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When It's Important - Find the Facts

by The Mike Parker Team

 

Most parents don't put a lot of credence in the statements "Everyone is doing it" and "No one does that anymore."  They'll dig a little deeper and get the facts of the situation.  Interestingly, when it comes to buying a home, similar common myths continue to prevail surrounding what it takes to buy a home.

One of the most common myths is that it takes 20% down payment to get into a home.  Certainly, an 80% mortgage might have the most favorable interest rate. It won't require mortgage insurance and qualifying requirements might be a little less but there are alternatives.

"88% of all buyers financed their homes last year and consistent with previous years, younger buyers were more likely to finance their home purchase.  In 2018, the median down payment was 13% for all buyers, 7% for first-time buyers and 16% for repeat buyers." Stated by the 2018 NAR Profile of Buyers and Sellers.

  • Qualified Veterans are eligible for zero down payment, 100% mortgage loans without mortgage insurance.
  • Conventional loans are available with as little as 3-5% down payments.
  • FHA mortgages have a 3.5% down payment.
  • USDA mortgages for rural housing have two major products: one does not require a down payment and the other has a 3% down payment.  Maps, based on population numbers, are available to determine if the area you're interested in purchasing in is eligible for a USDA mortgage.

We've come to believe that facts can be instantly verified by searching on the Internet.  Unfortunately, there are a lot of things on the Internet that are questionable and certainly, that includes some information on mortgages.  Specifically, some loans are not available in certain areas and to a particular persons based on their income and credit history.

The best approach, when it comes to buying a home, is to get the facts from a knowledgeable and trusted loan professional before you begin the home search process.  Contact me at (859) 647-0700 for a recommendation.

 A website may not provide relevant information for your individual situation.  Purchasing a home is a large investment and taking the time to find out the facts is worth the effort.

 

When It's Important - Find the Facts

by The Mike Parker Team

 

Most parents don't put a lot of credence in the statements "Everyone is doing it" and "No one does that anymore."  They'll dig a little deeper and get the facts of the situation.  Interestingly, when it comes to buying a home, similar common myths continue to prevail surrounding what it takes to buy a home.

One of the most common myths is that it takes 20% down payment to get into a home.  Certainly, an 80% mortgage might have the most favorable interest rate. It won't require mortgage insurance and qualifying requirements might be a little less but there are alternatives.

"88% of all buyers financed their homes last year and consistent with previous years, younger buyers were more likely to finance their home purchase.  In 2018, the median down payment was 13% for all buyers, 7% for first-time buyers and 16% for repeat buyers." Stated by the 2018 NAR Profile of Buyers and Sellers.

  • Qualified Veterans are eligible for zero down payment, 100% mortgage loans without mortgage insurance.
  • Conventional loans are available with as little as 3-5% down payments.
  • FHA mortgages have a 3.5% down payment.
  • USDA mortgages for rural housing have two major products: one does not require a down payment and the other has a 3% down payment.  Maps, based on population numbers, are available to determine if the area you're interested in purchasing in is eligible for a USDA mortgage.

We've come to believe that facts can be instantly verified by searching on the Internet.  Unfortunately, there are a lot of things on the Internet that are questionable and certainly, that includes some information on mortgages.  Specifically, some loans are not available in certain areas and to a particular persons based on their income and credit history.

The best approach, when it comes to buying a home, is to get the facts from a knowledgeable and trusted loan professional before you begin the home search process.  Contact me at (859) 647-0700 for a recommendation.

 A website may not provide relevant information for your individual situation.  Purchasing a home is a large investment and taking the time to find out the facts is worth the effort.

 

Owning Makes More Sense

by The Mike Parker Team

When comparing the cost of owning a home to renting, there is more than the difference in house payment against the rent currently being paid. It very well could be lower than the rent but when you consider the other benefits, owning could be much lower than renting.31066694-250.jpg

Each mortgage payment has an amount that is used to pay down the principal which is building equity for the owner. Similarly, the home appreciates over time which also benefits the owner by increasing their equity.

