Dramatic price reduction on this one of kind investment or in-town opportunity! [Read more…]
A solid game plan can help you narrow your homebuying search to find the best home for you.
House hunting is just like any other shopping expedition. If you identify exactly what you want and do some research, you’ll zoom in on the home you want at the best price. These eight tips will guide you through a smart homebuying process.
1. Know thyself.
Understand the type of home that suits your personality. Do you prefer a new or existing home? A ranch or a multistory home? If you’re leaning toward a fixer-upper, are you truly handy, or will you need to budget for contractors?
2. Research before you look.
List the features you most want in a home and identify which are necessities and which are extras. Identify three to four neighborhoods you’d like to live in based on commute time, schools, recreation, crime, and price. Then hop onto realtor.com to get a feel for the homes available in your price range in your favorite neighborhoods. Use the results to prioritize your wants and needs so you can add in and weed out properties from the inventory you’d like to view.
3. Get your finances in order.
Generally, lenders say you can afford a home priced two to three times your gross income. Create a budget so you know how much you’re comfortable spending each month on housing. Don’t wait until you’ve found a home and made an offer to investigate financing.
Gather your financial records and meet with a lender to get a prequalification letter spelling out how much you’re eligible to borrow. The lender won’t necessarily consider the extra fees you’ll pay when you purchase or your plans to begin a family or purchase a new car, so shop in a price range you’re comfortable with. Also, presenting an offer contingent on financing will make your bid less attractive to sellers.
4. Set a moving timeline.
Do you have blemishes on your credit that will take time to clear up? If you already own, have you sold your current home? If not, you’ll need to factor in the time needed to sell. If you rent, when is your lease up? Do you expect interest rates to jump anytime soon? All these factors will affect your buying, closing, and moving timelines.
5. Think long term.
Your future plans may dictate the type of home you’ll buy. Are you looking for a starter house with plans to move up in a few years, or do you hope to stay in the home for five to 10 years? With a starter, you may need to adjust your expectations. If you plan to nest, be sure your priority list helps you identify a home you’ll still love years from now.
6. Work with a REALTOR®.
Ask people you trust for referrals to a real estate professional they trust. Interview agents to determine which have expertise in the neighborhoods and type of homes you’re interested in. Because homebuying triggers many emotions, consider whether an agent’s style meshes with your personality.
Also ask if the agent specializes in buyer representation. Unlike listing agents, whose first duty is to the seller, buyers’ reps work only for you even though they’re typically paid by the seller. Finally, check whether agents are REALTORS®, which means they’re members of the NATIONAL ASSOCIATION OF REALTORS®. NAR has been a champion of homeownership rights for more than a century.
7. Be realistic.
It’s OK to be picky about the home and neighborhood you want, but don’t be close-minded, unrealistic, or blinded by minor imperfections. If you insist on living in a cul-de-sac, you may miss out on great homes on streets that are just as quiet and secluded.
On the flip side, don’t be so swayed by a “wow” feature that you forget about other issues — like noise levels — that can have a big impact on your quality of life. Use your priority list to evaluate each property, remembering there’s no such thing as the perfect home.
8. Limit the opinions you solicit.
It’s natural to seek reassurance when making a big financial decision. But you know that saying about too many cooks in the kitchen. If you need a second opinion, select one or two people. But remain true to your list of wants and needs so the final decision is based on criteria you’ve identified as important.
More from HouseLogic
- HOAs: What You Need to Know About Rules
- A Financial Plan for Your Home
- When It Pays to Do It Yourself
G.M. Filisko is an attorney and award-winning writer who has found happiness in a brownstone in a historic Chicago neighborhood. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.
You’ve found your dream home. Make sure missteps don’t prevent a successful closing.
A home purchase isn’t complete until you make it to the closing. Until then, the transaction can fall apart for many reasons. Here are five tips for avoiding mistakes that cause a home sale to crater.
1. Be truthful on your mortgage application.
You may think fudging your income a little or omitting debts when applying for a mortgage will go unnoticed. Not true. Lenders have become more diligent in verifying information on mortgage applications. If you fib, expect to be found out and denied the loan you need to fund your home purchase. Plus, intentionally lying on a mortgage application is a crime.
2. Hold off on big purchases.
Lenders double-check buyers’ credit right before the closing to be sure their financial condition hasn’t weakened. If you’ve opened new credit cards, significantly increased the balance on existing cards, taken out new loans, or depleted your savings, your credit score may have dropped enough to make your lender change its mind on funding your home loan.
