Featured Agent Fred Krueckeberg Shared Article About How Much Mortgage You Can Afford

Can I afford a mortgage4 Tips to Determine How Much Mortgage You Can Afford

By: G. M. Filisko

Published: March 11, 2010

By knowing how much mortgage you can handle, you can ensure that home ownership will fit in your budget.

1. The general rule of mortgage affordability

As a rule of thumb, you can typically afford a home priced two to three times your gross income. If you earn $100,000, you can typically afford a home between $200,000 and $300,000.

To understand how that rule applies to your particular financial situation, prepare a family budget and list all the costs of homeownership, like property taxes, insurance, maintenance, utilities, and community association fees, if applicable, as well as costs specific to your family, such as day care costs.

2. Factor in your downpayment

How much money do you have for a downpayment? The higher your downpayment, the lower your monthly payments will be. If you put down at least 20% of the home’s cost, you may not have to get private mortgage insurance, which costs hundreds each month. That leaves more money for your mortgage payment.

The lower your downpayment, the higher the loan amount you’ll need to qualify for and the higher your monthly mortgage payment.

3. Consider your overall debt

Lenders generally follow the 28/41 rule. Your monthly mortgage payments covering your home loan principal, interest, taxes, and insurance shouldn’t total more than 28% of your gross annual income. Your overall monthly payments for your mortgage plus all your other bills, like car loans, utilities, and credit cards, shouldn’t exceed 41% of your gross annual income.

Here’s how that works. If your gross annual income is $100,000, multiply by 28% and then divide by 12 months to arrive at a monthly mortgage payment of $2,333 or less. Next, check the total of all your monthly bills including your potential mortgage and make sure they don’t top 41%, or $3,416 in our example.

4. Use your rent as a mortgage guide

The tax benefits of homeownership generally allow you to afford a mortgage payment—including taxes and insurance—of about one-third more than your current rent payment without changing your lifestyle. So you can multiply your current rent by 1.33 to arrive at a rough estimate of a mortgage payment.

Here’s an example. If you currently pay $1,500 per month in rent, you should be able to comfortably afford a $2,000 monthly mortgage payment after factoring in the tax benefits of homeownership.

However, if you’re struggling to keep up with your rent, consider what amount would be comfortable and use that for the calcuation instead.

Also consider whether or not you’ll itemize your deductions. If you take the standard deduction, you can’t also deduct mortgage interest payments. Talking to a tax adviser, or using a tax software program to do a “what if” tax return, can help you see your tax situation more clearly.

G.M. Filisko is an attorney and award-winning writer who’s owned her own home for more than 20 years. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.

Agent Photo
cotact us

Office: 419-891-0888
Cell: 419-290-5240
Fax: 419 891-1092
VM: 419-897-2700 x 278
fredkrueckeberg@wellesbowen.com

Julie Crotin’s Featured Article How to Deduct Your Mortgage Interest & Equity Loan Costs

By: Richard Koreto

Published: December 21, 2012

Deducting mortgage interest, as well as interest on home equity loans and HELOCs, can save money on taxes.

Know your loan limits

A good place to check out what you can deduct before you borrow is the chart on page 3 of IRS Publication 936. It’ll walk you through the requirements you must meet to deduct all of your home loan interest. It’s an hour well spent.

The first hurdle you’ll run into is the total amount of your loan or loans. In general, individuals and couples filing jointly can deduct the interest on up to $1 million ($500,000 if you’re married and filing separately) in combined home loans, as long as the money was used for acquisition costs, that is the cost to buy, build, or substantially improve a home, explains Scott O’Sullivan, a certified public accountant with Margolin, Winer & Evens in Garden City, N.Y. Any interest paid on loan amounts above the $1 million threshold isn’t deductible.

The same $1 million limit applies whether you have one home or two. Buying a vacation home doesn’t double your loan limits. And two homes is the max; you can’t deduct a mortgage for a third home. If you have a mortgage you took out before Oct. 13, 1987, you

Interest Rates

have fewer restrictions on claiming a full deduction. The calculations for “grandfathered debt” can get complex, so get help from a tax professional or refer to IRS Publication 936.

Whatever you do, don’t forget that you can also deduct the points and fees associated with a first or second mortgage when you initially buy your home, says Jeff Rattiner, a CPA with JR Financial Group in Centennial, Colo. If you refinance the same house, you have to deduct those costs over the entire term of the loan. If you refinance again, you can deduct all the costs from the earlier refi in the year you take out the new loan.