There are additional expenses for owning a home that renters don't have like repairs and possibly, a homeowner's association. To get a clear picture, look at the following example of a $300,000 home with a 3.5% down payment on a 4.5%, 30-year mortgage.

net cost of housing.jpg

The total payment is $2,264 including principal, interest, property taxes, property and mortgage insurance. However, when you consider the monthly principal reduction, appreciation, maintenance and HOA, the net cost of housing is $1,218. It costs $1,282 more to rent at $2,500 a month than to own. In a year's time, it would cost $15,000 more to rent than to own which is more than the down payment and closing costs to buy the home.

With normal amortization and 3% annual appreciation, the $10,500 down payment in this example turns into $112,00 in equity in seven years. Check out your own numbers using the Rent vs. Own or call me at (859) 647-0700. Owning a home makes sense and can be one of the best investments a person will ever make.


The Tax Difference in Second Homes

by The Mike Parker Team

A principal residence and a second home have some similar benefits, but they have some key tax differences. A principal residence is the primary home where you live and a second home is used mainly for personal enjoyment while limiting possible rental activity to a maximum of 14 days per year.

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Under the 2017 Tax Cuts and Jobs Act, the Mortgage Interest Deduction allows a taxpayer to deduct the qualified interest on a principal residence and a second home. The interest is reduced from a maximum of $1,000,000 combined acquisition debt to a maximum of $750,000 combined acquisition debt for both the first and second homes.

Property taxes on first and second homes are deductible but limited to a combined maximum of $10,000 together with other state and local taxes paid.

The gain on a principal residence retained the exclusion of $250,000/$500,000 for single/married taxpayers meeting the requirements. Unchanged by the new tax law, the gains on second homes must be recognized when sold or disposed. 

Tax-deferred exchanges are not allowed for property used for personal purposes such as second homes. Gain on second homes owned for more than 12 months is taxed at the lower long-term capital gains rate. 

This article is intended for informational purposes. Advice from a tax professional for your specific situation should be obtained prior to making a decision that can have tax implications.

Holiday Travels

by The Mike Parker Team

The last thing you want if you’re traveling these holidays is to worry about someone burglarizing your home. Use this check list to add some peace of mind while you’re out of town.15632491-250.jpg

  • Ask a trusted friend - to pick up mail, newspaper and keep yard picked up to avoid an appearance of being empty.
  • Consider discontinuing your mail (USPS Hold Mail Service
  • Don’t post about your trip on Facebook and other social media until you return – some burglars actually look for this type of announcement to schedule their activities. 
  • Do notify police or neighborhood watch – especially if you’re going to be gone for more than just a few days. Let your monitoring service know when you’ll be gone and if someone will be checking on your home for you.
  • Light timers make it look like someone is home – use several sets for different times to better simulate someone being at home.
  • Do unplug certain appliances – TV, computers, toaster ovens that use electricity even when they’re off and to protect them from power surges.
  • Don’t hide a key – burglars know exactly where to look for your key and it only takes them a moment to check under the mat, above the door, in the flower pot or in a fake rock.

These easy-to-handle suggestions may protect your belongings while you’re gone while adding a level of serenity to your 

Tax Benefits of Home Ownership

by The Mike Parker Team

U.S. taxpayers have enjoyed specific tax benefits for home ownership since personal income tax was introduced by the 16th amendment in 1913. While these benefits may not be the primary reason that motivates a person to buy a home, they are still tangible and not available to tenants.26005238-266.jpg

The exclusion of capital gains tax on the profit made from a home is unique from other investments and provides homeowners significant savings. Single taxpayers can exclude up to $250,000 gain and married taxpayers up to $500,000 gain. During the five-year period ending on the date of sale, a taxpayer must have: owned the home for at least two years; lived in the home as their main home for at least two years; and, ownership and use do not have to be continuous nor occur at the same time.

Gain on the sale of a principal residence in excess of the allowed exclusion are taxed at the lower long-term capital gain rate of the owner.

A homeowner may take the standard deduction or itemized deductions in any tax year based on which will create the largest deduction. Property taxes and qualified mortgage interest are allowable itemized deductions.