Although it’s tempting to purchase new furniture and other items for your new home, or even a new car, wait until after the closing.
3. Keep your job.
The lender may refuse to fund your loan if you quit or change jobs before you close the purchase. The time to take either step is after a home closing, not before.
4. Meet contingencies.
If your contract requires you to do something before the sale, do it. If you’re required to secure financing, promptly provide all the information the lender requires. If you must deposit additional funds into escrow, don’t stall. If you have 10 days to get a home inspection, call the inspector immediately.
5. Consider deadlines immovable.
Get your funds together a week or so before the closing, so you don’t have to ask for a delay. If you’ll need to bring a certified check to closing, get it from the bank the day before, not the day of, your closing. Treat deadlines as sacrosanct.
More from HouseLogic
How maintenance adds to home values
Reducing closing stress
G.M. Filisko is an attorney and award-winning writer who wanted a successful closing on a Wisconsin property so bad that she probably made her agent rethink going into real estate. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.
Published: February 18, 2015
Moving into your first home is exciting! But it also means you’ve got work to do.
When I bought my first house, my timing couldn’t have been better: The house closing was two weeks before the lease was up on my apartment. That meant I could take my time packing and moving, and I could get to know the new place before moving in.
I recruited family and friends to help me move (in exchange for a beer-and-pizza picnic on the floor) and, as a bonus, I got to pick their brains about what first-time homeowners should know.
Their help was one of the best housewarming presents I could have gotten. And thanks to their expertise and a little Googling, here’s what I learned about what to do before moving in.
1. Change the locks. You really don’t know who else has keys to your home, so change the locks. That ensures you’re the only person who has access. Install new deadbolts yourself for as little as $10 per lock, or call a locksmith — if you supply the new locks, they typically charge about $20 to $30 per lock for labor.
2. Check for plumbing leaks. Your home inspector should do this for you before closing, but it never hurts to double-check. I didn’t have any leaks to fix, but when checking my kitchen sink, I did discover the sink sprayer was broken. I replaced it for under $20.
Keep an eye out for dripping faucets and running toilets, and check your water heater for signs of a leak.
Here’s a neat trick: Check your water meter at the beginning and end of a two-hour window in which no water is being used in your house. If the reading is different, you have a leak.
3. Steam clean carpets. Do this before you move your furniture in, and your new home life will be off to a fresh start. You can pay a professional carpet cleaning service — you’ll pay about $50 per room; most services require a minimum of about $100 before they’ll come out — or you can rent a steam cleaner for about $30 per day and do the work yourself. I was able to save some money by borrowing a steam cleaner from a friend.
4. Wipe out your cabinets. Another no-brainer before you move in your dishes and bathroom supplies. Make sure to wipe inside and out, preferably with a non-toxic cleaner, and replace contact paper if necessary.
When I cleaned my kitchen cabinets, I found an unpleasant surprise: Mouse poop. Which leads me to my next tip . . .
5. Give critters the heave-ho. That includes mice, rats, bats, termites, roaches, and any other uninvited guests. There are any number of DIY ways to get rid of pests, but if you need to bring out the big guns, an initial visit from a pest removal service will run you $100 to $300, followed by monthly or quarterly visits at about $50 each time.
For my mousy enemies, I strategically placed poison packets around the kitchen, and I haven’t found any carcasses or any more poop, so the droppings I found must have been old. I might owe a debt of gratitude to the snake that lives under my back deck, but I prefer not to think about him.
6. Introduce yourself to your circuit breaker box and main water valve. My first experience with electrical wiring was replacing a broken light fixture in a bathroom. After locating the breaker box, which is in my garage, I turned off the power to that bathroom so I wouldn’t electrocute myself.
It’s a good idea to figure out which fuses control what parts of your house and label them accordingly. This will take two people: One to stand in the room where the power is supposed to go off, the other to trip the fuses and yell, “Did that work? How about now?”
You’ll want to know how to turn off your main water valve if you have a plumbing emergency, if a hurricane or tornado is headed your way, or if you’re going out of town. Just locate the valve — it could be inside or outside your house — and turn the knob until it’s off. Test it by turning on any faucet in the house; no water should come out.
- The Key to Your Real Estate Deal: The Agent
- Do You Really Need a Real Estate Lawyer?
- Gimme Shelter: Homeownership’s Tax Breaks
What were the first maintenance projects you did when you moved into your first home?
