Four Tax Deductions Homeowners Need to Know

Buying a home can be a big investment. However, your home may provide you with tax advantages. Here’s a list of four common tax deductions for homeowners:

1.  Mortgage Interest Deduction

In the early years of your mortgage, the majority of your monthly house payments goes toward interest. You may even have multiple mortgages – one for your main home and another for a second home or a home equity loan. As long as the purpose for these mortgages is to buy, build or improve a home, the interest is usually fully tax-deductible. The exceptions are if the interest on your mortgages exceeds $1 million, or the mortgage interest is for three or more homes. Your lender will issue you a Form 1098 for each mortgage, which explains exactly how much you can deduct. Be sure to keep these forms in case you’re audited by the IRS.

Note: If the loan is not a secured debt on your home, the interest cannot be deducted.

2. Property Taxes

The second biggest tax deduction you can take is for the taxes you pay on your home. Annual state and local property taxes can be deducted based on the assessed value of your property. However, property taxes are only deductible in the year in which they were paid. Also, if this is your first year in your home, be sure to deduct your share of the property taxes included on your settlement or closing statement for your home.

3. Mortgage Insurance Premiums

Homeowners who purchase a home (a main or second residence) with less than a 20% down payment must carry private mortgage insurance (PMI). This insurance protects the lender if the homeowners default on the loan. You must itemize your deductions to claim the PMI deduction. You also need to have an adjusted gross income (AGI) of less than $100,000 for single, married or head of household taxpayers, or $50,000 if married filing separately. Once your AGI is above $109,000 ($54,000 for married filing separately), you no longer qualify for this deduction.

4. Points

When you purchase or refinance your home, points are the fees paid to obtain the mortgage. If this is your first year in your main residence, you can deduct the points you paid at closing on your tax return for the year you paid them. If the seller paid some or all of the points for you, you may still be able to deduct them. Ask your tax advisor. If you refinanced your mortgage, you can deduct the points proportionately over the life of the new loan. Also, if you still had points you were deducting on a previous refinance, you can write off the rest of the points in the year of the new refinance.

Since taxes from owning a home can be confusing, you should always talk to your tax advisor to determine what deductions apply to your particular situation. Also, make sure you keep excellent records, so you can take advantage of deductions.

If you’re looking to buy a new home or refinance in 2012, contact Grandview Lending. We can review your particular situation to find the right mortgage solution for you.

Beware of Code Violations on the Home You’re Buying

Did you know that as a homebuyer you may be a liable for a code violation on the property you’re attempting to purchase? 

Per an article in Chicago Tribune, code violations can often derail a home sale. 

So what are code violations? These are violations and fines recorded by a city or county’s code enforcement section against the property. The most common violations are unpaid property taxes and homeowner association (HOA) fees. In 16 states and the District of Columbia, HOAs can issue liens against the property which take precedence over any other liens – called a super lien. 

Additionally, violations can include issues with minimum building construction standards, accumulated trash, improper care of swimming pools, overgrown yards and landscaping, or even, noise complaints about barking dogs. 

Most violations occur when the previous homeowners were involved in some kind of duress, such as bankruptcy and foreclosure. However, violations can occur at any time. Once a fine has been issued, if it goes unpaid, it can grow into a five- or six-figure penalty over time.

In many cases, the real estate agent or the bank may not know about the violation until the property is in the escrow period. If a lien is recorded, then the title company should find it during the title search. Unfortunately, sometimes this happens a few days before escrow closing.  

At that point, either the home seller or the homebuyer will have to pay the fine and get any violations fixed. However, if the property was a foreclosure, it’s sometimes not that simple. Ideally, in these cases, it should be the bank’s responsibility to take care of the issues and pay the fine. But that doesn’t always happen. Then since the lien is against the property, it becomes the responsibility of the buyer. If the buyer accepts responsibility, he/she pays the fine and gets the violations fixed. If the buyer won’t accept the responsibility, then the sale falls through. 

So how can you determine if the property you’re buying has any code violations? First, be sure to read the preliminary title report carefully to see if there are any liens or violations against the property. Second, you can obtain a code property inspection, which is different than a home inspection. A home inspection reports on the condition of the home, while a code property inspection looks for building code violations and liens due to violations. Also, be aware that code violations tend to be a bigger issue in real estate markets that have high foreclosure rates and negative equity. 

If you are buying a new home, contact a professional mortgage broker to help you secure a mortgage loan that’s right for your needs.

Common Mistakes Mortgage Shoppers Make

Buying a home, and getting a mortgage, is probably the biggest financial decision you’ll ever make. Shopping for a mortgage isn’t like shopping for car insurance or buying something at the mall. It’s a totally different experience. Therefore, it’s best if you learn from other mortgage shoppers’ common mistakes so you can avoid making them yourself. 

