The RE/MAX Associates Louisville Real Estate Blog

Tax Breaks That Dissapear at Year's End

2016 could be the end of the tax breaks that homeowners once used to save some bucks. Before year’s end, let’s look at the tax breaks that you could use for the last time.

Many buyers and sellers use tax breaks that are likely to expire this year. What will keep them rolling is if Congress passes extensions for specific credits to extend for the next several years. At the rate Congress is working, it’s likely they won’t pass the extensions, leaving the taxes to expire.

If owning a home is a goal of yours by year’s end, you better act fast.  It’s within reach to claim the years end deductions and write-offs. Here’s what is likely to disappear by year’s end.

End of mortgage debt forgiveness

Usually, when a mortgage lender writes off part, or all, of a forgiven debt, the sum is sent back to the borrower as taxable for federal income tax purposes. This is typical for all debt including mortgages. Congress passed the Mortgage Debt Relief Act during the Great Recession to help struggling homeowners. This rule allowed for homeowners who lost their home, or qualified for repayment adjustments didn’t have forgiven debt taxed as income. Congress renewed this several times, but it’s almost certain they will let this expire this year.

If you happen to be in the middle of discharging debt, there is good news! You can still qualify for the exception and won’t be taxed on the debt if your agreement to discharge the debt with the lender was written this year.

Write off mortgage insurance premiums while it’s still here

Lenders tend to be hesitant when the market is rough. Since the recession, lenders have been requiring private mortgage insurance (PMI) for buyers to protect themselves if the buyer defaults. Writing off PMI in past years wasn’t...

How to Receive a Gifted Downpayment Correctly

Buying a home is a hefty undertaking and sometimes help coming up with a down payment is necessary. A lot of first time home buyers receive some, if not all, of their down payment as a gift. It can come from parents, relatives, or even very generous family friends.

A good amount of the first time homebuyers are facing circumstances like a stupid amount of student debt which makes saving for a down payment quite difficult. Obtaining a large sum of money like this isn’t as easy as just being handed a lump sum of money.

There’s a way to do it, and doing it right is critical. Avoiding these mistakes will help ensure you do it right.

The down payment needs to be a gift

Your down payment being a gift is absolutely mandatory. If the lender believes you were loaned the money they will believe you must repay it, and factor it into your loan amount. In this case it could affect the amount of your loan and leave you with an amount less than what you wanted.

To prove your gift is a gift you must receive a gift letter from the person who gave you the money. In the letter they need to make clear they do not expect to be repaid for the said amount.

The gift letter is a serious matter. It is possible, but highly doubtful, that the lender follows up and sees you are paying back the “gifted amount”; in which case you could find yourself being subpoenaed. Yeah, that’s pretty serious as lying on a mortgage application is a felony.

Get the down payment in advance

You will have two options when getting help. The first being during the planning stages getting your gifted money then and the second being when you’re ready to buy have the person gifting the money send it right before you walk into the bank’s office.

Either way works, but having it earlier rather than later is always...

Mortgage Rates at End of 2016

Ever since the election mortgage rates have risen .5%, and show no sign of slowing down. This should be a warning to anyone who was planning, or thinking about refinancing in the near future, and a louder siren to anyone planning on buying a home. Rates will doubtfully drop again, so it’s time to reassess your budget. Let’s have a look at what happened and what the next move is.

Why are rates rising?

The election of Donald Trump has made market participants believe that his policies of tax cuts, infrastructure spending, and trade tariffs, will be inflationary.

The rates are directly tied to bonds; and bonds pay the rate of returns to investors annually. If inflation is correlated to policy, the bond investor’s rate of return will be worth a less in the future. When inflation becomes a fear investors sell bonds, and rates rise when prices drop during a major selloff.

Since Trump was elected, bonds have been sold in a panic almost which has led to the biggest losses in almost 30 years.