Published: January 5, 2015
Don’t rouse the IRS or pay more taxes than necessary — know the score on each home tax deduction and credit.
As you calculate your tax returns, be careful not to commit any of these nine home-related tax mistakes, which tax pros say are especially common and can cost you money or draw the IRS to your doorstep.
Sin #1: Deducting the wrong year for property taxes
You take a tax deduction for property taxes in the year you (or the holder of your escrow account) actually paid them. Some taxing authorities work a year behind — that is, you’re not billed for 2013 property taxes until 2014. But that’s irrelevant to the feds.
Enter on your federal forms whatever amount you actually paid in that tax year, no matter what the date is on your tax bill. Dave Hampton, CPA, a tax department manager at the Cincinnati accounting firm of Burke & Schindler, has seen homeowners confuse payments for different years and claim the incorrect amount.
Sin #2: Confusing escrow amount for actual taxes paid
If your lender escrows funds to pay your property taxes, don’t just deduct the amount escrowed. The regular amount you pay into your escrow account each month to cover property taxes is probably a little more or a little less than your property tax bill. Your lender will adjust the amount every year or so to realign the two.
For example, your tax bill might be $1,200, but your lender may have collected $1,100 or $1,300 in escrow over the year. Deduct only $1,200 or the amount of property taxes noted on the Form 1098 that your lender sends. If you don’t receive Form 1098, contact the agency that collects property tax to find out how much you paid.
Sin #3: Deducting points paid to refinance
Deduct points you paid your lender to secure your mortgage in full for the year you bought your home. However, when you refinance, you must deduct points over the life of your new loan.
For example, if you paid $2,000 in points to refinance into a 15-year mortgage, your tax deduction is $2,000 divided by 15 years, or $133 per year.
Related: How to Deduct Mortgage Points When You Buy a Home
Sin #4: Misjudging the home office tax deduction
The deduction is complicated, often doesn’t amount to much of a deduction, has to be recaptured if you turn a profit when you sell your home, and can pique the IRS’s interest in your return.
But there’s good news. There’s a new simplified home office deduction option if you don’t want to claim actual costs. If you’re eligible, you can deduct $5 per square foot up to 300 feet of office space, or up to $1,500 per year.
Sin #5: Failing to repay the first-time homebuyer tax credit
If you used the original homebuyer tax credit in 2008, you must repay 1/15th of the credit over 15 years.
If you used the tax credit in 2009 or 2010 and then within 36 months you sold your house or stopped using it as your primary residence, you also have to pay back the credit.
The IRS has a tool you can use to help figure out what you owe.
Sin #6: Failing to track home-related expenses
If the IRS comes a-knockin’, don’t be scrambling to compile your records. File or scan and store home office and home improvement expense receipts and other home-related documents as you go.
Sin #7: Forgetting to keep track of capital gains
If you sold your main home last year, don’t forget to pay capital gains taxes on any profit. You can typically exclude $250,000 of any profits from taxes (or $500,000 if you’re married filing jointly).
So if your cost basis for your home is $100,000 (what you paid for it plus any improvements) and you sold it for $400,000, your capital gains are $300,000. If you’re single, you owe taxes on $50,000 of gains.
However, there are minimum time limits for holding property to take advantage of the exclusions, and other details. Consult IRS Publication 523. And high-income earners could get hit with an additional tax.
Sin #8: Filing incorrectly for energy tax credits
If you made any eligible improvements in 2014, such as installing energy-efficient windows and doors, you may be able to take a 10% tax credit (up to $500; with some systems your cap is even lower than $500). But keep in mind, it’s a lifetime credit. If you claimed the credit in any recent years, you’re done.
Installing a solar electric, solar water heater, geothermal, or small wind energy system can also make you eligible to take the Residential Energy Efficient Property Credit.
To claim the deduction, you have to use the complicated Form 5695, which can mean cross-checking with half a dozen other IRS forms. Read the instructions carefully.
Sin #9: Claiming too much for the mortgage interest tax deduction
Taxpayers are allowed to deduct mortgage interest on home acquisition debt up to $1 million, plus they can also deduct up to $100,000 in home equity debt.
This article provides general information about tax laws and consequences, but shouldn’t be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice.
Published: October 1, 2014
Want to rest assured you have all the documents you need when you need them, but not be awash in paper? Read on.
Unless you’re living in the 123-room Spelling Manor, you probably don’t have space to store massive amounts of tax and insurance paperwork, warranties, and repair receipts related to your home. But you’ll definitely want your paperwork at hand if you have to prove you deserved a tax deduction, file an insurance claim, or figure out if your busted oven is still under warranty.
