA loan -- This mortgage is made by lenders in the private sector (known as FHA-approved lenders) and is insured through the Federal Housing Administration. If the borrower defaults on the loan, the lender gets paid by the FHA.

 

VA loan -- This program is reserved for military service members and their families. It can be used to finance 100 percent of a home purchase, which eliminates the need for a down payment. This program is managed by the Department of Veteran Affairs. 

The FHA home loan is by far the most popular and widely used of the government programs. As of June 2011, FHA loans accounted for about 30 percent of the overall mortgage market. Their market share was in the single-digit percentages just a few years ago.

Why are they so much more popular today? Because the private mortgage market has gotten stricter with its lending requirements since the housing crash. So a lot of home buyers with less-than-perfect credit have no choice but to use the FHA program (with its more flexible lending guidelines).

I can walk you through the entire process! Give me a call.

Kandiss

248-875-5868

kandiss@dwellingsunlimited.com

I'm not ready to buy a house...yet

There are so many advantages to owning your own home. Tax deductions, appreciation value, equity, borrowing power, and stability are just a few. Mortagage rates are also at all time lows and that saves you a bundle! But, owning a home is also a big responsiblity that everyone isn't quite ready for. Everyone's financial situation, goals, and lifestyle are unique.

"I'm running out of space in this apartment", "I don't have a yard for my children and pets to play in", "I would love to have a basement". Does any of this sound familiar? Just because you aren't ready to BUY a house yet, doesn't mean you can't LIVE in a house. You have options. You can LEASE a house.

There are many homeowners that explore leasing their homes instead of outright selling them. There are lease options in all neighborhoods, with homes of all sizes. How does leasing a house work?  Leases are generally written for a period of 1-3 years. You are usually responsible for all utilities.  Repairs and maintenance are subject to the terms of your lease. In most cases, first and last months rent is required as well as a security deposit.

Another option is Lease to Own. A lease-to-own house purchase (also "rent-to-own purchase" or "lease purchase") is a lease combined with an option to purchase the property within a specified period, usually 3 years or less, at an agreed-upon-price. The lease-purchase offers homeownership opportunities to consumers who can't qualify for a loan at that time. During the option period, they have the opportunity to rebuild their credit and accumulate savings while living in the house.

Working with a Realtor can be very beneficial when looking to lease a home. I can help you not only find a house, but also research the market, and understand the terms & conditions included in the lease.  You have questions? I have answers!

~Best,

Kandiss Ecton

Realtor

Dwellings Unlimited

248-875-5868

kandiss@dwellingsunlimited.com