Mortgage rates were basically at the mid level of 3% all year long, and have risen to a low 4% since Trump was elected. It’s possible to level off, but it won’t likely drop to the rates we saw earlier this year.

Where to go from here

One of the world’s most notable bond investors, Jeffrey Gundlach, believes we have “seen about 80 percent of a post election rate spike”, which is just ahead of the Federal Reserve meeting on December 14. 

He is saying it’s possible for rates to rise a bit more and the final determination will be what the Fed decides.  They make the policy based on two criteria.

The first thing is they control the bank-to-bank lending rate which is the standard rate for mortgage rates in the economy. This time last year they jacked it up by 0.25%...

How to Save For A Down Payment and Not Sacrifice Your Lifestyle

Having enough money to put up as a down payment can greatly help you get the mortgage you want. You are more likely to get a better interest rate, make your offer to sellers much more appealing, and even skip out on PMI. The trickiest part of having a sufficient down payment is saving up for it. Saving 20% of a home’s purchase price might seem like an impossible task, and could very well take a long time to do.

Don’t lose your cool though; there are plenty of options to save cash for the home you want. Buying a home is just one item on your plate, so throwing every dollar at your down payment isn’t a good idea. Instead of sacrificing your fun, just look for smaller ways to sacrifice that could have a big impact. Saving 20% is more of a marathon than a sprint. It is possible to save while still enjoying life. Here’s how.

Limit your expenses without your limiting your services

Trimming down your costs is the first place to start when you saving for your down payment. Once you find what you can live without, you can take that money you used to spend and start placing it in your savings. Look at everything you can live without and cut it off immediately.

Find out what services you don’t need, like the subscription to a magazine you have, or maybe even cable; call them up and tell them you can’t afford their services anymore and see if they can come down on their price a bit. If they are unwilling to budge, cancel them, you’ll be fine without them.

Match your savings to your discretionary spending

This method can help you keep on track while spending your money carefully. Each time you go spend money for something you want, take the receipt and transfer that amount of money from your checking into your savings.

The way this works, is you are paying for something you want (not necessarily...

Need Cultural Sensativity in Agents

Homeownership among Hispanics and Asians is expected to double in the coming years. The fear is that the housing industry won’t be ready for it. There’s a panel called “Reigniting the First-Time Homebuyer Market,” are the ones worried about this.

The panel is currently in Dallas, Texas at the George W. Bush Presidential Library. It’s being hosted by J. Ronald Terwilliger Foundation for Housing America’s Families.

They predict the market for purchase mortgages to Hispanics and Asians will see major growth well into 2060. The problem lies in the fact that mortgage bankers aren’t capable in dealing with these communities.

Hispanics represent an astounding 3% of the mortgage banking industry. Having such misrepresentation allows for a lot of misunderstanding to occur. If they had more of their own people there to help, certain problems could be avoided.

The panel suggested an increase in “cultural sensitivity” among real estate agents could help. There is work being done to get more Latinos in the mortgage pool.  

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Equity Rich Trend

When a homeowner stays in their home for a long period of time, they become equity rich. They build their loan-to-value ratio of at least 50%.  This happens to be the trend that is happening lately as reported by the ATTOM Data Solutions.

Their report was taken in Q3 2016, labeled the U.S. Home Equity and Underwater Report. It found that 23.4% of the nation’s homeowners are considered equity rich, which is an increase of 2.6 million from Q3 of 2015.

The homeowners who are basically drowning have an LTV of 125 or higher, saw a decrease from last year by 854,000, settling at about 6 million. This segment is roughly 10% of all homeowners.

The second quarter reported that 6.6 million homes were underwater, nearing 12% of the total properties.

Luckily, today’s market sees that around one in every five homeowners is now equity rich. This is in thanks to property prices rising, and people staying in their homes longer.

Median home prices are rising every year, and this month is the 18th straight month homes have increased in price. The homeowners who sold their home this third quarter have owned their homes on average for almost 8 years. Since they are staying in their homes longer, they are building their equity wealth. They own more and more of their homes, while the banks own less and less.