Except for tax paperwork, there’s no official guideline governing exactly how long you have to keep most home-related documents. Lucky for you, we considered the situations in which you might need documents and came up with a handy “How Long to Keep It” home records checklist.
First, a little background on IRS rules, which informed some of our charts:
- The IRS says you should keep tax returns and the paperwork supporting them for at least three years after you file the return — the amount of time the IRS has to audit you. So that’s how long we advise in our charts.
- Check with your state about state income tax, though. Some make you keep tax records a really long time: In Ohio, it’s 10 years.
- The IRS can also ask for records up to six years after a filing if they suspect someone failed to report 25% or more of his gross income. And the agency never closes the door on an audit if it suspects fraud. Just sayin’.
|HOME SALE RECORDS|
|Document||How Long to Keep It|
|Home sale closing documents, including HUD-1 settlement sheet||As long as you own the property + 3 years|
|Deed to the house||As long as you own the property|
|Builder’s warranty or service contract for new home||Until the warranty period ends|
|Community/condo association covenants, codes, restrictions (CC&Rs)||As long as you own the property|
|Receipts for capital improvements||As long as you own the property + 3 years|
|Section 1031 (like-kind exchange) sale records for both your old and new properties, including HUD-1 settlement sheet||As long as you own the property + 3 years|
|Mortgage payoff statements (certificate of satisfaction or lien release)||Forever, just in case a lender says, “Hey, you still owe money.”|
Why you need these docs: You use home sale closing documents, receipts for capital improvements, and like-kind exchange records to calculate and document your profit (gain) when you sell your home. Your deed and mortgage payoff statements prove you own your home and have paid off your mortgage, respectively. Your builder’s warranty or contract is important if you file a claim. And sooner or later you’ll need to check the CC&R rules in your condo or community association.
|ANNUAL TAX DEDUCTIONS|
|Document||How Long to Keep It|
|Property tax payment (tax bill + canceled check or bank statement showing check was cashed)||3 years after the due date of the return showing the deduction|
|Year-end mortgage statements||3 years after the due date of the return showing the deduction|
|PMI payment (monthly bills + canceled check or bank statements showing check was cashed)||3 years after the due date of the return showing the deduction|
|Residential energy tax credit* receipts||3 years after the due date of the return on which the credit is claimed (including carryforwards**)|
Why you need these docs: To document you’re eligible for a deduction or tax credit.
*Energy tax credits for alternative energy sources; credit expires at the end of 2016.
**Tax credits that you carry forward from one year to a future year, such as when you don’t have enough tax liability to offset the entire amount of the credit. (You can’t deduct more than you earn.) Only certain tax credits can be carried forward. Check with your tax pro about your particular circumstances.
|INSURANCE AND WARRANTIES|
|Document||How Long to Keep It|
|Home repair receipts||Until warranty expires|
|Inventory of household possessions||Forever (Remember to make updates.)|
|Homeowners insurance policies||Until you receive the next year’s policy|
|Service contracts and warranties||As long as you have the item being warrantied|
Why you need these docs: To file a claim or see what your policy or warranty covers.
|INVESTMENT (LANDLORD) REAL ESTATE DEDUCTIONS|
|Document||How Long to Keep It|
|Appraisal or valuation used to calculate depreciation||As long as you own the property + 3 years|
|Receipts for capital expenses, such as an addition or improvements||As long as you own the property + 3 years|
|Receipts for repairs and other expenses||3 years after the due date of the return showing the deduction|
|Landlord’s insurance payment receipt (canceled check or bank statement showing check was cashed)||3 years after the due date showing the deduction|
|Landlord’s insurance policy||Until you receive the next year’s policy|
|Partnership or LLC agreements for real estate investments||As long as the partnership or LLC exists + 7 years|
|Landlord insurance receipts (canceled check or bank statement showing check was cashed)||3 years after you deduct the expense|
Why you need these docs: For the most part, to prove your eligibility to deduct the expense. You’ll also need receipts for capital expenditures to calculate your gain or loss when you sell the property. Landlord’s insurance and partnership agreements are important references.
|Document||How Long to Keep It|
|Wills and property trusts||Until updated|
|Date-of-death home value record for inherited home, and any rules for heirs’ use of home||As long as you own the home + 3 years|
|Original owners’ purchase documents (sales contract, deed) for home given to you as a gift||As long as you own the home + 3 year|
|Divorce decree with home sale clause||As long as you or spouse owns the home + 3 years|
|Employment records for live-in help (W-2s, W-4s, pay and benefits statements)||4 years after you make (or owe) payroll tax payments|
Why you need these docs: Most are needed to calculate capital gains when you sell. Employment records help prove deductions.
