How Owning a Home Pays Off at Tax Time

Article Courtesy of REALTOR®mag
Daily Real Estate News/Tuesday, April 18, 2017 (TAX DAY!)

This article covers some important facts for homeowners.  Learn about what deductions you may qualify for at tax time.  Tuck this one away for future reference. 

Mortgage interest deduction: Itemizing homeowners can deduct the interest they pay on their mortgage up to $1 million—or $500,000 if married but filing separately. The deductions can be made for loans issued to buy, build, or improve your home, and can apply to a house, trailer, or boat as long as it serves as your residence. A second mortgage, home equity loan, or home equity loan of credit to improve your home or buy a second home can also be included toward that $1 million limit.

Property tax deduction: The real estate property taxes paid can be another chunk of a deduction. For homeowners who purchased a home this year, they’ll want to check their HUD-1 settlement statement to see if they paid any property taxes when they closed on the purchase of the home.

Prepaid interest deduction: The prepaid interest, or points you paid when you took out your mortgage, is also deductible in the year you paid it too. This could apply to homeowners who refinanced their mortgage and used the money for home improvements. You can also deduct the points if you refinanced to get a better mortgage rate or shortened the length of your mortgage, but the deduction of the points must be over the life of your mortgage. See an example at HouseLogic.com.

PMI and FHA mortgage insurance premiums: The costs of private mortgage insurance can be deducted on loans taken out in 2007 or later. There are some stipulations, particularly if your adjusted gross income is more than $100,000, on how much you can deduct. Government insurance from the FHA, VA, and Rural Housing Service can also be deducted, but varies among agencies.

Vacation-home tax deductions: If the vacation home is used only by you, you can deduct the mortgage interest and real estate taxes. That means the home is not rented out for more than 14 days a year. If the home is rented out for more than that and used by yourself for less than 15 days, the home is classified like a rental property. Expenses are then deducted on IRS form Schedule E.

Energy-efficiency upgrades: Some energy-efficient upgrades may be eligible to be deducted via the Nonbusiness Energy Tax Credit. Among the upgrades that may qualify for the credit include: Biomass stoves; heating, ventilation, and air conditioning; insulation; roofs (metal and asphalt); water heaters (non-solar); and windows, doors, and skylights.
Source: “Are You Getting the Home Tax Deductions You’re Entitled To?” HouseLogic (2017)

Home Mortgages: Rates Up, Requirements Easing

This is a great article and visual on current mortgage rates. For anyone thinking about purchasing a home or refinancing, please remember that your credit is greatly affected by what you do financially prior to the loan funding. Do NOT make any large purchases or take out new credit cards prior to getting your loan... and don't quit your job! Seek advice from your lender about additional things that can affect your credit and your loan.

Article courtesy of Keeping Current Matters/the KCM Blog
April 13, 2017

The media has extensively covered the rise in mortgage interest rates since last fall (from 3.42% last September to the current 4.1% according to Freddie Mac). However, a less covered aspect of the mortgage market is that requirements to get a mortgage have eased while rates have risen. The Mortgage Bankers Association (MBA) quantifies the availability of mortgage credit each month with their Mortgage Credit Availability Index (MCAI). According to the MBA, the MCAI is:

“A summary measure which indicates the availability of mortgage credit at a point in time.”

The higher the index, the easier it is to get a mortgage. Here is a chart showing the MCAI over the last several months as rates have increased.

Have requirements for attaining a mortgage actually eased?

Yes. Here are two examples:

1. FICO® Score – the credit score which helps determine a buyer’s eligibility. The score required to attain a mortgage has been falling over the last five months:

2. Down Payment Requirement – the percentage of the purchase price necessary to place as a down payment on a home. To make this point, let’s look at the percentage of first-time buyers who have put less than 5% down over the last several years as compared to the 1^st quarter of 2017:

Bottom Line

Whether you are a current homeowner looking to move to a home that will better serve your family’s current needs, or a first-time buyer looking for a starter home, it is easier to get a mortgage today than it has been at any other time in the last ten years.