Some fun facts: Out of 88 cities with at least 500,000 residents or more, San Jose had the highest amount of equity rich homeowners, with a whopping 55.7%. Honolulu was second with 39.3% and Los Angeles just behind them at 38.2%.

 Out of the 88 cities, a lot of homes still showed being underwater, like Las Vegas with 25%, Akron with 24.2%. Cleveland wasn’t far behind with 22.8%, and several other Ohio cities were just behind them. Detroit came in at 20%, and Lakeland-Winter Haven, Florida also saw 20%.

 

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How to Rent With Poor Credit

Trying to get your first apartment? Having poor or no credit won’t be your only hurdle to clear. Even with less-than-desirable credit, you can still become an attractive candidate for your first apartment. Landlords look for more than just credit scores, and they may even offset your bad credit score.

Excellent rental history

One of the most important things landlords look at is your rental history. Considering you are trying to find your first apartment, you will unlikely have a rental history. If this is the case, you will want to add references such as past employers, teachers, etc. who can vouch for your personal character.

If you must have rental history for a certain place you want, you need to establish it. Start by paying rent to your parents, or try moving in with a friend and rent out a room in their house. This shows landlords you are dependable, and have shown you pay your rent in full, and on time. Make sure to get receipts, or have some form of proof that you have paid rent.

Make bank

If you are lucky enough to have a high salary, your landlord very well could forgive your poor credit score. In most markets, an income of $48,000 a year would be quite sufficient. In order to prove to your landlord what you make, show them your paystubs over the past year.  

The savings

Sometimes making bank won’t be enough for some landlords when you have poor credit. If you have a lot of debt, it can quickly grab most of your monthly income. The next best thing you can do is show your landlord your bank account, proving you have a pile of cash sitting there. They will want to see several months’ worth of rent saved up. Upon knowing you have cash, they will feel more confident that you pay rent, and on time.

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Buying a Home In Slow Month's Can Benefit You

One of the best times to buy a home is in the fall and winter months. The competition is lower, sellers are motivated, and year-end tax benefits. Here are several reasons you’ll want to consider buying a home in the down months of the real estate world.

Excellent Prices

The end of the year typically doesn’t send consumers out to buy houses, but more so gifts for themselves and their families. You don’t have to be like the rest of the consumers though, you can be different. With most of your community out buying TVs and toys, you will be one of the few in the housing market. The homes will still be there, but at that point there is less demand; which means fewer offers and no bidding wars.

Elastic schedules

The awesome thing about winter months in real estate is you don’t have to wait until the weekend to see all your potential homes. Since times are slow agents and home owners have time on their hands to show homes.

Motivated sellers

When homes are on the market late in the year, there is usually a reason why. Such reasons include financial hardships, change of circumstance, job relocations, etc. Either way, this gives you the leverage in negotiating. The best thing you can do for yourself here is lowball the offer and ask for a closing date that caters to your needs.  

Tax benefits

Buying a home late in the year is good for your bottom line come tax season. Closing before December 31st allows you to deduct property taxes, mortgage interest, origination points on your loan, and interest costs, and in the meantime you watch your equity grow. These money savers are quite helpful in the beginning stages of homeownership as you pay off the interest.

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VA Loans & What You Need to Know

Good news for Veterans! If you have served your country, you can get a loan backed by the U.S. Department of Veterans Affairs without a down payment!

As the days of the financial crisis become more distant in the past mortgage options are becoming more flexible. A good option that is often unnoticed is the VA loan.

VA Loans Feature

To everyone’s surprise these loans aren’t made by the VA. The mortgage lenders make them and the VA backs them, giving lenders more flexibility.

The features of VA loans include:

-          100% financing of the home, with a loan limit of up to $417,000; also with the possibility of going up to $1,000,000 in high-cost areas. The VA website has loan limits for your area.