Organizing Your Home Records
Because paper, such as receipts, fades with time and takes up space, consider scanning and storing your documents on a flash drive, an external hard drive, or a cloud-based remote server. Even better, save your documents to at least two of these places.
Digital copies are OK with the IRS as long as they’re identical to the originals and contain all the accurate information that was in the original receipts. You must be able to produce a hard copy if the IRS asks for one.
Tip: Tax season and year’s end are good times to purge files and toss what you no longer need; that’s often when the spirit of organization moves us.
When you do finally toss out your home-related paperwork, use a shredder. Throwing away intact documents with personal financial information puts you at risk for identity theft.
This article provides general information about tax laws and consequences, but isn’t intended to be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice.
Understand which mortgage loan is best for you so your budget isn’t stretched too thin.
It’s easier to settle happily into your new home if you’re confident you can afford it. Here’s what you need to know about your mortgage financing options, including how to choose the loan that matches your income and tolerance for risk.
Mortgage Financing Basics
The most important features of your mortgage loan are:
1. Term (how long the loan lasts)
Mortgages typically come in 15-, 20-, 30- or 40-year lengths. The longer the term, the lower your monthly payment. The interest rate on a 15-year mortgage might be 1% lower than the rate on a 30-year mortgage.
The trade-off for a lower payment on the 30-year mortgage is that you make more payments. Since you borrow the money for longer, you pay more interest to the lender.
2. Interest Rate (how much you pay to borrow money)
Mortgage interest rates generally come in two flavors: fixed and adjustable.
A fixed rate gives you the same interest rate and payment until the end of your mortgage. That’s attractive when you’re risk-averse, if your future income won’t rise, or when interest rates are low.
The interest rate you pay on an adjustable-rate mortgage (ARM) changes at some point in the future based on where interest rates are at that time. ARMs are named for how long the rates last. For example, with a 5/1 ARM, your rate changes after the first five years and again every year after that.
ARM Risks and Rewards
An adjustable-rate mortgage rate goes up or down based on a particular financial market index, such as treasury bills. Typically, ARMs include a limit on how much the interest rate can change, such as 3% each time the rate changes, or 5% over the life of the loan.
Rewards for the uncertainty:
- ARMs can be a good choice if you expect your income to grow significantly in the coming years.
- The interest rate may drop if the financial market index that it tracks dips.
- An ARM usually starts at a lower rate than a fixed-rate mortgage of the same length and that can mean big savings.
Risks: If rates go up, your ARM payment will jump dramatically. So before you choose an ARM, be comfortable with your answers to these questions:
- How much can my monthly payments go up at each adjustment?
- How soon and how often can my monthly payment go up?
- Can I afford the maximum monthly payment?
- Do I expect my income to increase or decrease by the time the mortgage payment adjusts?
- Do I plan to own the home for longer than the initial low-interest-rate period, or do I plan to sell before the rate adjusts?
- Will I have to pay a penalty if I refinance into a lower-rate mortgage or sell my house?
- What’s my goal in buying this property? Am I considering a riskier mortgage to buy a more expensive house than I can realistically afford?
More Mortgage Options: Government-Backed Loans
If you’ve saved less than the ideal downpayment of 20%, or your credit score isn’t high enough for you to qualify for a fixed-rate or ARM with a conventional lender, consider a government-backed loan from FHA or the Department of Veterans Affairs.
FHA offers adjustable- and fixed-rate loans at reduced interest rates and with as little as 3.5% down; VA offers no-money-down loans. FHA and VA also let you use cash gifts from family members.
Before you decide on any mortgage, remember that slight variations in interest rates, loan amounts, and terms can significantly affect your monthly payment. To determine how much your monthly payment will be with various terms and loan amounts, try realtor.com’s mortgage calculator.
Related: More on Mortgages from HouseLogic
G.M. Filisko is an attorney and award-winning writer who has opted for both fixed and adjustable-rate mortgages. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.
Beautiful three bedroom, three and a half bathroom townhouse overlooking a private courtyard. [Read more…]
Sunny split two bedroom, two bathroom home in Lincoln Park! [Read more…]
Super Southport location! [Read more…]