Spend loan proceeds wisely

The other limitation on how much you can borrow and still get your deduction comes into play when you take out a home equity loan or HELOC that you don’t use to buy, build, or improve your home. In that case, you can deduct the interest you pay only on the first $100,000 ($50,000 if married filing separately). This loan limit also applies in a so-called cash-out refi, in which you refinance and take out part of the equity you’ve built up as cash, says John R. Lieberman, a CPA with Perelson Weiner in New York City.

That means if you decide to take out a $115,000 home equity loan to buy that Porsche, you can deduct the interest on the first $100,000 but not on the $15,000 that exceeds the limit. Use the same $115,000 to add a new bedroom, however, and the full amount is allowable under the $1 million cap. Keep in mind, though, that the $115,000 gets added into the pot of whatever else you owe on your other home loans. In many cases, points and loan origination costs for HELOCs are deductible.

Consider this simplified scenario: You borrow $250,000 against your home at 8% interest. That means you’ll pay $20,000 in interest the first year. Spend the $250,000 on home improvements, and all of the interest is deductible. Spend $150,000 on improvements and $100,000 on your kids’ college tuition, and all the interest is still deductible.

But spend $100,000 on improvements and $150,000 on tuition, and the improvement outlays are deductible, though $50,000 of the tuition expense isn’t. That’ll cost you $4,000 in interest deductions. Preserve the $4,000 deduction by coming up with the extra money for tuition from another source, perhaps a low-interest student loan or by borrowing from a retirement plan. For someone in a 25% bracket, a $4,000 deduction lowers taxes by $1,000, plus applicable state income taxes.

Beware the dreaded AMT

Even if you’ve followed all the loan limit rules, you can still get stuck paying tax on mortgage interest. How come? It’s all thanks to the Alternative Minimum Tax. Congress created the AMT, which limits or eliminates many deductions, as a way to keep the wealthy from dodging their fair share of taxes.

Calculating the AMT can be complex, but if you make more than $75,000 and have several kids or other deductions, you might well be subject to it. Problem is, if you fall into the AMT group, you may not be able to deduct interest on a home equity loan, even if the loan falls within the $1 million/$100,000 limit. If you’re subject to the AMT and borrow money against the value of your home, you’ll have to use it to buy, build, or improve your place, or you may not have a chance to deduct the interest, says Rattiner, the Colorado CPA.

This article provides general information about tax laws and consequences, but shouldn’t be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice.

Agent Photo
cotact us

Office: 419-891-0888
Cell: 419-787-8926
Fax: 419 891-1092
VM: 419-897-2700 ext. 230
juliecrotin@wellesbowen.com

Enhanced by Zemanta

Linda Smith Brings You This Weeks Article

Congress Heaps Uncertainty on Financially Troubled Home Owners’ Misery

Published: November 12, 2012

Unless Congress extends the forgiven debt exemption, financially troubled home owners who short sell their homes to avoid foreclosure or otherwise have mortgages forgiven will get slammed with a huge tax bill in 2013.

The nation’s attorneys general worked hard to get the five biggest mortgage servicers to agree to a $25 billion settlement to help the nation’s financially troubled home owners avoid foreclosure.

Agent Photo

Linda Smith
Realtor

The national mortgage settlement was intended to help stop the housing market spiral and hold the banks accountable for foreclosure abuses.

Now, a good portion of that money may end up in Uncle Sam’s bank account, wrenched from the depleted pocketbooks of those same troubled home owners in the form of income taxes.

The tax rub occurs because IRS rules say a debt you get to walk away from is really income, which as you know, is taxable.

Here’s an example of how you could get taxed on a short sale, where you sell your home for less than you owe on the mortgage:

Say you have a $100,000 mortgage on your house. You short sell your house and net $75,000 after sales expenses. You repay your lender that $75,000, creating $25,000 in forgiven debt.

The IRS will add that $25,000 to your taxable income. So if you have no deductions and you’re in a 28% tax bracket, you’d owe $7,000 ($25,000 x 0.28) in tax on that forgiven debt.

Up until the end of this year, you can escape that forgiven debt tax because Congress created an exemption for you back in 2009. Unfortunately, that exemption expires at the end of 2012.