-          Possible financing of your closing costs, which include appraisals, credit report, title insurance, lender origination fee, recording fees, and even survey fees. In your average closing, these are the major expenses.

-          The ability to finance a one-time VA funding fee that is mandatory for all VA loans, and the possibility to have this fee waived if the buyer has an injury or disability.

-          Mortgage insurance? Nope! This can save a buyer hundreds of dollars a month.

-          No penalty if you pay off the loan early.

-          Loans for a primary residence only.

-          A plethora of options for fixed- or adjustable-rate mortgage loan programs.

Who is eligible for VA loans?

In order to receive a VA loan you must work with a specialist so they...

What to Do If You Can't Make Mortgage Payments

A lot of homeowners live paycheck to paycheck, and tomorrow is never promised. There will be times that the month’s finances can get tight, and it’s tempting to skip a payment thinking you can pay it back once you get back on track. Don’t fall for this reasoning, as life will still happen and things can come up, pushing you even further behind.

Being passive to your finances is not a good approach because it can have a major impact on your life. The best thing you can do is be proactive and honest with your creditors.

Being honest

The best thing you can do it help yourself is contact your creditor/lender about a delinquent payment. Write them explaining your hardship, and the reason for your inability to make a payment.

Admitting the fact you cannot make your mortgage payment will serve you better in the long-run than trying to hide it.

Don’t wait too long

Chances are the longer you wait to disclose your financial struggles to your lender, the less lenient they will be with you. Nobody likes someone who is withholding information especially when it comes to business deals, so do yourself the favor and let it be known as soon as you can.  

Educate yourself

If this isn’t your first missed mortgage payment, you need to find loan assistance quickly. There are rules restricting dual tracking that offer such help.

Dual tracking is when a lender forecloses a property while considering a loan modification. The Consumer Financial protection Bureau outlawed this practice during the 120-day period after the default.

This rule protects the homeowner when they go into foreclosure. The only violation you can get yourself in trouble in is if you destroy the property, which will end up with you in a lawsuit.

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2017 - What's Going to Happen?

Most of this year has been a struggle for keeping a sufficient amount of home inventory. This factor alone has been the biggest hurdle to achieve a fully healthy housing market. According to the newly released forecast from the National Association of Realtors, 2017 will be better.

Chief economist from NAR, Lawrence Yun, and Dennis Lockhart, the CEO of the Federal Reserve Bank of Atlanta discussed the 2017 economic forecast at the residential housing and economic forecast session at the 2016 Conference and Expo.

Yun in short said, the demand and sales were weakened over the summer when the low supply hindered buyer’s choices. This in turn made the price grow pushing some consumers out of the market.

Yun predicts that 2017 will see the skimpy supply grow and the affordability issues dissolve; but warns it will take time and won’t happen in a short period of time. He said he believes housing starts can jump 5.3% to 1.22 million next year.

The growing demand and the shortfall to make up for recent years is still needing another 1.5 million homes. It’s estimated that new single-family home sales are likely to reach 570,000 homes by the end of 2016, and rise to 620,000 for 2017.

Who will buy these new homes? Millennials! Both Yun and Lockhart are hopeful that the housing demand will include leading-edge millennial households who will jump into the market at a growing rate.

The NAR surveyed current renters and recent buyers, and found there’s a strong will to own homes of their own by younger generations. The market should see a big lift in demand from these new buyers over the next several years. The only thing that could slow this down is not enough inventory. So it is crucial home builders build, build, build, at entry level prices.

Yun also predicted that 2017 existing-home sales should grow around 2% to around 5.46 million, and even 4% by 2018 to $5.68 million.

Median existing-home prices will likely rise by 4%...

Ready to Buy Your Second Home and Rent Out Your First?

If your current home seems like it’s becoming too small, and you’re ready to get out, you don’t have to let it go in order to get yourself another one.

