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  • Mon, 16 Apr 2018 14:34:52 +0000: Case Study - Housing Decision During Retirement - InTouch

    A couple is planning to tour the United States in a travel trailer during their first few years of retirement. They are going to sell their current home now and purchase another home when they finish their travels. 30349530-250.jpg

    An interesting exercise is to determine the optimum time of selling the home: now or when they're ready to buy their replacement home.

    If they intend on traveling for more than three years, then, it may be a good decision to sell prior to the sojourn to avoid paying taxes on the gain in their home. IRS allows for a temporary rental of a principal residence while still keeping the $250,000/$500,000 capital gains exclusion intact. A homeowner must own and use a home for two out of the previous five years which means that it could be rented for up to three years, but it would need to be sold and closed before that three-year window expires.

    If the travel will be less than three years, there is an option of selling now or later. Using the example below, the homeowner sold the home, paid their expenses and invested the proceeds in a three-year certificate of deposit until the replacement home was purchased.

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    As an alternative, if the homeowner rented the home, not only would they have income, the home would continue to appreciate and the unpaid balance would go down resulting in larger net proceeds. Based on a 5% appreciation and continued amortization of the mortgage, the net proceeds could easily be $40,000 more.

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    Obviously, there are a lot of considerations that affect the decision to sell now or later but in an appreciating real estate environment, being without a home for several years could affect the financial position of the owner in the replacement property. It is certainly reasonable to look at various alternatives before making a decision. Call me at (727) 434-1673 to help you look at the different possibilities and talk to your tax professional.


  • Mon, 09 Apr 2018 13:33:34 +0000: Waiting Period After Distressed Sale - InTouch

    "How long do we have to wait to qualify for another mortgage" is the question concerning people who've had a foreclosure, short sale or bankruptcy. The loan types for the new loan will differ in amounts of time to heal credit scores based on the event.43296989-250.jpg

    The following chart is meant to be a general guide for how long a person might have to wait. During this waiting period, it's important that the person be current on all payments and maintains a history of good credit.

    A recommended lender can give you specific information regarding your individual situation and can make suggestions that will improve your ability to qualify for a mortgage. This process should be started before looking at homes because of the time constraints listed here can vary based on current requirements and possible extenuating circumstances of your case.

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    We want to be your personal source of real estate information and we're committed to helping from purchase to sale and all the years in between. Call us at (727) 434-1673 for lender recommendations.


  • Mon, 02 Apr 2018 12:50:17 +0000: Waiting Will Cost More - InTouch

    With the first quarter of 2018 in the books, the 30-year fixed rate mortgage is nearing what Freddie Mac predicted it would be in the second quarter. If this pace continues, rates will exceed the five percent mark expected by the end of the year.42814186-250.jpg

    The Fed has had its first of an expected three raises for this year and two more are expected in 2019. While these rates are not directly related to mortgages, they certainly have an effect.

    Delaying the decision to purchase or refinance could be an expensive missed opportunity. A $270,000 mortgage at 4.44% has a principal and interest payment of $1,358.44 per month. If the rate were to rise one-percent in the next twelve months, the payment would be $1,522.88.

    The $164.44 increase would cost a homeowner an additional $13,812.97 in seven years and close to $60,000 over the full term of the loan.

    The question facing people is "what would you spend $164.44 each month if you had acted sooner to get the lower rate?"

    If you're curious to know what your "missed opportunity" could be costing you, try this Cost of Waiting to Buy calculator . Use 0% increase on price change if you are refinancing a home you already own.


  • Mon, 26 Mar 2018 13:16:28 +0000: FHA Advantages - InTouch

    The Federal Housing Administration, operating under HUD, offers affordable mortgages for tens of thousands of buyers who may not qualify for other types of programs. They are popular with both first-time and repeat buyers.

    The 3.5% down payment is an attractive feature but there are other advantages:fha3.png

    • More tolerant for credit challenges than conventional mortgages.
    • Lower down payments than most conventional loans.
    • Broader qualifying ratios - total house payment with MIP can be up to 31% of borrower's monthly gross income and total house payment with all recurring debt can be up to 43%. There is a stretch provision taking it to 33/45 for qualifying energy efficient homes.
    • Seller can contribute up to 6% of purchase price; this money must be specified in the contract and can be used to pay all or part of the buyer's closing costs, pre-paid items and/or buy down of the interest rate.
    • Self-employed may qualify with adequate documentation - two year's tax returns and a current profit and loss statement would be required in addition to the normal qualifying and underwriting requirements.
    • Liberal use of gift monies - borrowers can receive a gift from family members, buyer's employer, close friend, labor union or charity. A gift letter will be required specifying that the gift does not have to be repaid.
    • Special 203(k) program for buying a home that needs capital improvements - requires a firm contractor's bid attached to the contract calling for the work to be done. The home is appraised subject to the work being done. If approved, the home can close, the money for the improvements escrowed and paid when completed.
    • Loans are assumable at the existing interest rate with buyer qualification. Assumptions are easier than qualifying for a new mortgage and closing costs are lower.
    • An assumable mortgage with a lower than current rates for new mortgages could add value to the property.

    Finding the best mortgage for an individual is not always an easy process. Buyers need good information from trusted professionals. Call (727) 434-1673 for a recommendation of a trusted lender who can help you.


  • Mon, 19 Mar 2018 12:52:06 +0000: Standard or Itemized - InTouch

    Taxpayers can decide each year whether to take the standard deduction or their itemized deductions when filing their personal income tax returns. Roughly, 75% of households with more than $75,000 income and most homeowners itemize their deductions.Standard or Itemized-250.png

    Beginning in 2018, the standard deduction, available to all taxpayers, regardless of whether they own a home, is $24,000 for married filing jointly and $12,000 for single taxpayers.

    Let's look at an example of a couple purchasing a $300,000 home with 3.5% down at 5% interest. The first year's interest would be $14,630 and property taxes are estimated at 1.5% of sales price would be $4,500.

    The interest and property taxes would provide a combined total of $19,130 which is less than the $24,000 standard deduction. Unless this hypothetical couple has other itemized deductions like charitable contributions that would make the total exceed $24,000, they would benefit more from taking the standard deduction.

    If the mortgage rate were at 8%, the combined total of taxes and interest would be almost $28,000 which would make itemizing the deductions more beneficial.

    Tax professionals will compare available alternatives to find the one that will benefit the taxpayer most. For more information, see www.IRS.gov and consult a tax advisor.