If you qualify for a foreclosure avoidance program, like a short sale (or any of the other ways that reduce what you owe, below), but you can’t close your deal until 2013, you could face a huge tax bill. A tax bill large enough to put you right back into another financial tailspin.
Principal reduction: The lender shaves off a specific amount from what you owe on your mortgage.

Recasted mortgage: If the lender reduces what you owe overall to lower your monthly payment, that reduction would count as forgiven debt.

Second mortgage waivers: The bank says you no longer have to repay your second mortgage and just wipes out that loan.

Foreclosure: You’d be taxed on whatever is left on the mortgage that you didn’t pay.

Finally, any time you find yourself in a cash-out situation, such as a home equity line of credit, exercise care, because not all of it will be necessarily forgiven.

There’s not a soul in Congress who’s opposed to extending the forgiven debt exemption, but it still might not happen. With the federal budget in full-on crisis mode, any legislation that concerns a tax issue faces an uphill battle.

But wait. It gets worse. Traditionally, Congress lumps all the expiring tax provisions into a single bill. That bill is among the last things Congress passes before it goes home in December. That means the odds of Congress passing the forgiven debt extension by itself aren’t good. In the last 15 years, Congress has never passed a bill extending only one expiring tax provision.

Going through the foreclosure process is incredibly stressful, even if things work out OK in the end. Having to sell your home because you can’t afford it anymore is devastating. Having the IRS send you a tax bill for the forgiven debt? That’s just cruel.

Contact Linda Smith Here:

Office: 419-352-6565
Cell: 419-276-2354
Fax: 419 352-2654
VM: 419-354-4871 ext.113
lindasmith@wellesbowen.com

lindasmith.wellesbowen.com

Selling Your Home? Don’t Make This Costly Mistake

Bill had to sell his house quickly.

He was being transferred out of state, and the company wasn’t footing the bill. Instead, they offered him a higher salary. Now he had to sell quickly or risk paying two mortgages.

But Bill wasn’t sweating it. After all, his house was in a great neighborhood in a desirable part of town. He hired a real estate agent, confident that once the “for sale” sign went up, the buyers would come knocking. He’d get a quick sale at asking price, no problem.

Only a month went by, and there were zero offers. Bill had to move soon and was getting nervous about those double mortgage payments, but no one was interested. Then, to really rub salt in the wound, buyers were leavings tons of negative comments!

So what was the problem?

Sue Aldrich Presents Keep Your Home Purchase On Track

Loan

Loan (Photo credit: Philip Taylor PT)

Keep Your Home Purchase on Track

By: G. M. Filisko  Published: March 30, 2010

You’ve found your dream home. Make sure missteps don’t prevent a successful closing.

1. Be truthful on your mortgage application

You may think fudging your income a little or omitting debts when applying for a mortgage will go unnoticed. Not true. Lenders have become more diligent in verifying information on mortgage applications. If you fib, expect to be found out and denied the loan you need to fund your home purchase. Plus, intentionally lying on a mortgage application is a crime.

2. Hold off on big purchases

Lenders double-check buyers’ credit right before the closing to be sure their financial condition hasn’t weakened. If you’ve opened new credit cards, significantly increased the balance on existing cards, taken out new loans, or depleted your savings, your credit score may have dropped enough to make your lender change its mind on funding your home loan.

Although it’s tempting to purchase new furniture and other items for your new home, or even a new car, wait until after the closing.

3. Keep your job

The lender may refuse to fund your loan if you quit or change jobs before you close the purchase. The time to take either step is after a home closing, not before.

4. Meet contingencies

If your contract requires you to do something before the sale, do it. If you’re required to secure financing, promptly provide all the information the lender requires. If you must deposit additional funds into escrow, don’t stall. If you have 10 days to get a home inspection, call the inspector immediately.

5. Consider deadlines immovable

Get your funds together a week or so before the closing, so you don’t have to ask for a delay. If you’ll need to bring a certified check to closing, get it from the bank the day before, not the day of, your closing. Treat deadlines as sacrosanct.

More from HouseLogic

How maintenance adds to home values

Reducing closing stress

Other web resources

More on calculating closing costs

More on the closing process

G.M. Filisko is an attorney and award-winning writer who wanted a successful closing on a Wisconsin property so bad that she probably made her agent rethink going into real estate. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.

