Tuesday, April 29, 2014

Homeowner Tax Deductions

Tax season is officially over for most of us and 2014 may have some big changes for homeowners.  First, here are the current tax deductions allowed for homeowners (information provided by TurboTax):

The following can be eligible for a deduction:
  • Your property taxes. Don’t forget to include any taxes you may have reimbursed the seller for.  These are taxes the seller had already paid before you took ownership. You won't get a 1098 report listing these taxes. Instead, that amount will be shown on the settlement sheet.
  • The mortgage interest on your primary residence, as well as on a second residence. (There are limits, but relatively few taxpayers are affected.)
  • The interest on up to $100,000 borrowed on a home equity loan or home equity line of credit, regardless of the reason for the loan.
  • Points that you paid when you purchased the house (or those that you convinced the seller to pay for you).
  • The premiums paid for Private Mortgage Insurance (PMI), but only for policies issued after 2006.This deduction is scheduled to expire at the end of 2013. (The right to this deduction disappears as your Adjusted Gross Income rises from $100,000 to $109,000 (or $50,000 to $54,500 for those who use married filing separately status.)
  • Home improvements required for medical care.

As TurboTax highlights in red, PMI is no longer deductible in 2014 but we will see if Congress acts to extend this again as they did previously in 2012 and 2013.  There is also a proposed 2014 Tax Reform Act by Dave Camp who is Chairman of the House Ways and Means Committee.  Stated in the executive summary are three bullet points:
  • The plan makes no changes whatsoever to the mortgage interest deduction for any current mortgage – if you have a mortgage today, your mortgage interest deduction is unchanged.
  • The plan has no impact on future refinancing of existing mortgages.
  • Current law caps the amount of mortgage interest that can be deducted at the amount associated with the first $1 million of mortgage debt. Beginning in 2015, for those taking out new mortgages, the plan would gradually and responsibly reduce the existing $1 million dollar cap so that for mortgages taken out in 2018 or later, the cap would be $500,000. This means homeowners will still be able to deduct interest on the first $500,000 of mortgage debt. (For instance, if someone buys a home for $750,000 and takes out a $600,000 mortgage, they would still be able to deduct five-sixths of their interest.) This new cap is estimated to impact less than 5 percent of the most expensive homes on the market today.
There is no mention in this tax reform about extending the PMI deduction.  We are hoping that it will be extended to help homebuyers who have less than a 20% down payment as it will make homeownership more feasible and tangible for many Americans.

Thursday, April 24, 2014

FHA vs. Conventional trend

I saw this graph the other day (below) and thought this would be a great topic to mention because of recent changes FHA has made since 2012.

FHA vs. Conventional

FHA is a great program for first - time homebuyers because only 3.5% down payment is required and borrowers aren't penalized in rates or fees for having less than prefect credit scores.  However, due to recent changes,  it often makes more sense to gather an additional 1.5% down payment to go conventional with a total of 5% down. This can be seen in the trend displayed below.

In April of 2012, FHA raised their upfront Mortgage Insurance Premium (MIP) from 1% to 1.75% of the loan amount. At this time it also raised it's monthly mortgage insurance premium by 0.1%.  Both of these changes increase the monthly payment for a borrower and impacts the amount they qualify for.

In June of 2013, FHA further increased its monthly mortgage insurance another 0.1%. However, the biggest change they made at this time was making mortgage insurance (MI) last the life of the loan unless 10% is used as the down payment. Even then, the borrower will be required to pay MI for 11 years.  No longer will a borrower in an FHA loan be able to cancel MI by showing enough home equity.  The only way to get out of the mortgage insurance is to pay off the loan or refinance out of an FHA loan.

This is why less borrowers are going FHA and we often recommending collecting a 5% down payment to go conventional instead.  This can come as a Gift from a relative!

Please contact me if you would like further information on this topic.

Thursday, April 17, 2014

Portland homes selling fast!

In Portland, 14.5% of all homes on the market are selling within just 3 days according to a study by Redfin.  That puts Portland 4th on the list only behind Denver, Austin, and Seattle.  Pretty amazing!

To help homebuyers chances at getting an accepted offer in this fast paced market, we are proud to be one of the only lenders who guarantees performance.  We will pay homebuyers $2,000 if we don't close timely (21 calendar days) once they have been fully pre-approved for the loan and they have an accepted offer.  We will also pay the seller $2,000 which gives your offer a strong advantage if there are competing offers.  For more information, please contact me!  Below is a sample of our guarantee.

Thursday, April 10, 2014

April You Magazine - Housing, mortgage, and home security

Below is the April edition of You Magazine with great information on housing, mortgage, home security and more!

Follow Me On:  
YOU Magazine
Clayton Scott   Clayton Scott
Branch Manager/Mortgage Consultant
Phone: 503-497-5060
NMLS ID 754407
License WA-CL 713524, OR-ML 5271
April 2014

March 2014
February 2014
January 2014
December 2013
November 2013
October 2013

A New Season for Housing
Will First-Time Buyers Face Challenges? 