Calling and getting a quick rate quote. Unfortunately, if you do this, you’ll just be wasting your time. You need to find a lender who asks questions, so he really understands your particular financial situation. This way the lender can find a mortgage solution that’s right for you. 

Comparing apples to oranges. You may think you can call a few lenders over a couple days and get some quotes. The process just doesn’t work this way. The rates and costs are always fluctuating, so the quote you may get is only good for that day until you lock the rates in. So you can’t truly compare quotes unless you get them all on the same day within an hour or two of each other. 

Getting an estimate without providing all the facts about your financial situation. All the lenders you talk to need to have all of the same information ( your credit score, down payment amount, loan size, type of property, etc.) in order to analyze your situation and give you an accurate quote. 

Working with a lender you don’t trust. You may encounter lenders who promise the “best deal.” Unfortunately, if it seems too good to be true, then it probably is. You should always work with a reputable mortgage broker. Ask family members, friends or co-workers for recommendations of lenders they’ve worked with. Also check out the lender’s client testimonials.  

Everyone wants the best deal, because no one likes to overpay. Therefore, by following these tips, you’ll avoid making costly mistakes when looking for the right mortgage for your financial situation.

Ways to Avoid Foreclosure

When homeowners buy a home, the last thing they’re thinking about is losing their home to foreclosure. But in the past few years, millions of Americans have lost their homes or are in the process of foreclosure. There are several reasons why homeowners may stop making timely mortgage payments, including loss of employment, divorce, sudden illness or medical emergencies, or inability to pay an adjustable mortgage rate that increases. 

If you’re having difficulties paying your mortgage, by following these steps, you may be able to keep your home and/or protect your credit rating. 

1. Negotiate with your lender. Depending upon your particular situation, your lender may:

• Wait to take legal action and agree to a repayment plan based upon your financial situation, called forbearance. You’ll be required to provide information to your lender to show you can meet the requirements of the new payment plan.
• Waive the payments, called debt forgiveness. (This rarely happens.)
• Agree to a repayment plan that spreads out your missed payments over a longer term.
• Allow you to refinance your mortgage, or change your loan terms, or extend the amortization period, called mortgage modification.
• Allow you apply for another interest-free loan to pay the missed payments, called a partial claim. This is only available on certain government loans and if you met the loan criteria.

2. Get government help. Contact a HUD-approved housing counseling agency for information on services and programs offered by Government agencies. If your home was bought with a Veterans Administration (VA) guaranteed loan, contact your nearest VA office for information. 

3. Sell your home by yourself or through a real estate agent to pay off your mortgage loan to avoid foreclosure. You will need to discuss this with your lender to see if you qualify for this option. Consider selling your home as a short sale if the home is worth less than the amount you owe. You or your agent will need to talk with your lender to see if they’ll agree to a short sale. While a short sale does affect your credit rating, it won’t be as bad as a foreclosure.

4. Deed your home back to your lender, which will cancel the foreclosure. However, deeds-in-lieu of foreclosure will affect your credit the same as a foreclosure. 

Above all else, beware of scams. If it sounds too good to be true, it probably is. 

If you are feeling overwhelmed with your mortgage or you have questions about what's the best option for you, contact a trusted mortgage broker for assistance.

New Year’s Resolution: Home Improvement?

Have you made your New Year’s resolutions? Most people think of resolutions in terms of self-improvement – losing weight, quitting smoking, and getting more exercise. But why not make a resolution to improve your home in 2012? 

While the economic downturn has forced many people to reassess what’s necessary and what’s not, remodeling trends show that people are: 

• Investing in spaces that meet a need to accommodate schoolwork, computers or sports equipment.
• Focusing on features that put an emphasis on family.
• Looking for ways to make to their homes more energy efficient in order to save money. 

Some remodeling trends for 2012 include: 

• Upgraded kitchens that offer convenience and energy savings – induction and gas stovetops, engineered stone and quartz bars, European spray pullout faucets, deep single bowl sinks, and French door refrigerators. 
• Mini-spa-like master bathrooms with large steam showers that allow homeowners to relax and save money by conserving water. Other popular features are dual rain shower heads, quartz and granite countertops, large benches and handle grip bars in showers for the elderly, and high-efficiency toilets and faucets for water savings. 
• Large family or great rooms that open up to the kitchen and dining room, creating a free-flowing space for optimal entertaining with family and friends. 
• Lifestyle centers, instead of a formal office, for computer and electronic equipment use, providing an area for the kids to do homework or adults to pay bills. 
• Mud rooms that serve as drop zones for coats, hats, shoes, backpacks and other clutter. These rooms include cubbies, hooks, and closets for storage, and can be combined with the laundry room. 
• Updated flooring with radiant heat. Homeowners are switching from carpet to hardwood, laminate, bamboo, stone, cork, tile or reclaimed materials. Radiant heating provides a practical and efficient way for homeowners to heat their home.  
• Energy-efficient windows, appliances and lighting for cost savings. 

Even if you can’t afford to spend a lot on updating your home, you can always add a coat of paint, or declutter and purge old items to give your home a fresher appearance.

If you are doing a major renovation project and need a remodeling loan, contact Grandview Lending. We’re here to work with you for all your lending needs.

New Year’s Resolution: New Home in 2012?

The new year is almost here. Is buying a new home on your list of resolutions for 2012? If it is, then you need to make sure your financial situation is order. By following these tips, you can make your dream a reality.

1. Improve Your Credit Score  

In order to determine whether you qualify for a mortgage, banks or lending companies will check your credit score to determine how much of a risk you are in repaying the money they loan you. The higher your credit score, the more trustworthy they’ll view you. A low score may keep you from getting a loan or the best interest rate. Therefore, check your credit reports with Experian, Equifax and TransUnion to make sure the information contained on them is correct. Get any inaccurate information corrected. It can take 2 to 3 months to resolve any discrepancies. If your credit score is low, you’ll need to make an ongoing effort to improve it by paying down debt, paying your bills on time, keeping your credit card balances low, and not opening new lines of credit. Over time by managing your credit responsibly, you can improve your score.  

2. Determine What You Can Afford 

Use one of the many online calculators to determine how much you can afford for a home, or contact a reputable mortgage broker to discuss your financial situation. Generally, you can afford a home that costs about 2-1/2 times your gross annual salary. However, if you have other financial obligations, like credit card debt, alimony or child support, you may need to settle for a less expensive home. Also, the size of your down payment will determine what you can afford, too. 

3. Save Money for a Down Payment and Closing Costs 

Generally, lenders want at least 20 percent of the home’s purchase price as a down payment. If you can pay more, you may qualify for a larger loan. If you don’t have the money, you may still qualify for a low-down payment mortgage (as little as 3 percent of the home’s cost) through a variety of public and private lenders. Plus you’ll need to pay for private mortgage insurance which adds about 0.5 percent of the total loan amount to your mortgage payments for the year. You also need to ensure you have enough money saved to pay for closing costs and other fees for the appraisal, title search, inspection, and attorney. 

4. Consider All Costs of Home Ownership

Besides your monthly house payment, make sure you can afford all the other costs associated with home ownership, such as property taxes, homeowners’ insurance, homeowners’ association fees, utilities, maintenance and repairs, and home improvements. 

5. Build Up Your Bank Account 

In addition to saving money for the down payment, closing costs and other fees of home ownership, you should have at least 3 to 5 months’ worth of mortgage payments saved. Your lender will want assurance that you’re a good loan candidate who’s not living from paycheck to paycheck. 

By taking a good look at your financial situation and doing what you can to make changes to improve your credit history and save money, you can improve your chances of qualifying for a mortgage and buying a new home in 2012. 

Is Your Home Ready for Winter?

This week is the official start of the winter season. If you haven’t already done so, you should prep your home for the cold weather. The following is a checklist of things to do, so you don’t have to worry about your home this winter.

• Have your furnace inspected to make sure it’s working properly. Keep plenty of furnace filters on hand and change them monthly.
• Bleed the valves on hot-water radiators.
• Check your doors and windows for leaks – caulking and weather-stripping as needed. Install storm windows, replace any cracked windows and/or install plastic sheeting on the insides of windows.  
• Clean out your gutters and downspouts.
• Replace missing or worn roof shingles or tiles.
• Add extra insulation in the attic.
• Insulate any water pipes along exterior walls to reduce freezing. Disconnect garden hoses, drain and store them inside the house. Turn off the water supply to exterior faucets and drain the water in the line. Consider installing an insulated faucet cover.
• Seal foundation cracks and entry points to keep small animals out. Close up crawlspace entrances. Seal the areas around dryer vents, cable outlets and mail chutes.
• Have your chimney or flue inspected. Make sure the fireplace damper opens and closes properly. Stock up on dry, seasoned wood for wood-burning stoves or fireplaces.
• Install smoke and carbon monoxide detectors. Install fresh batteries in existing detectors.
• Trim tree branches that are close to the house or power lines to prevent house damage or the power lines from coming down in storms.
• Stock up on rock salt or environmentally friendly products to melt ice on walkways. Keep sand available for traction for your vehicles.
• Tune-up snow blowers and have snow shovels handy.
• Prepare an emergency supply kit that includes a three-day supply of food and water for each person, a battery-powered or hand-crank radio, flashlights and batteries, candles and matches or lighter, battery back-up to protect your computer and electronic equipment, extra blankets and warm clothes, first-aid kit, and extra pet food, if you have a pet. Never use a generator or other gasoline, propane, natural gas, or charcoal-burning devices inside the house.

By following these winter preparation tips, you can safeguard your home and family against any weather-related damage and save energy, too.

If you’re considering a new mortgage, contact a reputable mortgage broker to discuss your options and determine the best loan for your situation and future plans.