In everyone’s life there comes a time when a move is needed. Perhaps it is because of a job change, the coming of a new family member, a marriage or divorce, or you just simple want a new scene.

A good sized portion of millennial home owners (who represent half of all home buyers today) are ready to move on to their next home. If this is the boat you are in, there is a decision to make. Is it best to sell your first home or rent it out?

If you choose to rent it out, there will be the luxury of that extra income. But before you decide there are several factors to consider before pulling the trigger.

Financial perks and considerations

Along with the extra monthly income, owning a second home will begin your real estate investment portfolio. What’s cool about this is it allows one to leave your owner- occupied mortgage intact by converting your primary residence into a rental.

Buying a non-owner-occupied property (which is just buying a house with the intention to rent out) typically requires 20-25 percent down payment and has an interest rate of /375 to .75 percent high than you’d get for an owner-occupied house.

The end game here is that it will cost less to turn your home into a rental property now, and buy a second home as your primary residence, than it would to buy a second home as a rental property. The requirements for a second loan are much stricter when you already have one, and it’s much more difficult to obtain.

If you happen to already have a lease in place on your first home before closing on your second home, your lender is more likely to allow the second mortgage. It can also help if you have experience in property management; lenders love seeing that.

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What to do When Your Neighbor is Selling

The biggest myth in real estate is that your real estate life is over once you finally close and move into your new home. People forget they are constantly surrounded by real estate; and they should be aware of what is happening with that real estate around them at all times. It will continue after closing. Think about the neighbors you have, and what happens when they decide to put their house on the market.

There are several important implications once your neighbor decides to move, read on and find out what you need to know.

Document important disclosure items

Usually a good fence can make a good neighbor. The exception arises when they don’t cooperate and unresolved issues poke their head out once their home goes on the market.

This is typically a property line dispute, or a broken fence. They want to make sure the buyer knows about it. Most states require sellers to disclose this information to potential buyers, but not all areas like this are required.

Be the friendly neighbor and let your new neighbor-to-be know by informing the seller’s agent to anything the new buyer should know.

Look at things differently

The beauty of open houses is they allow buyers to check out a home, as well as let the neighbors check out the listed home.

It’s common for neighbors to check out their own home from their neighbor’s perspective. They might be taking a look at how visible their property is from across the yard, or how their paint job looks.

Know and learn the market in today’s time

A good seller claims and saves their home online, and keeps searching. They do this to keep an eye on the market, see the comparable sales and have a real-time idea of what is happening around them.

Just when you were buying, knowing the area and what...

Private Mortgages are the Secret Buying Weapon

The driven portions of millennials who want to own a home have that as a life goal. The National Association of Realtors took a study this year and found that roughly 35% of the home buying market is millennials, and most of them desire to own their own home(s) one day.

We all know buying a home is no simple task, especially for the first-timers. Today’s new buyers are facing a ton of student debt, massive credit card bills, and a shortage of homes making the price skyrocket to ridiculous numbers. It can be done, but it’s not easy. The only thing home buyers have on their side at the moment is historically low interest rates. One way around the arduous process is to find yourself a private mortgage note.

What is a private mortgage note?

Private notes are the other option outside of a traditional mortgage. It’s a private lender supplying money to buy a piece of property. The cool thing is, there is no bank!

The mortgage note is a legally binding document detailing the parameters of the mortgage. It’ll include the pu8rchase price, the repayment schedule, and interest rate. When the bank gives a mortgage note, they hold on to the note and collect the monthly payments. When it’s a private note, the lender receives the monthly payments while holding on to the note.

Typically, it is only homeowners who have paid their mortgage off in full and have a large pile of cash who can offer buyers private loans. If the private lender chooses, they may sell their note to another person or company. As the buyer you are entitled to interact with either group. The advantage of private notes against a traditional note is the private note won’t have as many requirements and restrictions.

Millennials & Private Notes

A millennials secret weapon in today’s housing market is a private note. Most banks are not approving...