Knowing how to read your good-faith estimate can help you save money on your home loan.
A good-faith estimate is an approximation of the fees and interest rate you'll pay on a home loan.
When you’re shopping for a mortgage loan, it’s sometimes hard to understand the jargon lenders use in the good-faith estimate explaining the costs and fees you’ll pay when taking out a mortgage.
When you apply for a mortgage, the lender has three days to give you a good-faith estimate of the fees and interest rate you’ll pay, as well as other loan terms. Here are five tips for using the new three-page form to your advantage.
When you apply for a mortgage, the lender has three days to give you a good-faith estimate of the fees and interest rate you’ll pay, as well as other loan terms. Here are five tips for using the new three-page form to your advantage.
1. Know which fees can increase and by how much
In the past, lenders provided an estimate of the costs involved in getting your home loan, and if those costs rose by the time you closed on your home, tough luck. The good-faith estimate shows some fees the lender can’t change, like the loan origination fee that you pay to get a certain interest rate (commonly called points) and transfer costs.
The form also lists the charges that can increase by up to 10%, like some title company fees and local government recording fees. The lender must cover any increase over that amount.
Finally, the good-faith estimate lists the fees that can change without any limit, such as daily interest charges.
2. Look for answers to basic loan questions
In the summary section, lenders explain your loan’s terms in simple language. Can your interest rate rise? If so, a lender must spell out how much the rate can jump and what your new payment would be if it does. Can the amount you owe the lender increase, even if you make your payments on time? If it can, a lender must show you the potential increase.
3. Evaluate the “tradeoffs” on a loan
In the new “tradeoff table,” you can ask lenders to provide details on the tradeoffs you can make in choosing among home loans. If you’d like the same loan with lower settlement charges, how will the interest rate change? If you’d like a lower interest rate, how much will your settlement charges increase?
4. Compare apples to apples with the shopping chart
Included on the good-faith estimate is space for you to list all the terms and fees for four different loans, so you can make side-by-side comparisons.
5. Know what’s missing from the good-faith estimate
The new form lacks some key information, such as how much you’ll reimburse the sellers for property taxes they’ve already paid on the home. It also doesn’t tell you the amount of money you’ll have to bring to the closing table. Some lenders have created supplemental forms providing that information. If yours hasn’t, ask for it.
Read more: http://buyandsell.houselogic.com/articles/5-tips-deciphering-your-home-loans-good-faith-estimate/#ixzz0xiOg0pKf
Thursday, August 26, 2010
Homeowner Tax Advantages
When you’re evaluating how much home you can afford, make sure you factor in the tax advantages of homeownership.
You can claim some tax deductions if you work from home, but be sure you're entitled to them before taking them.
Owning your home not only allows you to build wealth through appreciation, but it can also reduce the amount of income tax you pay every year.
Here are seven tax benefits for homeowners.
1. Homebuyer tax credits
If you purchase your first home before April 30, 2010, you’re entitled to a tax credit of up to $8,000. If you currently own a home, but sell it to purchase another home before April 30, 2010, you’re eligible for a federal tax credit of up to $6,500.
2. Deductions for loan fees
Typically, you can deduct the “prepaid interest” you paid when you got your mortgage loan. That includes points, loan origination fees, and loan discount fees listed on your settlement statement, even if the seller paid those fees for you. Each time you refinance your home, you can deduct prepaid interest fees.
However, you must meet certain requirements to take the prepaid interest deductions when you purchase or refinance your home. Check with your accountant to be sure you’re following the rules.
3. Property tax deductions
In the year you purchase your home, you’re entitled to deduct the real estate taxes you paid at the closing table. You can continue to deduct the property taxes you pay each year.
4. The mortgage interest deduction
Every year, you can deduct the amount of interest and late charges you pay on your mortgage and home equity loans, though there are limitations. If you’re required to purchase private mortgage insurance (PMI) because you made a downpayment of less than 20% on your home, you can also deduct those premiums as mortgage interest expenses.
5. Home office expenses
If you have a home office you use only for business, you may be eligible to deduct the prorated costs of your mortgage, insurance, and other expenses related to that space. The government scrutinizes home-office deductions closely. Be sure you’re entitled to the deductions before claiming them.
6. The costs of selling your home
In the year you sell your home, you can deduct the costs of selling it, including real estate commissions, title insurance, legal fees, advertising, administrative costs, and inspection fees. You can also deduct decorating or repair costs you incur in the 90 days before you sell your home.
7. The gain on your home
If you lived in your home for at least two of the previous five years before you sell it, the government lets you to take up to $250,000 of profit on the sale of your home tax free. That amount is doubled for married couples. This deduction isn’t available on rental or second homes.
The government also allows you to subtract from your home sale profit any amounts you spend on improvements, such as window replacement, siding, or a kitchen remodel. Those deductions are in addition to the tax credits you can receive in 2010 for making energy-saving upgrades. Money invested for routine maintenance and repairs doesn’t count.
This article includes general information about tax laws and consequences, but is not intended to be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice; tax laws vary by jurisdiction.
Read more: http://buyandsell.houselogic.com/articles/7-homeowner-tax-advantages/#ixzz0xiMRZZPN
You can claim some tax deductions if you work from home, but be sure you're entitled to them before taking them.
Owning your home not only allows you to build wealth through appreciation, but it can also reduce the amount of income tax you pay every year.
Here are seven tax benefits for homeowners.
1. Homebuyer tax credits
If you purchase your first home before April 30, 2010, you’re entitled to a tax credit of up to $8,000. If you currently own a home, but sell it to purchase another home before April 30, 2010, you’re eligible for a federal tax credit of up to $6,500.
2. Deductions for loan fees
Typically, you can deduct the “prepaid interest” you paid when you got your mortgage loan. That includes points, loan origination fees, and loan discount fees listed on your settlement statement, even if the seller paid those fees for you. Each time you refinance your home, you can deduct prepaid interest fees.
However, you must meet certain requirements to take the prepaid interest deductions when you purchase or refinance your home. Check with your accountant to be sure you’re following the rules.
3. Property tax deductions
In the year you purchase your home, you’re entitled to deduct the real estate taxes you paid at the closing table. You can continue to deduct the property taxes you pay each year.
4. The mortgage interest deduction
Every year, you can deduct the amount of interest and late charges you pay on your mortgage and home equity loans, though there are limitations. If you’re required to purchase private mortgage insurance (PMI) because you made a downpayment of less than 20% on your home, you can also deduct those premiums as mortgage interest expenses.
5. Home office expenses
If you have a home office you use only for business, you may be eligible to deduct the prorated costs of your mortgage, insurance, and other expenses related to that space. The government scrutinizes home-office deductions closely. Be sure you’re entitled to the deductions before claiming them.
6. The costs of selling your home
In the year you sell your home, you can deduct the costs of selling it, including real estate commissions, title insurance, legal fees, advertising, administrative costs, and inspection fees. You can also deduct decorating or repair costs you incur in the 90 days before you sell your home.
7. The gain on your home
If you lived in your home for at least two of the previous five years before you sell it, the government lets you to take up to $250,000 of profit on the sale of your home tax free. That amount is doubled for married couples. This deduction isn’t available on rental or second homes.
The government also allows you to subtract from your home sale profit any amounts you spend on improvements, such as window replacement, siding, or a kitchen remodel. Those deductions are in addition to the tax credits you can receive in 2010 for making energy-saving upgrades. Money invested for routine maintenance and repairs doesn’t count.
This article includes general information about tax laws and consequences, but is not intended to be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice; tax laws vary by jurisdiction.
Read more: http://buyandsell.houselogic.com/articles/7-homeowner-tax-advantages/#ixzz0xiMRZZPN
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