Qualified mortgage interest is acquisition debt plus home equity debt not to exceed the maximum amounts. Acquisition debt is the amount of debt incurred to buy, build or improve a first and second home up to $1,000,000. Home equity debt is limited to $100,000 over the current acquisition debt on the combination of a first and second home and may be used for any purpose.

For more information, see your tax advisor or see IRS Publications 523, Selling Your Home and 936, Home Mortgage Interest Deduction. 

Proof of Purchase

by The Mike Parker Team

People who experience a property loss are usually asked by their insurance company for proof of purchase which can come in the form of a receipt or current inventory of their personal belongings.receipts or inventory.png

Even the most organized people might find it challenging to find receipts for all the valuables in their home. If the inventory isn’t up-to-date, a homeowner might forget to add some items to the claim and may not recognize the omission for long after the claim is settled.

The inventory can serve as a guide to make sure a homeowner gets compensated for all the loss.

Photographs and videos can be adequate proof that the items belonged to the insured. A series of pictures of the different rooms, closets, cabinets and drawers are helpful. When video is used, consider commenting as it is shot and be sure to go slow enough and close enough to things becoming recorded.

For your convenience, download a Home Inventory, complete it, and save a copy off premise. Good places for your inventory could be a safety deposit box or digitally, in the cloud if you have server-based storage available like Dropbox.

Live the Dream!!

by The Mike Parker Team

Consumers are more easily living the American Dream of owning a home because of the incredibly low mortgage rates. Today, most buyers can get a much lower rate than their parents or grandparents got on their first home.


Top Ten reasons to move the dream to reality:
In a recent housing survey, FNMA released information about consumers' thoughts on the current market. Almost two-thirds would rather buy than rent and believe that now is a good time to buy. Half of the respondents expect rent and home prices will go up.

  1. It’s cheaper than renting in most cases
  2. Avoid rental increases in the future
  3. Equity build-up with amortization of each payment going to principal
  4. A home is a forced savings account
  5. Appreciation increases your equity and your overall investment
  6. Mortgage interest and property tax deductions
  7. Home equity interest deduction
  8. A place you can call your own
  9. A place to share with friends and family
  10. Capital gains exclusion on profit

Buyers need the confidence that they can afford a home and proof for the sellers when they’re ready to submit a contract. If a buyer has steady reliable income, a good record of paying their bills, money saved for a down payment and are prepared to pay the mortgage each month, the next step is to get pre-approved by a trusted mortgage professional.

Take a look at the Rent vs. Own to see what the real cost of owning a home for your price range.

Looking for the Largest Deduction

by The Mike Parker Team

IRS allows taxpayers the option to take the standard deduction or the itemized deduction.  The astute taxpayer will compare to see which one will result in the greatest deduction and the election can be made each year.

The 2013 standard deduction for a married couple filing jointly is $12,200 and $6,100 for a single taxpayer.  It doesn’t require any proof of actual expense and has no requirement for home ownership.

Items that can be included on Schedule A for itemized deductions include: 

  • Certain taxes paid for state and local income tax, general sales tax, real estate property taxes, personal property taxes or other taxes paid
  • Qualified home mortgage interest, investment interest or possibly, mortgage insurance premiums
  • Charitable contributions
  • Casualty or theft losses
  • Medical and dental expenses that exceed 7.5% of adjusted gross income if born before 1/2/49 or 10% if born after 1/2/49
  • Job expenses and other miscellaneous deductions that exceed 2% of adjusted gross income

A non-homeowner taxpayer who has been taking the standard deduction needs to consider that it isn’t just the ability to deduct the mortgage interest and property taxes.

While the standard deduction might be the obvious choice for a non-homeowner, the combination of the mortgage interest and the property taxes plus other allowable deductions not recognized previously such as charitable contributions, now makes taking the itemized deductions significantly more advantageous. 

Displaying blog entries 1-9 of 9

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Mike Parker - CRS
HUFF Realty
60 Cavalier Blvd.
Florence KY 41042
859-647-0700
859-486-3300