Sue Aldrich, Realtor

Office: 419-535-0011
Cell: 419-343-6315
Fax: 419-535-7571
VM: 419-539-2700 ext. 139
suealdrich@wellesbowen.com

Visit Sue’s website HERE

Enhanced by Zemanta

Negotiate Your Best House Buy-brought to you by Deon Davis

Article From BuyAndSell.HouseLogic.com

By: G. M. Filisko Published: June 04, 2010

Keep your emotions in check and your eyes on the goal, and you’ll pay less when purchasing a home.

Buying a home can be emotional, but negotiating the price shouldn’t be. The key to saving money when purchasing a home is sticking to a plan during the turbulence of high-stakes negotiations. A real estate agent who represents you can guide you and offer you advice, but you are the one who must make the final decision during each round of offers and counter offers.

Here are six tips for negotiating the best price on a home.

1. Get prequalified for a mortgage

Getting prequalified for a mortgage proves to sellers that you’re serious about buying and capable of affording their home. That will push you to the head of the pack when sellers choose among offers; they’ll go with buyers who are a sure financial bet, not those whose financing could flop.

2. Ask questions

Ask your agent for information to help you understand the sellers’ financial position and motivation. Are they facing foreclosure or a short sale? Have they already purchased a home or relocated, which may make them eager to accept a lower price to avoid paying two mortgages? Has the home been on the market for a long time, or was it just listed? Have there been other offers? If so, why did they fall through? The more signs that sellers are eager to sell, the lower your offer can reasonably go.

3. Work back from a final price to determine your initial offer

Know in advance the most you’re willing to pay, and with your agent work back from that number to determine your initial offer, which can set the tone for the entire negotiation. A too-low bid may offend sellers emotionally invested in the sales price; a too-high bid may lead you to spend more than necessary to close the sale.

Work with your agent to evaluate the sellers’ motivation and comparable home sales to arrive at an initial offer that engages the sellers yet keeps money in your wallet.

4. Avoid contingencies

Sellers favor offers that leave little to chance. Keep your bid free of complicated contingencies, such as making the purchase conditional on the sale of your current home. Do keep contingencies for mortgage approval, home inspection, and environmental checks typical in your area, like radon.

5. Remain unemotional

Buying a home is a business transaction, and treating it that way helps you save money. Consider any movement by the sellers, however slight, a sign of interest, and keep negotiating.

Each time you make a concession, ask for one in return. If the sellers ask you to boost your price, ask them to contribute to closing costs or pay for a home warranty. If sellers won’t budge, make it clear you’re willing to walk away; they may get nervous and accept your offer.

6. Don’t let competition change your plan

Great homes and those competitively priced can draw multiple offers in any market. Don’t let competition propel you to go beyond your predetermined price or agree to concessions-such as waiving an inspection-that aren’t in your best interest.

More from HouseLogic

Determine how much mortgage you can afford (http://buyandsell.houselogic.com/articles/4-tips-determine-how-much-mortgage-you-can-afford/)

Keep your home purchase on track (http://buyandsell.houselogic.com/articles/keep-your-home-purchase-track/)

Plan for a stress-free home closing (http://buyandsell.houselogic.com/articles/7-steps-stress-free-home-closing/)

G.M. Filisko is an attorney and award-winning writer who has to remind herself to remain unemotional during negotiations. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.

Deon Davis, Realtor

Deon Davis, Realtor

Office: 419-535-0011
Cell: 419-810-1560
Fax: 419 535-7571
VM: 419-539-2700 ext. 167
deondavis@wellesbowen.com
Visit Deon’s website, by going to wellesbowen.deondavis.com

Americans buy more homes, market may be on the mend

From the Detroit Freepress

WASHINGTON — Americans are buying more homes in every region of the country, the latest indication that the housing market could be on the mend.

An increasing portion of those sales are from first-time buyers, who are critical to a housing recovery.

Sales of previously occupied homes rose 3.4% in April from March to a seasonally adjusted annual rate of 4.62 million, the National Association of Realtors said Tuesday.

That nearly matches January’s pace of 4.63 million — the best in two years. It is still well below the nearly 6 million that most economists equate with healthy markets.

A pickup in hiring and cheaper mortgages, combined with lower home prices in most markets, has made home buying more attractive.

While many economists acknowledged that the market has a long way to go, most said the April sales report was encouraging.

“The trend in sales is upward, and we think it has a good deal further to go over the next few months as payrolls pick up further and mortgage availability improves,” said Ian Shepherdson, chief U.S. economist for High Frequency Economics.