Spring is officially here. The warmer season will hopefully bring a much-needed warm-up to the housing market, which suffered from the harsh winter weather.
  A New Season for Housing -  Will First-Time Buyers Face Challenges?
Are Distractions Getting in Your Way?
By Jason Womack, MEd, MA

Think about the last time you sat down to do some high priority, very important work. How long were you able to focus on what you were doing before you got distracted?
  Are Distractions Getting in Your Way? -  By Jason Womack, MEd, MA
How to Save on Auto Repairs
By Cameron Huddleston, Kiplinger.com

Follow these steps to lower the cost of routine car maintenance and major repair work.
  How to Save on Auto Repairs -  By Cameron Huddleston, Kiplinger.com
Home Security Tips and Traps
According to the Department of Justice and the FBI, of the more than 2 million burglaries reported in 2012, 74.5 percent took place in homes, not businesses-and they averaged more than $2,188 in stolen items, adding up to nearly $15.5 billion in lost property in a single year!
  Home Security Tips and Traps
Foods Your Pets Should Never Eat
Your pet's digestive system is different than yours. Food that can be a delicious treat for people can be a deadly poison to an animal. That's why it's very important to keep a close eye on what your pets eat.
  Foods Your Pets Should Never Eat
Wok This Way
A Neophyte's Guide to the Perfect Stir-Fry
By Kirk Leins

Have your attempts at this age-old cooking method yielded less than spectacular dishes? If so, I ask you to read this article carefully, which may just result in a meal fit for an emperor.
  Wok This Way -  A Neophyte's Guide to the Perfect Stir-Fry - By Kirk Leins

You are receiving a complimentary subscription to YOU Magazine as a result of your ongoing business relationship with Clayton Scott. While beneficial to a wide audience, this information is also commercial in nature and it may contain advertising materials.

Friday, April 4, 2014

5 Things to Avoid Before Buying a Home

Below is an article about The 5 Worst Things You Can Do Before Buying a Home which was posted on Realtor.com.  This is a great article for those who are creating a plan to become homeowners or even those who are already pre-approved!

Here’s a look at five of the worst things you can do before buying a home:

1. Go Credit-Crazy
Avoid obtaining credit for any major expense, such as a car, a boat or, yes, a new bedroom set.
Be careful with even minor expenses. If you absolutely need to obtain new credit or accrue debt before closing, talk with your loan officer as soon as possible.

New payments are going to affect your monthly debt-to-income ratio, and not in a good way. Hard inquiries on your credit report could also lower your credit score. That might hurt your interest rate if you haven’t locked or even knock you out of qualifying range all together.

2. Shuffle Dollars and Cents
Lenders will scour your most recent bank statement as part of the pre-approval process. It’s not like they forget about it after that. They’ll take another look at your assets and bank records again during the underwriting process.

You’ll need to explain any unusual deposits or withdrawals (we will need to document any deposits over 25% of your gross income). Lenders will require clear documentation and a paper trail if you’re putting gift funds toward a down payment or closing costs (we can help you document any gift funds you may be using). Stuffing a wad of undocumented cash into your account is going to raise some red flags (we look at the most recent two months bank statements).

3. Get Behind on Bills
Having a late payment hit your credit report before closing can devastate your deal. Payment history comprises about a third of your credit score (35% payment history, 30% amounts owed, 15% length of credit history, 10% new credit, 10% types of credit used).

One solitary 30-day late payment can clip 60 to 110 points from your credit score. Maybe not a huge deal if you had an 800 score, right?

Possibly. But if that 30-day late blemish is a mortgage or rent payment, some lenders will boot your application altogether. Many will require at least 12 consecutive months of on-time payments to qualify for a home loan.

4. Co-Sign on a Loan
Co-signing a loan is arguably a bad financial move whenever you make it. But it’s especially risky during the mortgage lending process. It means you’re financially liable for someone else’s debt.

Yes, that someone else might be the most responsible person on the planet. Lenders will still need to factor that new monthly obligation into your overall affordability profile. Adding one more debt to the list could stretch too thin your debt-to-income ratio and assets.

5. Changes in Employment
Probably goes without saying, but losing your job is going to be a big problem. Even job-hopping can present some major hurdles. Lenders crave stable, reliable income that’s likely to continue.

Lenders are likely to slam on the brakes if you take a new job in a different field. Or if you decide to start your own business. Or even if you get a promotion but see some or all of your income shift to a commission basis.

The bottom line: Any change to your employment is significant. Keep your loan officer in the loop, and ask questions when in doubt. The last thing you want is to waste time and money on a home loan you’re never going to get.

Tuesday, April 1, 2014

Oregon home values up 13.8% YOY in February

CoreLogic released today it's February Home Price Index report which can be found at their website. To summarize Oregon's portion of the report, I have included these screenshots: