Thursday, March 3, 2016

Tax Advantages of Owning a Home



The tax deductions you are eligible to take for property taxes and mortgage interest greatly increase the financial benefits of homeownership.  Here is how it works.
Assume:

$9877 = Mortgage interest paid (a loan of $150,000 for 30 years, at 7 percent, using year-five interest)

$2700 = Property taxes (at 1.5 percent on $180,000 assessed value)

$12,577 = Total deduction

Then, multiply your total deduction by your tax rate.

For example, at a 28 percent tax rate: 12,577 x 0.28 = $3521.56
$3521.56 = Amount you have lowered your federal income tax (at 28 percent tax rate)

Note: Mortgage interest may not be deductible on loans over $1.1 million.  In addition, deductions are decreased when total income reaches a certain level.

Wednesday, March 2, 2016

Tip To Get Your Finances In Order Before You Buy



 
1.     Develop a household budget - Use receipts to create a budget that reflects your actual spending habits over the past several months.  This will all you to factor in unexpected expenses, such as auto repairs, as well as predictable costs such as rent.

2.     Reduce your debt - Lenders generally look for a total debt load of no more than 36 percent of income.  This figure includes your mortgage, which typically ranges between 25 and 28 percent of your net household income.  So you will need to get your monthly payments on the rest of your installment debt down to between 8 and 10 percent of your net monthly income.

3.     Look for ways to save - You probably know how much you spend on rent and utilities but keep in mind that little expenses add up too.  Try writing down everything you spend in one month; you will probably spot some great ways to save.

4.     Increase your income - Now is the time to ask for a raise!  If a raise is not an option you may want to consider taking on a second job to get your income high enough to qualify for the home you want.

5.     Save for a down payment - Designate a certain amount of money that you will put in away in a savings account every month.  Although it’s possible to get a mortgage with only 5 percent down, or even less, you should strive to make a 20 percent down payment.

6.     Keep your job - While you don’t need to be in the same job forever to qualify for a home loan, having a job for less than two years may mean you have to pay a higher interest rate.

7.     Establish a good credit history - Get a credit card and make payments by the due date. A good practice would be to pay off the entire balance promptly.