To read the complete article please click here.

A little assistance understanding apprasals

Loan

Loan (Photo credit: Philip Taylor PT)

This was an article found on The Realty Times website, hope you find it helpful.

Understanding Appraisals
by Carla Hill

It’s a term homeowners and sellers hear all the time. What does “appraisal” really mean and how will it affect your ability to make a deal?

As the market dips and continues to struggle across the nation, many sellers are finding themselves in an unhappy predicament. They have a buyer lined up and an offer on the table, but wait…… the buyer’s financing has now fallen through. The asking price of the home has come in over the appraised value.

This has led to a unnaturally high number of contract cancellations. According to the National Association of Realtors (NAR), “Twenty-one percent of NAR members in January reported delays in contracts, and 33 percent said contracts fell through.. The number of contract cancellations remains mostly unchanged from December. An increase in the past year of contract cancellations or delays has been blamed on more lenders declining mortgage applications from stricter underwriting standards and low appraisals coming in under the agreed upon contract price.”

Here are some things you need to know about appraisals:

First, it’s true that lenders usually won’t write a mortgage for more than a home is “worth”. This sets them up for a large financial burden should the prospective borrower default on their loan. They will, instead, write a mortgage for whichever price is less, be it the sale price or the appraised value. From a business standpoint it is logical. For a stalled and unpredictable housing market, it is downright frustrating.

An appraisal is figured by your local tax office (appraiser’s office). They calculate what the market value of your home is based on, the square footage and specifics of your home. Do you have a fireplace, hardwood floors, and four bedrooms? You’ll pay more in taxes and have a higher appraised home than the same home with no fireplace and laminate floors.

You generally receive a statement from the tax office each year showing you the appraised value of your home. If you feel this is in error be sure to contest it!

To read the full article, click here

Enhanced by Zemanta

Buying a Home? The COST Is More Important Than the PRICE

English: Mortgage debt

Image via Wikipedia

Snippets of an article found at the KCM blog, read full article here.

We have often advised buyers to look at the COST of purchasing a house more than the PRICE of the home. Obviously, price is part of the cost equation. The other piece, assuming you are not an all cash buyer, is the mortgage rate. The mortgage rate to finance a purchase can have a dramatic impact on the overall cost.

Lawrence Yun, chief economist for the National Assoc of Realtors, recently wrote:

“Mortgage rates will be starting to rise. From the 3.9 to 4.0 percent average rate in the past five months on a 30-year fixed mortgage, the new rates will soon be in the range of 4.3 to 4.6 percent.

Dan Green of The Daily Market Reports recently stated:

“The Fed sees growth coming faster than originally expected. There’s suddenly less chance that the Federal Reserve will intervene to help keep mortgage rates low. Absent Fed intervention, mortgage rates are apt to rise and Wall Street is now betting that the Fed has bowed out. With no stimulus, mortgage rates rise.”

 

Enhanced by Zemanta

How Does a Lender Evaluate You for a Loan

Personal finance

From the Zillow Blog.

Here is a snippet of a good article on what a lender looks for when you are applying for a loan. We hope this helps. If you would like to apply for a mortgage loan please call either of our very talented loan officers by going to our Mortgage page.

If you are thinking about buying a home, one of the first things you should do is go to a lender to get pre-approved. This will determine how much money you can borrow on a mortgage. This will also help you filter your home search by sale price, which will narrow your choices within your financing range.

So how does a lender evaluate — called underwriting — and determine how much you can borrow? It involves the three C’s: Credit, capacity and collateral!

Credit or FICO Score

The first item a lender will review is your credit profile, also known as your credit score or FICO score. This can range from 350 – 850. This is where all the decisions you’ve made in the past regarding will be reflected, such as:

  • How much debt you have outstanding
  • How much debt you have outstanding as a percentage of open credit accounts
  • How much debt you have in the different types of credit accounts (credit cards, car loans, school loans, etc.)
  • How well you’ve paid your bills over the years

Lenders used to allow much lower credit scores for borrowing purposes, but they’ve gone up the past few years. You need, in general, at least a 640 FICO score to borrow on a loan. The optimal score is 740-760 or above. The lower your score, the higher your interest rate and points on your mortgage loan.

The rest of this article can be found by going to the Zillow blog website.

Enhanced by Zemanta